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Energy efficient homes are unaffordable with conventional bank financing. Locally issued value indexed bonds will make them affordable.



The technologies to build homes that address climate change are readily available.  Include the distributed production of heat and biochar in homes, from local biomass, and living in a home can truly be carbon negative.  

The problem is that the average home buyer will own his home for only 7 years and it will take a little more than 6 years just to pay back enough principal to cover all the closing costs.  Is it any wonder that we can't afford to build energy efficient homes with bank financing?

Currently the US residential mortgage debt alone stands at $10.834 trillion.  The total bill for interest and fees this year will be well in excess of a half a trillion dollars.   

What makes the problem far worse is that, as unbelievable as it may sound, when the principle is paid, it vanishes into thin air from whence it was created, the same way it vanishes when the borrower defaults on the loan. See reference #5.

Meanwhile the interest paid does not vanish into thin air, but does vanish from the community along with the jobs, to be invested offshore by climate deniers who refuse to pay any new taxes that could be used to build energy efficient homes.

The solution is to finance energy efficient residential buildings with locally issued bonds indexed to the current value of the home. The payments and energy bills will be much less and every payment will be to a bond holder and applied to equity.  These bonds could also be used as, or to back, a local currency for their current value.

Instead of the debtor/creditor relationship that dominates our economy, we could have a partnership between home buyers and bond holders that share the economic and moral advantages of addressing climate change.

With this kind of partnership we can eventually turn our communities into mortgage free sanctuaries that can eventually afford to rebuild our communities in a way that addresses climate change in every aspect of our lives.

What actions do you propose?

Who will take these actions?

The short answer is anyone who sees partnership investing in residential buildings that address climate change as the best and most moral investment they can make. Also anyone that sees the financial advantages yo investing in a REIT could se the same advantages to investing in a LNC.  

More than half of the investment needed to build or remodel residential buildings into energy efficient buildings that address climate change is labor. The one thing that you can be sure of is that in poor communities there is an abundance of labor that is either unemployed or underemployed and investing in the LNC could be the only opportunity they have to work.

To motivate this labor force to invest their excess labor in exchange for bonds, the LNC can guarantee that it will use payments made by cash investors to purchase the bonds from local vendors that have accepted them for goods and services before new projects are financed.  As it becomes apparent that the bond increase in value, relative to the dollar, and that more goods and services are becoming available locally, the demand for redemption by vendors will decrease.

In addition to the above incentives investors will also be attracted by their investment in bonds not violating any social, environmental or religious prohibitions against usury.

The home buyer is also a critical actor and will be attracted for all the above reasons. But the overwhelming advantage for the poor is that it is perhaps the only opportunity a poor person may ever have to own his own home for less money than he is now paying for rent and non-renewable energy. Furthermore every payment made on a home will be applied to equity. .

All these same advantages, plus the creation of many new jobs, will also attract the migration of skilled labor and retired people, and many of the people that move into the community will be in a position to pay significant down payments or cash for their homes thereby leveraging many new projects.

Where will these actions be taken?

Everywhere that affordable energy efficient buildings can be seen as a way to increase the standard of living, security and address Climate change.

The first place these actions should take place are in small isolated villages, like the one where I live, where perhaps as little as 5% of the income, mostly from entitlements and low income seasonal work, ever circulates in the community. People often live in these poor communities because of the low rent or very cheap homes.  Ironically the energy utilities are often higher than the rent.

Significantly, interest free financing of energy efficient homes in poor communities will, by contrast, create the most awareness of the investment and environmental benefits that can stimulate its adoption in towns, cities, and rural areas, globally.

Poor countries could also benefit from a similar financing arrangement with the difference being that the money portion of the investment needed for tools and materials could also come from investors in developed countries.  To encourage government participation, a small annual tax could be charged on the current value of the money portion of the investments.

How much will emissions be reduced or sequestered vs. business as usual levels?

What are other key benefits?

  1. A vigorously expanding property tax base.

  2. Reduced dependency on welfare.

  3. Rapid growth in production of goods and services in response to the expansion of local currency.

  4. A rapid expansion of construction and renewable energy technology jobs that will stimulate the migration of qualified investors of labor to fill the jobs not already filled by local labor.

  5. The opportunity to expand alternative financing to commercial buildings and sustainable agriculture in the area.

  6. Alternative financing will provide a safety net that will prevent the sudden collapse of the banking sector that could doom efforts to address climate change.

  7. Renters who have never dreamed of owning a home will find it cheaper to buy an efficient home than it is to rent.

  8. Eliminating the divide between renters and landlords helps create civic pride, cooperation and commitment to building a better community.

  9. An important benefit is that the interests of labor and home buyers would be aligned with the interests of other investors.  

What are the proposal’s costs?

All of the costs will be paid for by the savings in interest paid to the banks and the net savings in energy, while producing the bonus of truly affordable energy efficient homes and unprecedented economic development for poor communities.

Conversely, conventional buildings that can not be affordably remodeled with the local financing are sure to decline in value rapidly when energy efficient residential buildings that address climate change are more affordable and available.

I am even looking forward to the day when the primary value of a conventional residential building, that can not be affordably brought up to the standards that adequately address climate change, will be the value of the materials for recycling into residential building that do address climate change.

Time line

Many people believe that, primarily because of climate change, our unsustainable banking system is going to collapse or at least fail in a much bigger way than it has ever failed before. If this happens it will make it even more difficult or impossible to address climate change in a meaningful way.

Looking at the states around the globe that are failing now, largely because of the stresses of climate change, we see that even more stress is being placed on the environment by these failing states.

What I am saying here is that we are running out of time. A failure of our banking system before there is an alternative in place may destroy our very last chance to address climate change before it's too late.

With proven alternatives in place we can hope for an orderly nonviolent alternative to our banking system, to the extent that the banking system will no longer be an obstacle to addressing climate change.

We don't know how much time we have left on the economic front but if within the next 2 or 3 years we have a highly visible alternative in place it could lead to a paradigm shift that could offer a lot of hope that we can address climate change before it is too late.

Related proposals

Carbon-negative biochar economies Carbon-negative biochar economies

Fix the system-get a global circular economy Fix the system - get a global 'circular economy'


1.  Seven Policy Switches For Global Security Presented At Nato Advanced Research Workshop, Split, Croatia 17th-18th June


3.  Richard D Wolff - Leading Marxian economist with analysis of why we can not fix our capitalist economic system.

4.  Progress and Poverty by Henry George, 1880, abridged by Bob Drake, 2006.  Describes the role of land speculation in our economic system.

5.  Fractional Reserve Banking: How to Create and Destroy Money