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Bangkok's Low-interest Loans for Building Retrofits = win-win-win

When a building owner retrofits their building, everybody wins. In Thailand, the Ministry of Energy gives loans at 3-4% for building retrofits. Over 300 buildings retrofitted, 2 billion US dollars invested, and 75 million USD/year saved.

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In Thailand, there is a small sliver of a tax on all petroleum sold. That tax goes into a revolving loan fund for energy efficiency and building retrofits. That fund loans up to 1.5 million USD per project with a cap of 4% (the building owner can negotiate a lower rate depending on their credit) and a maximum of 7 years payback. That money can be used to replace old windows, upgrade air conditioning, or put solar on the roof, etc. Energy efficiency projects typically have a return on investment that is considerably better than investing in the S&P500 or a US treasury bond (average IRR of 25% across 40 projects in Bangkok) - first win - the building owner has a financial incentive.

Energy efficiency reduces energy use and carbon emissions - second win - the climate (average of ~5000 tCO2e/year reduced across 40 projects in Bangkok).

A retrofit also improves the air quality and lifestyle of the building and the community - third win - the inhabitants. As people, we exist in our built environment, our experience of the world is affected by the quality of that environment.

Lastly, of the 300+ projects that have gone through the fund's pipeline, the default rate is less than 1%.  In comparison, a typical mortgage portfolio (pre 2008) has a default rate of ~5%. Furthermore, because it is a revolving fund, all repayment is then re-loaned to new projects. Fourth win - the government and the banks - the government and the banks have a low risk investment that keeps on giving.

That is putting tax dollars to good use.

There are a number of other municipalities, states, nations, and development agencies who have similar incentive programs. If you know of any, please share!

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Photo of Sarah Fathallah

What an interesting business model! Thanks for sharing Nat!