Contributed by Robert Lyman © 2019
Robert Lyman is an Ottawa energy policy consultant. He was a public servant for 27 years and prior to that he served as a diplomat for 10 years.
A small but vocal group of Canadians who call themselves “The Leap” are backing the idea that Canada should adopt a Green New Deal, such as that advocated by several candidates for leadership of the Democratic Party in the United States. The Green New Deal is an idea (one can hardly call it a plan) to socialize most aspects of the American economy and to eliminate the use of fossil fuels (i.e. coal, oil and natural gas) by 2030, with the transformational changes all paid for by a tax on “the rich”.
One of the central parts of the energy proposals in the Green New Deal is that all (i.e. 100 per cent) of the housing stock in the United States would be retrofitted to reduce GHG emissions to zero in the next eleven years. The Leap in Canada supports the same objective here.
I was reminded of this in reading a recent article written by Michael Kelly, a professor at the University of Cambridge, in which he described a 2019 U.K. government report stating that “the 29 million existing homes in the U.K. must be made low-carbon, low-energy and resilient to climate change”. Professor Kelly’s article can be read here:
In it, he described his experience in advising on a pilot program launched by the UK government in 2008. That program, called, “Retrofit for the Future” committed 150,000 pounds (Canadian $262,000 at today’s exchange rates) to retrofit each of 100 houses in the housing association (i.e. social housing) sector. The target for the program was to reduce per house GHG emissions by 80%, largely by installing full wall insulation, underfloor insulation, the newest high-efficiency appliances, and other measures. The efficiency improvement goal was not attained (some units reached 60 per cent GHG emissions reduction), even at that elevated cost.
The City of Cambridge subsequently considered a proposal to retrofit the city’s 49,000 homes and 5500 other buildings at a cost of 700,000 to one billion pounds (Canadian $1.2 billion to $1.7 billion) to halve the CO2 emissions. The City declined. If that proposal were to be extended to all 29 million existing homes in the U.K., the cost of retrofitting would be about 4.3 trillion pounds (Canadian $7.5 trillion).
If the typical U.K. household energy bill of 2,000 pounds per year (Canadian $3,500) were halved, the saving would be 29 billion pounds (Canadian $51 billion) per year, and the payback time would be 150 years.
Proponents of expensive emissions reduction measures often claim that, if they were ordered to be done in the entire economy, the resulting economies of scale would reduce costs to a more manageable level. However, in the U.K., private lenders would not agree to finance a home improvement unless the payback period were about 3-4 years, rising to perhaps 7-8 years on infrastructure investments in the home. There is no way that the payback period could be reduced to that level, especially in eleven years.
If private lenders would not touch such uneconomic investments, would governments? There are about 14 million housing units in Canada. If the cost of major housing retrofit here were the same as in the U.K., the cost to halve GHG emissions would be $3.6 trillion.
How much is $3.6 trillion ($3,600,000,000,000)? If you were given a guaranteed annual income of $100,000 per year from such a fund, you would have to live 36,000 years to spend it, even if you received no interest. It costs about $6 million per kilometer to build a highway in Canada, and the distance from Halifax to Vancouver is just under 6,000 km. You could build a highway that crossed Canada 100,000 times for $3.6 trillion. It costs about $2 billion to build a new hospital in Canada; you could build 1800 of them for $3.6 trillion. If you laid $3.6 trillion U.S. one dollar bills on their edge in a row, they would stretch around the earth at the equator 10 times.
Which political party will commit to that?
Compare housing retrofit costs to GDP of countries:
Read our “LookB4ULeap Manifesto”