by Jen Weiss

Jen Weiss is a Finance Analyst at the Environmental Finance Center. 

Mention the words ‘climate change’ and you will likely get a variety of responses. Nationally, opinions range from sentiments like former Vice President Al Gore’s declaration in 2005 that “we are facing a global climate crisis” to geology scientist Martin Keeley’s 2004 statement that “global warming is indeed a scam, perpetrated by scientists with vested interests.”  Despite all of the controversy, last month President Barack Obama laid out his own views on climate change:  “Our planet is changing in ways that will have profound impacts on all of humankind … those who are already feeling the effects of climate change don’t have time to deny it – they’re busy dealing with it.”

Whether or not you are in agreement that climate change is real or what the long term effects of it may be, one thing is true – it is a huge topic of conversation.  And when it comes to conversations about climate change, it isn’t just the environment that gets top billing.  Often, the climate discussion comes down to pure economics.  President Obama’s June 2013 Climate Action Plan is focused on reducing carbon emissions that cause climate change and affect public health.  One of the three primary ways he plans to do this is to cut carbon “pollution” – similar to the way we have reduced pollution from toxins like lead, mercury and arsenic – so Americans can “protect the health of our children and move our economy toward American-made clean energy sources that will create good jobs and lower home energy bills.”

Cutting carbon pollution – or energy waste – in homes, businesses and factories is an admirable goal, but there are often financial barriers that restrict widespread investment into clean energy solutions.  Even energy efficiency, the low hanging fruit of the clean energy world, is not free.  And let’s face it, investment in compact fluorescent bulbs and programmable thermostats is not sexy. In order for investment in energy efficiency projects to really make a difference in the climate change discussion, the financial aspects of reducing carbon emissions must be easy to understand, measurable, and wallet friendly.  While many incentives, rebates and tax credits are available to assist homeowners and businesses invest in clean energy projects (visit for a complete listing), it is the more creative financial mechanisms that just might move the climate change needle downward.

A few of my favorite financial mechanisms endeavor to take some of the financial uncertainty out of the equation.  By reducing the upfront capital cost to building owners and matching savings (or more appropriately, avoided costs) from reduced energy use with loan repayment, these three mechanisms offer carbon reduction choices that are easier on the wallet.

Utility On-Bill Repayment

An on-bill repayment program enables building owners to repay loans for energy efficiency and renewable electricity generation projects through their monthly utility bills. In most cases, a financial institution lends the money and the participating utility agrees to collect monthly payment for the repayment of the loan.  In some cases the utility acts as the lender as well.  The loan payments are part of the customer’s monthly utility bill and, once collected, are used to repay the customer’s loan obligation.  The goal of most on-bill repayment programs is for the customer’s bill to remain “payment neutral” – the total amount paid to the utility remains the same – since the reduction in energy expenditures offsets the increase in the utility bill associated with the loan payment.  In 2011, Central Electric Power Cooperative, the wholesale power provider to South Carolina’s 20 electric cooperatives, launched Help My House, a 125 home pilot of on-bill repayment.  On average, the homes participating in the pilot reduced their energy use by 34% or almost 11,000 kwh annually with average net savings (after loan repayment) of $288 each year. On-bill repayment programs result can result in an improvement in building efficiency without an increase in monthly expense for the building owner.

Employee Benefit Programs

A relatively new type of energy efficiency investment program is being offered by companies to employees.  Similar to a 401(k) or an employee health plan, a company might offer to help finance clean energy projects for its employees as part of its suite of benefit offerings.  The Clinton Climate Initiative, part of the Clinton Foundation, has launched its own version of an employee benefit program – the Home Energy Affordability Loan (HEAL) program – that helps to facilitate a commercial retrofit to employers’ buildings and gives employees an opportunity to receive home energy audits. Employees can choose to make their homes more energy efficient through improvements and appliance upgrades, which will lower their utility bills. HEAL uses payroll deduction to repay the loans that finance the retrofits.  The resulting reduction in carbon emissions and avoided energy costs is a win-win for the company and the employee.

Residential and Commercial Building Assessments

Some states have started to use Property Assessed Clean Energy (PACE) programs to finance renewable energy and energy efficiency projects, although the programs are almost as controversial as climate change itself. PACE programs use a special assessment on the building owner’s property – much like a property tax. In most cases, a local government will finance energy efficiency and renewable energy improvements to private property. Under PACE, property owners allow a “special assessment” to be placed on the property to pay for the improvement.   The assessment is paid annually like a property tax bill. More on PACE programs can be found in the Environmental Finance Center’s report “Assessment of PACE Local Government Financing Issues in Three States.”

Just as there are many ways to reduce carbon emissions, there are many ways to finance the cost of clean energy projects. President Obama’s climate action plan focuses on our “moral obligation to future generations to leave them a planet that is not polluted or damaged.”  How we get there is up to each of us individually, but the path we take will be much more straightforward if the environmental decisions we make have a minimal effect on our wallets.


MH900442173Do you have a favorite wallet-friendly energy efficiency financing mechanism?  Comment below and tell us more!