Iras & Rnergy--Investing in Renewables

[Paul Rogat Loeb]

As state and federal initiativesbegin to give renewable energy systems a chance to cost out economically as well as environmentally, we still face the question of where individual home-owners will find the money to install them. What if we allowed people to use money from their IRAs and 401Ks?

Obviously we need more than just individual consumer actions, but if we’re going to shift to renewables, much of this will happen through individuals responding to government incentives. This has been the model pursued by states like California, New York and Washington, and how Germany developed its highly successful solar photovoltaic program. As rebate, tax credit, and subsidy programs have begun to make individual photovoltaic installations cost out within a reasonable time frame (solar hot water already did), we now face the question of where people will get the money to pay for them.

One good option is Al Gore’s suggestion of a Carbon Neutral Mortgage association, designed to finance renewable technologies with low interest loans. Another is for homeowners to fold the cost into their existing mortgages, or work out arrangements through local utilities.

But if we’re looking at where most Americans have their savings, why not allow them to tap their IRAs and 401Ks. A modest change would let people withdraw tax-deferred funds without penalties, while still paying taxes on their gains--just as they can for higher-education and first-time home purchases. A stronger option would allow them to withdraw their appreciated funds tax free. This would cost some tax revenues, but would be a major encouragement for people to purchase these systems.

Obviously this wouldn’t work for everyone. America already faces a crisis of low retirement savings, stemming from stagnating low-end incomes. If you can’t afford to put funds away for retirement, you can’t afford to purchase $20,000-solar electric systems, or even $5,000 solar hot water systems, even if the rebates and credits will pay back down the line. So we need initiatives that address the situation of those without additional financial resources—instead of cutting low-income weatherization programs, as has the Bush administration, we need to extend these programs to address not only conservation but the installation of renewable energy systems. But just as no single magic bullet will solve global warming, so no single approach will address how to finance the alternatives. Given the magnitude of the global climate change crisis, we need to get all the renewables installed that we can, increasing their visibility while lowering prices through economies of scale. By furthering this process, allowing people to buy solar systems with their retirement savings could let them continue to invest in their individual future while helping secure a better common future for us all.


Paul Rogat Loeb is the author of The Impossible Will Take a Little While: A Citizen's Guide to Hope in a Time of Fear, winner of the 2005 Nautilus Award for the best book on social change, and Soul of a Citizen See www.paulloeb.org.