Zero Interest Loans for Energy Sustainability

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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.

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Zero Interest Loans for Energy Sustainability

  1. 1. Financing Sustainability <ul><li>Kevin Cox </li></ul><ul><li>Ngunnawal ACT </li></ul>
  2. 2. OCTOBER 24 th 2009 <ul><li>If we achieve Energy Sustainability we will have the resources to fund other sustainability e.g. BioDiversity or Water . </li></ul>Financing Sustainability
  3. 3. OCTOBER 24 th 2009 Proportion of Energy Costs
  4. 4. OCTOBER 24 th 2009 Today’s Costs in Cents per KWH
  5. 5. OCTOBER 24 th 2009 Estimated 2020 Costs in Cents per KWH
  6. 6. OCTOBER 24 th 2009 Price of Energy to Compete with Coal
  7. 7. OCTOBER 24 th 2009 Cost to Save 1kg of CO2
  8. 8. OCTOBER 24 th 2009 <ul><li>If we reduced the cost of finance we would make Sustainable Energy Immediately Profitable </li></ul>Financing Sustainability
  9. 9. OCTOBER 24 th 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.
  10. 10. OCTOBER 24 th 2009 Fred Fred 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
  11. 11. OCTOBER 24 th 2009 Fred Fred requests loan from bank for $100m. Bank Bank 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
  12. 12. OCTOBER 24 th 2009 CURRENT SITUATION – SCENARIO ONE Fred Fred 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
  13. 13. OCTOBER 24 th 2009 CURRENT SITUATION – SCENARIO ONE Fred Fred 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
  14. 14. OCTOBER 24 th 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 Loan 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 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
  15. 15. OCTOBER 24 th 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 Loan 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 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.
  16. 16. OCTOBER 24 th 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 Loan 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 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.
  17. 17. OCTOBER 24 th 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 Loan 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 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
  18. 18. OCTOBER 24 th 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
  19. 19. OCTOBER 24 th 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.
  20. 20. OCTOBER 24 th 2009 Fred Fred finds an investor to invest in his business venture. Investor 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
  21. 21. OCTOBER 24 th 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
  22. 22. OCTOBER 24 th 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
  23. 23. OCTOBER 24 th 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
  24. 24. OCTOBER 24 th 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
  25. 25. OCTOBER 24 th 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.
  26. 26. OCTOBER 24 th 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.
  27. 27. OCTOBER 24 th 2009 <ul><li>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 </li></ul>PAGE HEADING HERE
  28. 28. OCTOBER 24 th 2009 ZERO INTEREST SOLUTION Fred Wants to build a Solar Thermal Power Plant. Currently has no assets to secure bank loan.
  29. 29. OCTOBER 24 th 2009 ZERO INTEREST SOLUTION Fred Fred 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.
  30. 30. OCTOBER 24 th 2009 ZERO INTEREST SOLUTION Fred Fred 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.
  31. 31. OCTOBER 24 th 2009 ZERO INTEREST SOLUTION Fred Fred 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.
  32. 32. OCTOBER 24 th 2009 ZERO INTEREST SOLUTION Fred Fred 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
  33. 33. OCTOBER 24 th 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
  34. 34. OCTOBER 24 th 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
  35. 35. OCTOBER 24 th 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 fails Fred 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
  36. 36. OCTOBER 24 th 2009 <ul><li>Risk to the Government is Money supply increases if too many loans fail so causing inflation. </li></ul>ZERO INTEREST LOANS
  37. 37. OCTOBER 24 th 2009 <ul><li>How do we ensure compliance? </li></ul>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.
  38. 38. OCTOBER 24 th 2009 <ul><li>Low Cost Finance Gives Low Cost Renewable Energy </li></ul><ul><li>ZERO emissions by 2020 with $1,500 loans per person per year. </li></ul>SUMMARY
  39. 39. Thank you <ul><li>Kevin Cox </li></ul><ul><li>cscoxk.wordpress.com </li></ul><ul><li>[email_address] </li></ul>

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