Tuesday, February 12, 2008

Dr. Makhijani - Some More

I thought that Dr. Makhijani made some interesting points in his presentation today but I also had a problem with his reasoning about the retrofitting of existing homes by simply adding the costs to the mortgage.

This idea is a very regressive solution. It directly impacts first-time homeowners, low-income/working class families, and further forces the burden of retrofitting onto those who can least afford it because significantly more $100K homes are purchased than $1m homes.

Nonetheless, his idea about retrofitting houses as they are sold is an interesting idea to force the fact. California has similar legislation regarding limiting property tax increases on homes until they are sold, at which point taxes readjust to market value. Although a completely different context i.e. taxes and energy conservaiton, the results have been surprising and could provide insight into the types of problems that might be incurred by such a obligation.Perhaps tax credits could be offered over the length of a mortgage with incurred retrofitting costs. Tax credits would appeal to the 'more affluent circles' most able to pay. This is also the principle behind the Kyoto agreement . . . developing countries (China & India) dont pay the costs of development whereas developed countries (US, EU) do.

I'm not in a position to fully address the point that the energy savings would outweigh the cost of retrofitting however, it appeared to me that he grossley oversimplified their relationship. Time-value of money considerations must be made and projections about future energy costs, efficiencies, and further retrofitting requirements also considered to lay claim to savings exceeding costs.

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