Tag: Inflation

8 tips for reducing carbon emissions in 2020

Butcher Facebook feeds
Approximate investment: $0
Payoff period: from the day you start shopping
Emissions reduction: 952.6 kg co2 equivalent per year

Signing up to butcher Facebook feeds is a great way to save money and reduce your emissions.

Butchers often run specials on Facebook that allow you to plan your shopping ahead. I found that using multiple butchers’ feeds allowed me to cut down my meat expense from $44 per week to around $18 per week, a saving of 59%.

Buying meat on special means there is less waste. It also means you gravitate towards the cheaper meats that the butcher can afford to discount. Often these are meats such as pork and chicken, which have a lower carbon footprint.

Let’s assume a two person household consumes 121 kg of meat per year. This equates to around 330g per day. Switching from a diet spread equally across lamb, beef, pork and chicken to one more concentrated on pork and chicken would save 952.6 kg co2 equivalent emissions per year.

To do this, all you have to do is like 3 or 4 local butchers’ Facebook feeds and pin them to the top of your feed, so you can see when specials are announced.

Thermal underwear
Approximate investment: $80
Payoff period: Less than 1 winter month
Emissions reduction: 1,037 kg co2 equivalent across 4 winter months

After four weeks of using butcher Facebook specials, you should be able to afford some thermal underpants for your family for winter.

When Australian journalist Greg Foyster pointed this out, I did a double-take. We spend too much energy concentrating on heating spaces, when we could be insulating our bodies directly for a fraction of the price.

This led to an experiment where providing my family with thermals contributed to cutting down on winter energy consumption by 487 kWh in a single month.

Making stock from meat bones and leftover vegetables
Approximate investment: $0
Payoff period: from the day you start cooking
Emissions reduction: difficult to estimate, around 260 kg co2 equivalent per year

Making home made stock is a great way to stretch your household shopping budget even further and create more meals for less input. It also ties in neatly with winter.

The EAT Lancet diet has been recommended by scientists and involves dramatically cutting down on each individual’s consumption of meat, treating meat as a garnish rather than the centre of a meal. One way to achieve this easily is to use the bones from meat to provide additional nourishment during the week.

The bones from a 1.2kg chicken carcass can easily provide 2kg of stock. This could cover 8 additional servings per week at almost no extra cost.

Build a home compost system
Approximate investment: $50
Payoff period: 6 months (depending on council rates)
Emissions reduction: difficult to estimate

By the end of winter, you should now have over $1000 extra in your back pocket. It’s time to invest some of that in some eco-initiatives that will set you up for further long term savings.

Let’s start with the cheap ones. Setting up a composting system, in our case a worm farm, is an easy way to cut down on waste collection costs.

In Kapiti, waste collection isn’t cheap. A council rubbish bag can cost $4.60 and tends to go up over time.

Home composting allows you to strip your rubbish bag of all compostible matter. A study undertaken by the Feilding Council revealed that around 40% of the contents of rubbish bags were unnecessarily going to landfill.

By cutting down on the annual number of rubbish bags required, a home compost should save you an extra $95.68 per year, assuming you started with going through one rubbish bag per week.

Prices of waste collection will vary depending on the collection costs of your council.

Build a square foot garden
Approximate investment: $130
Payoff period: one growing season
Emissions reduction: difficult to estimate

Once you’ve built up enough home made compost, you can start planning how you are going to use it. One good way is to build a square foot garden.

Square foot gardens are raised beds designed for maximum productivity with little maintenance. Two gardens should be enough to provide vegetables for one adult each day of the growing season.

Finance an ebike
Approximate investment: $3500 cash, but can currently be purchased on 0% interest finance
Payoff period: 1-6 years
Emissions reduction: 643 kg co2 equivalent to 2145 kg co2 equivalent per year

The return on investment you get from an ebike will depend on how often you use it, how far you travel, and whether you can save on parking costs if you work at a city centre.

The most important thing is to choose an ebike that is fit for purpose, and that has quality components that don’t break down or cause functional problems over time. I have found my current Shimano Etoro to be very reliable and I have travelled over 7000 kilometres on it.

If you can save on inner city parking costs using an ebike, it is likely you will pay for the bike in less than a year. The upper end of 6 years’ return is based on travelling 100 km per week for shorter trips. Results will vary depending on how you use it.

Note that by accepting an offer of low interest finance you can sometimes receive an ebike that is cost neutral. This calculation can vary heavily depending on your usage, so double and triple check your calculation before committing to a purchase and always choose reliable equipment. Also note your usage may change over time, which will affect the return from your investment.

Install an HRV system
Approximate investment: Varies, in our case came to $3400 for installation
Payoff period: 5.82 years (Will vary depending on household)
Emissions reduction: Varies, but in our case about 840 kg co2 equivalent per year

Another way to reduce your winter energy consumption is to install an HRV system. This does not need to be an HRV brand system.

HRV systems work by circulating warm air stored in the roof with cooler air stored in the lower building. The result is a more temperate environment for a lower heating or cooling cost. The system functions best at times of year when the discrepancy between roof space temperature and indoor temperature is at its greatest. This is often during the months leading up to and trailing off from winter.

HRV systems are available on finance at low rates of interest and are sometimes worth it, but due to low-ish and fluctuating returns, will not be cash neutral.

The above payoff period calculation assumes that an HRV system will save a household 4.9 kWh per average day and that retail energy prices will increase by 3.2% per annum.

Note that there is also a cost of replacing filters included in the calculation, which will vary depending on the supplier.

Invest in a vehicle with low fuel consumption per hundred kilometres
Approximate investment: $8500
Payoff period: 8.6 years
Emissions reduction: 1043 kg co2 equivalent per year

For some jobs, travel by car is unavoidable. In this situation it is essential to invest in a car that achieves the lowest consumption of fuel per hundred kilometres, relative to what you can afford for the purchase cost.

For this sort of decision, it is sometimes worth looking at the second hand hybrid market. At present, it is possible to buy a hybrid with a 4.0 litres per hundred kilometres consumption rate for less than $10000, although note that second hand cars bought by private sale may sometimes include hidden defects and should be properly inspected prior to purchase. Note also that cars bought by private sale will have to be paid in cash.

The car I own now is a Honda CR-Z that I bought for $8500. Taking into account petrol price inflation, the car will achieve an 11.64% return on investment, better than many high performing stocks on the NZX.

The idea behind all of this is that reducing carbon emissions is a straightforward process that can add thousands in retirement savings per year. Using the above steps and just moving from small and cost-effective challenges to bigger propositions and challenges I’ve increased my savings by over $5,000 per year. I’m constantly on the lookout for new ways to reduce emissions that are also good household investments. So if you know of any please hit me up in the comments section below.

Why I think quantitative easing will make things very, very hard

A few years ago as a result of the global financial crisis, central banks used quantitative easing to purchase securities from the market in order to lower interest rates and increase the money supply. The money was then distributed to lenders as a way of stabilising their balance sheets and then promoting lending.

The point is that despite everything feeling normal, we are actually in uncharted territory as far as economics is concerned. Following a major economic event that threatened to devastate the international economy and usher in a new great depression, central banks responded by dramatically increasing the money supply. This in turn resulted in a period of artificially low interest rates, more capital circulating in the economy, and the resumption of economic growth. It also led to (frankly), the return to old bad habits of investing in assets that have been shown so recently to be bubble-prone. 

This, despite the fact that the downsides of quantitative easing have not been figured out. We are very inexperienced with quantitative easing: this is, after all, a new maneouvre. There are two main drawbacks to quantitative easing that people regularly draw attention to, namely, that QE may cause inflation, and that it may devalue domestic currencies. But I believe that there is another, unscoped, potential risk to QE that will rear its ugly head in years to come. 

The loan hierarchy

To understand this third risk, we need to look at the loan hierarchy. The lenders to whom central banks have distributed the proceeds of QE have a hierarchy in terms of how they look at investment propositions. To radically simplify everything, let’s look at a hospital and the people who work within it and the way that banks may proceed in terms of funding certain investment propositions. 

A doctor comes to a bank to get a loan to buy a house. The bank looks at the doctor’s income, assets, and credit score, and notes that the doctor has a stable professional job and a good chance of repaying the loan over time. The lender therefore approves the loan. 

A nurse comes to a bank to get a loan to buy a house. The bank looks at the nurse’s income, assets, and credit score, and notes that the nurse has a stable professional job, albeit at a lower level of salary, and a good chance of repaying the loan over time. The lender therefore approves the loan. 

A part-time hospital orderly comes to a bank to get a loan to buy a house. The bank looks at the orderly’s income, assets, and credit score, and notes that while the orderly only works part time for the hospital, and that there is less of a margin on being able to service the loan due to an increase in asset valuations as a result of all the doctors and nurses having recently purchased houses, that the income nevertheless appears stable, and since the bank has relaxed their lending criteria due to having a surplus of capital to lend, there are some doubts, but if they don’t approve the loan, the orderly will go to the bank down the street and get it approved there. 

On and on it goes, during times of surplus capital and relaxed lending restrictions, until every man, woman and dog in the hospital has a loan. Eventually, the lenders are providing interest free loans to people to buy chainsaws to cut butter. Which leads to…

The mass creation of bad debt

A consequence of having so much capital circulating the economy is that irresponsible lending practices will likely result (again, as they did ten years ago). Lenders will reach further and further down the hierarchy in order to find ‘deals’. Even under normal circumstances, this could cause problems, but in the long run it also causes a major unforeseen event, which is that…

Loan defaults will be more responsive to interest rate rises

In the old days, when central banks increased interest rates in order to reduce inflation, they did so with at least some level of awareness of what sort of impact the interest rate might have on reductions in consumer spending. 

With QE, however, this has all changed. With dramatically more money in the economy, and that capital circulating around and around again due to the credit multiplier, the responsiveness of any nation to an increase in the central bank’s interest rate movements will be unpredictable and potentially more severe. 

To illustrate this, shifting interest rates upwards by 25 basis points would have dramatically more impact on consumer spending if it applied to one hundred million loans rather than 25 million loans. Particularly if the bottom 75 million loans are at the bottom of the loan hierarchy: loan defaults will skyrocket. 

My concern is not just that lenders may not have realised this, my concern is that people on the street (who under times of lax lending restrictions themselves become professional capital mispricers) may not have realised this. This is one of those things that is going to be so simple in hindsight – and yet, few, if anyone, will have seen it coming. 

Do HRV systems dehumidify a living environment?

We’ve installed the HRV system and it’s actually doing a pretty bang up job of mitigating our heat consumption, so much so that in recent weeks our motel administration block ICP has been a net exporter of renewable energy to the grid. <p><br><!–more–>

I am not happy with HRV, however, because one thing they told me would happen, didn’t happen. When the sales agent called on me, he explained to me that not only did the HRV system circulate warm air from the roof into the living area, but it also made the living area easier to warm by removing moisture from the air. <p><br>

I was interested in this idea and decided to put it to the test. How much moisture did the HRV system remove from the air? And how much would the process lead to the speeding up of heating within the living environment?<p><br>

To test this, I went out and bought a hygrometer before the HRV installation took place. A hygrometer measures the level of humidity. I also did a test during the evening to run the heater until it had caused an increase in the temperature by two degrees, and to time how long it took to do this (around 30 minutes).<p><br>

Prior to the installation, I got a humidity reading of 61. Based on my discussion with the sales rep, I was expecting the humidity to drop to between 30 and 40 post installation. I would then be able to retest the heater experiment in the reduced moisture environment and calculate how much actual time the moisture levels saved us in energy in heating the environment. <p><br>

As it turned out, the HRV system had no impact on moisture levels at all. And why would it? HRV does not dehumidify an environment; it only ventilates it. The moisture readings after the installation were the same as before, except on a couple of readings where they were slightly higher. <p><br>

Because of this, the secondary test was effectively redundant. Because HRV does not dehumidify the living environment, only ventilates it, it logically follows that energy expenditure to heat the environment would be the same prior to installation as post installation. <p><br>

So the sales rep received one very firmly worded email. I do not know whether this is an isolated incident, or a misleading marketing claim that HRV makes regularly, but it’s very disappointing, because that false claim was a core part of our decision to adopt the system. <p><br>

Apart from this infuriating lie, I so far can only recommend the HRV system. It has actually made a substantial difference to our average energy consumption at this time of year, and looks to be a good investment, despite the high-ish filter replacement costs. In particular, it reduces our energy consumption during early evening, which is a peak time where solar is not available, meaning that it has tipped the balance for our motel administration block to become a net exporter of renewable energy to the grid. 

Let’s have a look at Z’s annual report

I’ve heard our Prime Minister is preparing law to enable the Commerce Commission to have a sweeping set of powers to investigate fuel businesses and collect information on their profit margins. Did you know that this information is already freely available in the company’s annual report? You can access this information without the need for law changes that will force new compliance costs and ultimately the cost of doing business in New Zealand up higher than it has been recently. More importantly, you are guaranteed the information is accurate, since if a public company lies to its shareholders it gets sued.

Continue reading “Let’s have a look at Z’s annual report”

We saved 487 kWh this month

I just did a bill on bill comparison between our June energy consumption for last year versus this year. It turns out that we have successfully reduced our actual energy consumption for our motel manager flat by 487 kWh in just one month this winter.

Continue reading “We saved 487 kWh this month”