Financing Sustainability Kevin Cox Ngunnawal ACT
Zero Interest Loans for Energy Sustainability
May 12, 2015
Presentation given at the Australian Green Institute Seminar at Melbourne October 24th 2009.
Describes an alternative to carbon taxes and carbon trading in its many forms to encouraging investment in ways to reduce green house gas concentrations in the atmosphere. Allows us to get to zero emissions within ten years if we so choose.
Describes an alternative to carbon taxes and carbon trading in its many forms to encouraging investment in ways to reduce green house gas concentrations in the atmosphere. Allows us to get to zero emissions within ten years if we so choose.
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Transcript
Financing Sustainability
Kevin Cox
Ngunnawal ACT
OCTOBER 24th 2009
If we achieve Energy Sustainability we will have the resources to
fund other sustainability e.g.
BioDiversity or Water.
Financing Sustainability
OCTOBER 24th 2009
Proportion of Energy Costs
OCTOBER 24th 2009
Today’s Costs in Cents per KWH
OCTOBER 24th 2009
Estimated 2020 Costs in Cents per KWH
OCTOBER 24th 2009
Price of Energy to Compete with Coal
OCTOBER 24th 2009
Cost to Save 1kg of CO2
OCTOBER 24th 2009
Financing Sustainability
If we reduced the cost of finance we would make
Sustainable Energy Immediately Profitable
OCTOBER 24th 2009
COAL PRODUCER WITH AN EXISTING PLANT WISHES TO BUILD A NEW COAL PLANT
Fred
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
OCTOBER 24th 2009
FredFred requests loan from bank for $100m.
Bank
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
COAL PRODUCER WITH AN EXISTING PLANT WISHES TO BUILD A NEW COAL PLANT
OCTOBER 24th 2009
FredFred requests loan from bank for $100m.
BankBank creates money
Bank creates $100m worth of money to loan to Fred
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
COAL PRODUCER WITH AN EXISTING PLANT WISHES TO BUILD A NEW COAL PLANT
OCTOBER 24th 2009
CURRENT SITUATION – SCENARIO ONE
FredFred requests loan from bank for $100m.
Bank
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
Mortgage
Bank takes out mortgage on existing coal fired power plant
Bank creates money
Bank creates $100m worth of money to loan to Fred
OCTOBER 24th 2009
CURRENT SITUATION – SCENARIO ONE
FredFred requests loan from bank for $100m.
Bank
Equity
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
Bank secures loan with $100m equity from Fred’s existing coal plant.
Mortgage
Bank creates money
Bank creates $100m worth of money to loan to Fred
Bank takes out mortgage on existing coal fired power plant
OCTOBER 24th 2009
Fred
Fred builds new coal plant using loan from Bank with 7% interest and fixed terms
Fred requests loan from bank for $100m.
Bank
LoanEquity
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
Bank secures loan with $100m equity from Fred’s existing coal plant.
Mortgage
COAL PRODUCER WITH AN EXISTING PLANT WISHES TO BUILD A NEW COAL PLANT
Bank creates money
Bank creates $100m worth of money to loan to Fred
Bank takes out mortgage on existing coal fired power plant
OCTOBER 24th 2009
CURRENT SITUATION – SCENARIO ONE
Fred
Fred builds new coal plant using loan from Bank with 7% interest and fixed terms
Fred requests loan from bank for $100m.
Bank
LoanEquity
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
Bank secures loan with $100m equity from Fred’s existing coal plant.
Mortgage
New plant succeeds
Bank creates money
Bank creates $100m worth of money to loan to Fred
Bank takes out mortgage on existing coal fired power plant
Fred continues to trade successfully and eventually pays off loan and bank destroys money.
OCTOBER 24th 2009
Fred
Fred builds new coal plant using loan from Bank with 7% interest and fixed terms
Fred requests loan from bank for $100m.
Bank
LoanEquity
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
Bank secures loan with $100m equity from Fred’s existing coal plant.
Mortgage
New plant fails
Fred can no longer pay back loan as he cannot make repayments
New plant succeeds
COAL PRODUCER WITH AN EXISTING PLANT WISHES TO BUILD A NEW COAL PLANT
Bank creates money
Bank creates $100m worth of money to loan to Fred
Bank takes out mortgage on existing coal fired power plant
Fred continues to trade successfully and eventually pays off loan and bank destroys money.
OCTOBER 24th 2009
Fred
Fred builds new coal plant using loan from Bank with 7% interest and fixed terms
Fred requests loan from bank for $100m.
Bank
LoanEquity
Owner of energy generating plant fuelled by coal worth $200m. Wants to setup new plant for $100m.
Bank secures loan with $100m equity from Fred’s existing coal plant.
Mortgage
New plant fails Bank destroys money
Fred can no longer pay back loan as he cannot make repayments
Bank seizes Fred’s plant and sells assets to pay off mortgage.Money is destroyed.
New plant succeeds
Fred continues to trade successfully and eventually pays off loan and bank destroys money.
COAL PRODUCER WITH AN EXISTING PLANT WISHES TO BUILD A NEW COAL PLANT
Bank creates money
Bank creates $100m worth of money to loan to Fred
Bank takes out mortgage on existing coal fired power plant
OCTOBER 24th 2009
CONTROLLING THE QUANTITY OF MONEY
Creating Money through Loans and then
Destroying Money when it is Repaid limits Money Supply and reduces risk
of Inflation
OCTOBER 24th 2009
RENEWABLE ENERGY PRODUCER WITH NO ASSETS WISHES TO BUILD RENEWABLE ENERGY PLANT
Fred
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
OCTOBER 24th 2009
Fred
Fred finds an investor to invest in his business venture.
InvestorWants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
RENEWABLE ENERGY PRODUCER WITH NO ASSETS WISHES TO BUILD RENEWABLE ENERGY PLANT
OCTOBER 24th 2009
Fred
Fred finds an investor to invest in his business venture.
Investor Investor gives money
Investor gives money to Fred with expectation of 20% return on investment.
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
RENEWABLE ENERGY PRODUCER WITH NO ASSETS WISHES TO BUILD RENEWABLE ENERGY PLANT
OCTOBER 24th 2009
Fred
Fred finds an investor to invest in his business venture.
Investor Investor gives money
Investor gives money to Fred with expectation of 20% return on investment.
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Setup
Fred builds Solar Thermal Power Plant with money from investor.
RENEWABLE ENERGY PRODUCER WITH NO ASSETS WISHES TO BUILD RENEWABLE ENERGY PLANT
OCTOBER 24th 2009
Fred
Fred finds an investor to invest in his business venture.
Investor Investor gives money
Investor gives money to Fred with expectation of 20% return on investment.
Trading
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Setup
Fred builds Solar Thermal Power Plant with money from investor.
RENEWABLE ENERGY PRODUCER WITH NO ASSETS WISHES TO BUILD RENEWABLE ENERGY PLANT
To ensure he can provide 20% ROI to his investor, Fred must recover costs by increasing the price of energy
OCTOBER 24th 2009
Fred
Fred finds an investor to invest in his business venture.
Investor Investor gives money
Investor gives money to Fred with expectation of 20% return on investment.
Trading
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Setup
Fred builds Solar Thermal Power Plant with money from investor.
New plant succeeds
Fred continues to trade successfully and the investor gets a 20% return on investment.
RENEWABLE ENERGY PRODUCER WITH NO ASSETS WISHES TO BUILD RENEWABLE ENERGY PLANT
To ensure he can provide 20% ROI to his investor, Fred must recover costs by increasing the price of energy
OCTOBER 24th 2009
Fred
Fred can no longer continue to keep trading.
Fred finds an investor to invest in his business venture.
Investor Investor gives money
Investor gives money to Fred with expectation of 20% return on investment.
New plant fails
Trading
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Setup
Fred builds Solar Thermal Power Plant with money from investor.
New plant succeeds
RENEWABLE ENERGY PRODUCER WITH NO ASSETS WISHES TO BUILD RENEWABLE ENERGY PLANT
To ensure he can provide 20% ROI to his investor, Fred must recover costs by increasing the price of energy
Fred continues to trade successfully and the investor gets a 20% return on investment.
OCTOBER 24th 2009
Fred
Fred can no longer continue to keep trading.
Fred finds an investor to invest in his business venture.
Investor Investor gives money
Investor gives money to Fred with expectation of 20% return on investment.
New plant fails
Trading
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
To ensure he can provide 20% ROI to his investor, Fred must recover costs by increasing the price of energy
Setup
Fred builds Solar Thermal Power Plant with money from investor.
No money
Both Fred and investor try to sell the business and do not get a return on investment.
New plant succeeds
RENEWABLE ENERGY PRODUCER WITH NO ASSETS WISHES TO BUILD RENEWABLE ENERGY PLANT
Fred continues to trade successfully and the investor gets a 20% return on investment.
OCTOBER 24th 2009
PAGE HEADING HERE
Investors have to get a high return on investment to
compete with putting money in a bank and getting a zero
risk return through fixed interest
OCTOBER 24th 2009
ZERO INTEREST SOLUTION
Fred
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
OCTOBER 24th 2009
ZERO INTEREST SOLUTION
FredFred enacts his right to zero interest loan from bank for $100m and provides 10% deposit
Bank
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
OCTOBER 24th 2009
ZERO INTEREST SOLUTION
FredFred enacts his right to zero interest loan from bank for $100m and provides 10% deposit
Bank Bank Creates Money
Bank creates $100m worth of money to loan to Fred. Bank will still charge transaction fees on repayments.
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
OCTOBER 24th 2009
ZERO INTEREST SOLUTION
FredFred enacts his right to zero interest loan from bank for $100m and provides 10% deposit
Bank
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Government
Government guarantees the money so bank doesn’t have to obtain deposits to cover the money so there is no need to charge Fred interest
Bank Creates Money
Bank creates $100m worth of money to loan to Fred. Bank will still charge transaction fees on repayments.
OCTOBER 24th 2009
ZERO INTEREST SOLUTION
FredFred enacts his right to zero interest loan from bank for $100m and provides 10% deposit
Bank
Loan
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Fred builds new solar plant using loan from Bank with 0% interest.
Government
Bank Creates Money
Bank creates $100m worth of money to loan to Fred. Bank will still charge transaction fees on repayments.
Government guarantees the money so bank doesn’t have to obtain deposits to cover the money so there is no need to charge Fred interest
OCTOBER 24th 2009
ZERO INTEREST SOLUTION
Fred
Fred begins trading with loan repayments being automatically deducted from his profit.
Fred enacts his right to zero interest loan from bank for $100m and provides 10% deposit
Bank
Trading Loan
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Fred builds new solar plant using loan from Bank with 0% interest.
Government
Bank Creates Money
Bank creates $100m worth of money to loan to Fred. Bank will still charge transaction fees on repayments.
Government guarantees the money so bank doesn’t have to obtain deposits to cover the money so there is no need to charge Fred interest
OCTOBER 24th 2009
ZERO INTEREST SOLUTION
Fred
Fred begins trading with loan repayments being automatically deducted from his profit.
Fred enacts his right to zero interest loan from bank for $100m and provides 10% deposit
Bank
Trading Loan
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Fred builds new solar plant using loan from Bank with 0% interest.
Government
New plant succeeds
Fred continues to trade successfully and eventually pays off loan.
Bank Creates Money
Bank creates $100m worth of money to loan to Fred. Bank will still charge transaction fees on repayments.
Government guarantees the money so bank doesn’t have to obtain deposits to cover the money so there is no need to charge Fred interest
OCTOBER 24th 2009
ZERO INTEREST SOLUTION
Fred
Fred begins trading with loan repayments being automatically deducted from his profit.
Fred enacts his right to zero interest loan from bank for $100m and provides 10% deposit
Bank
Trading Loan
Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
Fred builds new solar plant using loan from Bank with 0% interest.
Government
New plant succeeds
Fred continues to trade successfully and eventually pays off loan.
New plant failsFred can no longer pay back loan as he cannot make repayments. Fred loses 10% deposit
Bank Creates Money
Bank creates $100m worth of money to loan to Fred. Bank will still charge transaction fees on repayments.
Government guarantees the money so bank doesn’t have to obtain deposits to cover the money so there is no need to charge Fred interest
OCTOBER 24th 2009
ZERO INTEREST LOANS
Risk to the Government is Money supply increases if
too many loans fail so causing inflation.
OCTOBER 24th 2009
ENSURING LOANS ARE REPAID
Government decides the amount of money and areas of investment
needed – Government limits the Risks
Government distributes rights to loans to the population according
to political criteria. (equally, to low polluters). Taking up rights is
voluntary.
Population can sell their rights to the loan so risk averse
individuals need not invest
Loans are made with 10% deposit and defined automatic
repayments when investments earn income
If Bank, Plant Owner or Investor break the rules, they are not permitted to
participate in future zero interest loans and have to repay all loans.
This ensures those that try and fail aren’t punished but those who cheat are.
How do we ensure compliance?
OCTOBER 24th 2009
SUMMARY
Low Cost Finance Gives Low Cost Renewable
Energy
ZERO emissions by 2020 with $1,500 loans per
person per year.
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