RENEWABLE ENERGY
Green investing
Buy a bond, save the planet
Tom Rand wants to make Canada a renewable energy superpower
Last Updated: Tuesday, July 22, 2008 | 7:53 AM ET
By Eve Savory CBC News
Tom Rand says we are at war with carbon.
The 40-year-old engineer and venture capitalist believes the problem of climate change is so serious that he has invested heavily in green enterprises and renewable energy technologies.
Tom Rand in the Queen Charlottes. (Amelie Messier) Now he and a team of Action Canada Fellows want you to have a chance to do the same.
They believe the public is far ahead of government in wanting to reduce carbon dioxide emissions into the atmosphere. Canadians are "biting at the bit to do something other than change a light bulb," Rand has written.
Canada's prime minister has called the country an "energy superpower." The Action Canada team, however, funded by the federal government and private money to explore public policy issues, says that should be renewable energy superpower.
They have put forward a proposal they say could make it happen, if the government will follow Europe's successful example — with Canadian Green Bonds.
CBC News spoke to Tom Rand about the proposal.
CBC News: What are Green Bonds?
Tom Rand: Green Bonds are like a victory bond but for the environment. They are designed to engage Canadians directly in what we believe is the most important battle of this generation, which is the battle against climate change. So the green bond is a way for the public to buy a government-backed financial instrument and the money that is raised from that bond will go directly into accelerating the deployment of renewable energy production.
How would I buy them, what rate would they pay, who would manage it?
The government backs the bond, so their role is really in saying, we guarantee the principal plus a minimal rate of interest, which would be similar to a Canada Savings Bond.
The private sector would bid on the contract to manage the fund. So the government would say, you need to lend this money out, and then you need to show me that you are reducing carbon at as low a dollar cost per ton as you can. The private sector lends the money out to companies who produce renewable energy.
So the taxpayer is carrying the risk.
There is a cost. It is a subsidy. There is no question the government will have to eat some of these bonds. That's the cost of this program. However, our argument is that for the reduction of carbon, this is more efficient than any other subsidy the government currently makes. We've done the analysis and we say, this is the cheapest way for the government to reduce carbon in the short-term.
'We think you could raise tens of billions of dollars a year on this.'—Tom Rand
But what we are also saying is that the softer benefit of that policy is that it directly engages the public in this, so it is a nation-building project. It's like the victory bonds, right? So it helps to shift people's psychology into seeing that a) this is something we all have to participate in, and b) I've now got some upside in this; I've put $1,000 into a green bond; I'm contributing to this thing.
And from a practical level, as that money begins to amass, we think you could raise tens of billions of dollars a year on this.
Tens of billions?
Tens of billions if the government gets behind it, solidly behind it.
Seeking a Champion
What is happening with the government on this?
We've had a lot of meetings in Ottawa, and there is genuine interest in this, but everyone seems to be a little scared to take the first step forward.
So it seems to me that the missing element in our picture is the line department champion who would normally be Minister [of the Environment John] Baird. He has yet to step forward and champion this proposal although we are still hoping that he does.
What kinds of projects could borrow the money?
The kind of infrastructure the Green Bonds are aimed at, once it gets accepted, once it gets adopted, once the government gets more comfortable with it, is these large-scale pieces of infrastructure that individual companies are not really willing to undertake. Not the companies who are building technology, but the companies that are buying existing technology and producing renewable energy.
'We can fill our prairies with windmills. And we can fill the Bay of Fundy with tidal … and we can do it starting tomorrow.'—Tom Rand
These are companies that would buy technology that already exists? So it's not going to be pushing innovation forward?
We're not funding technology directly, but what we are funding is a market for technology. We are providing demand — suction for those technologies — into the marketplace. So in that sense, what we are doing is we are filling a hole that exists right now.
What is missing is when those technologies are ready to go, they are expensive because there is no demand for them. And there is no demand for them on a large scale because commercial banks will not lend money for large-scale installations of these technologies because they are not familiar with [them].
So for example if I want to build a coal plant, compared to a biogas plant, and I went to the bank and borrowed money for the coal plant, they will lend me money at prime, assuming I am a good company. But funding a biogas plant or a tidal generation plant, that's going to be about 18 per cent, because they're just not familiar with it.
'We know it works. Engineers have signed off on it. It works. But banks don't get it yet.'—Tom Rand
So being able to borrow [cheap] money is going to give them a marketplace?
That's right. [Take] the companies that build what will be the next generation of wind turbines — we call them threshold technology, technologies that are, from an engineering point of view, sound.
We know that they produce energy. They've gone through all their pilot tests. We know it works. Engineers have signed off on it. It works.
But banks don't get it yet. Banks need to see technology in commercial scale operations for 10 to 15 years before they give their best rates. That's why they make money. They are enormously conservative. But that's not what we need right now.
So the companies that are producing the next generation of renewables, their customers can't find capital. Not cheap capital, anyways. So what Green Bonds do is promote innovation, because it provides a marketplace for innovative products.
Canada's renewable potential
But the banks also see risk there.
When we first built the railway … that was a nation-building project that changed the face of our country forever. That's what Green Bonds is meant to be in 10 years' time. It's meant to provide things like a high-efficiency DC line up to Hudson Bay so we can open Hudson Bay to wind, and if we did that you could power every vehicle in North America.
'When we first built the railway … that was a nation-building project that changed the face of our country for ever. That's what Green Bonds is meant to be.'—Tom Rand
That potential is there for this country, and Green Bonds is meant to sort of provide the paving stones to get us there. We can produce more renewable energy than any other country on the planet. Tidal, wave, biomass, wind, geothermal …. We can fill our prairies with windmills. And we can fill the Bay of Fundy with tidal …. And we can do it starting tomorrow.
So part of what Green Bonds is supposed to do is just take advantage of that. And just say, well, while everyone else is just trying to sort out the big problem [of climate change], we are just going to produce massive amounts of renewable energy from existing technologies. Why? Because we have the physical space to do it. How are we going to fund it? Canadians are going to buy a bond.
And that's a nation-building project for this generation's war, which is a war on carbon …. It is a war. And that's why it's a victory bond. Canada is participating in the solution.
For more on the proposal you can read the Public Policy Proposal at http://www.greenbonds.ca/GB_Policy.pdf.
