Energy-efficient upgrades for homeowners
By Gina Pogol
One of the biggest drawbacks to many energy-efficient improvements is that they require a sizable investment upfront but can take many years to pay for themselves. So homeowners who don’t expect to be in the home long enough to reap the benefits skip the upgrades that could be good for the environment as well as the pocketbook.
What Is PACE?
PACE was created to solve this problem. Under the program, counties raise money through bonds and use them to finance homeowners’ energy-efficient upgrades. The homeowners pay back the loans over time as special assessments on their property tax bills.
Thus the cost of the improvements can be paid for over time with the savings they generate. If the property is sold before the loan is repaid, the new owners take over the assessment. This way, the upgrades are always paid for by the person benefiting from them. The program was quite popular in its first years.
Fannie and Freddie Spoil the Party
However, Fannie Mae and Freddie Mac, which together control about 90 percent of non-government mortgages in the country, have chosen to classify these assessments as loans, not taxes. The mortgage giants decided that in the event of a home foreclosure, the PACE program would be in first position and get paid before the mortgage lenders – this goes against their guidelines.
Fannie Mae's May 2010 letter to lenders characterized the PACE tax assessments as “loans” with "senior lien status to a mortgage”; Freddie Mac joined in the same day with a letter reminding mortgage lenders that an “energy-related lien may not be senior to a mortgage delivered to Freddie Mac.”
Because this could make it difficult or impossible for potential buyers to get financing on the PACE homes, it makes them difficult or impossible to sell. Congressional and legal challenges to the agency’s rulings have failed to overturn them.
Residential PACE Programs Move Forward
Some states and municipalities have continued their residential PACE programs. These programs have taken a number of different approaches to residential PACE as a result of the FHFA’s positions.
Some have chosen to make PACE a junior lien with lower priority than mortgage payments. Vermont, Oklahoma, Maine and Rhode Island have taken this route. Unfortunately, giving PACE junior lien status makes the program less attractive to investors.
Some municipal and county programs keep PACE as a senior lien, providing disclaimers for homeowners enrolling in the programs. Western Riverside Council of Governments has taken this approach in California with the HERO Program. The program addressed the FHFA’s requirements by giving homeowners two cautionary messages. First, homeowners should review their mortgages for any provisions that may be triggered by the assessment. Second, they may have to pay off their assessments when they sell or refinance their homes.
FHA, VA Provide Alternatives
Those who'd like to make their homes more energy-efficient have other options. FHA makes home improvement loans and you don't need home equity to qualify. The loan amount is based on the improved value of the property. These loans take the form of either refinances that include extra funds to pay for qualified improvements, including energy efficiency upgrades, and personal loans for lower amounts. Some personal loans don't even involve liens against your property.
The VA will refinance your mortgage if you’re eligible, and you can add up to $6,000 for qualified energy-related home improvements.Finally, conventional home equity loans and HELOCs are the classic methods of financing home improvements, including energy-efficient upgrades. Interest rates are still exceptionally low, and as housing values increase, more homeowners are finding they have home equity to convert to cash for improvements.
Improving your energy efficiency is a worthy goal and can be accomplished in several ways. Explore your mortgage alternatives and check out home equity loan rates
Author Bio: Gina Pogol spent over a decade in mortgage lending, originating, processing and underwriting home loans. She has written about mortgage rates and finance issues for a number of publishers since 2006. Currently a senior marketing manager with Lending Tree, Gina advocates for consumers and loves answering their mortgage and personal finance questions.
Carbon dioxide removal revenues worth £2bn a year by 2030
Carbon dioxide removal revenues could reach £2bn a year by 2030 in the UK with costs per megatonne totalling up to £400 million, according to the National Infrastructure Commission.
Engineered greenhouse gas removals will become "a major new infrastructure sector" in the coming decades - although costs are uncertain given removal technologies are in their infancy - and revenues could match that of the UK’s water sector by 2050. The Commission’s analysis suggests engineered removals technologies need to have capacity to remove five to ten megatonnes of carbon dioxide no later than 2030, and between 40 and 100 megatonnes by 2050.
The Commission states technologies fit into two categories: extracting carbon dioxide directly out of the air; and bioenergy with carbon capture technology – processing biomass to recapture carbon dioxide absorbed as the fuel grew. In both cases, the captured CO2 is then stored permanently out of the atmosphere, typically under the seabed.
The report sets out how the engineered removal and storage of carbon dioxide offers the most realistic way to mitigate the final slice of emissions expected to remain by the 2040s from sources that don’t currently have a decarbonisation solution, like aviation and agriculture.
It stresses that the potential of these technologies is “not an excuse to delay necessary action elsewhere” and cannot replace efforts to reduce emissions from sectors like road transport or power, where removals would be a more expensive alternative.
The critical role these technologies will play in meeting climate targets means government must rapidly kick start the sector so that it becomes viable by the 2030s, according to the report, which was commissioned by government in November 2020.
Early movement by the UK to develop the expertise and capacity in greenhouse gas removal technologies could create a comparative advantage, with the prospect of other countries needing to procure the knowledge and skills the UK develops.
The Commission recommends that government should support the development of this new sector in the short term with policies that drive delivery of these technologies and create demand through obligations on polluting industries, which will over time enable a competitive market to develop. Robust independent regulation must also be put in place from the start to help build public and investor confidence.
While the burden of these costs could be shared by different parts of industries required to pay for removals or in part shared with government, the report acknowledges that, over the longer term, the aim should be to have polluting sectors pay for removals they need to reach carbon targets.
Polluting industries are likely to pass a proportion of the costs onto consumers. While those with bigger household expenditures will pay more than those on lower incomes, the report underlines that government will need to identify ways of protecting vulnerable consumers and to decide where in relevant industry supply chains the costs should fall.
Chair of the National Infrastructure Commission, Sir John Armitt, said taking steps to clean our air is something we’re going to have to get used to, just as we already manage our wastewater and household refuse.
"While engineered removals will not be everyone’s favourite device in the toolkit, they are there for the hardest jobs. And in the overall project of mitigating our impact on the planet for the sake of generations to come, we need every tool we can find," he said.
“But to get close to having the sector operating where and when we need it to, the government needs to get ahead of the game now. The adaptive approach to market building we recommend will create the best environment for emerging technologies to develop quickly and show their worth, avoiding the need for government to pick winners. We know from the dramatic fall in the cost of renewables that this approach works and we must apply the lessons learned to this novel, but necessary, technology.”
The Intergovernmental Panel on Climate Change and International Energy Agency estimate a global capacity for engineered removals of 2,000 to 16,000 megatonnes of carbon dioxide each year by 2050 will be needed in order to meet global reduction targets.
Yesterday Summit Carbon Solutions received "a strategic investment" from John Deere to advance a major CCUS project (click here). The project will accelerate decarbonisation efforts across the agriculture industry by enabling the production of low carbon ethanol, resulting in the production of more sustainable food, feed, and fuel. Summit Carbon Solutions has partnered with 31 biorefineries across the Midwest United States to capture and permanently sequester their CO2 emissions.
Cory Reed, President, Agriculture & Turf Division of John Deere, said: "Carbon neutral ethanol would have a positive impact on the environment and bolster the long-term sustainability of the agriculture industry. The work Summit Carbon Solutions is doing will be critical in delivering on these goals."
McKinsey highlights a number of CCUS methods which can drive CO2 to net zero:
- Today’s leader: Enhanced oil recovery Among CO2 uses by industry, enhanced oil recovery leads the field. It accounts for around 90 percent of all CO2 usage today
- Cementing in CO2 for the ages New processes could lock up CO2 permanently in concrete, “storing” CO2 in buildings, sidewalks, or anywhere else concrete is used
- Carbon neutral fuel for jets Technically, CO2 could be used to create virtually any type of fuel. Through a chemical reaction, CO2 captured from industry can be combined with hydrogen to create synthetic gasoline, jet fuel, and diesel
- Capturing CO2 from ambient air - anywhere Direct air capture (DAC) could push CO2 emissions into negative territory in a big way
- The biomass-energy cycle: CO2 neutral or even negative Bioenergy with carbon capture and storage relies on nature to remove CO2 from the atmosphere for use elsewhere