8. Financing Campus Climate Action
8.1 Dealing with Sticker Shock
At some point, most schools preparing a CAP will probably face “sticker shock.” This is likely to occur when the cost of actually achieving significant GHG emissions reductions is initially estimated and better understood as a result of the climate action planning process. The reality is that avoiding the worst consequences of climate change is a huge undertaking, and it shouldn’t surprise anyone that there are going to be real costs involved. On larger campuses, the costs of achieving climate neutrality or deep cuts in emissions may cost many millions of dollars and require substantial on-going costs. Balanced against those costs will be annual savings resulting from reduced waste and greater levels of efficiency.
Preparing the CAP can also be costly in terms of staff time. Dedicating existing staff to this process involves an “opportunity cost,” i.e. the functions and benefits those staff will not be able to achieve because they are instead focused on planning for and achieving GHG emissions reductions. Some may see this as a negative. Those concerned about environmental responsibility and the fate of the Earth may have another view since shifting resources toward saving the planet will seem like a good thing to them. One group likely to be pinched for time is campus sustainability staff who will probably be asked to do more even though they were already stretched thin before the CAP process began. Their own personal sustainability may be at risk. Energy managers asked to do more and more may find themselves in the same boat.
Energy conservation and energy efficiency improvements tend to be the primary GHG emissions mitigation strategies that can save enough money to pay for themselves. While short payback energy conservation projects can produce “positive cash flow” (savings in excess of cost or debt service) that can be used to leverage and pay for other measures, the deep conservation necessary for achieving significant GHG emissions cuts will probably entail an acceptance of energy conservation measures with longer paybacks and less attractive economics. These will erode the prospects of positive cash flow and limit the ability of conservation projects to produce a cash stream capable of financing other GHG emissions reduction strategies.
As the real costs are better understood, it is important that campus climate planners and activists think carefully and creatively about financing options and develop an effective financing strategy for their CAP. They also need to be very strategic in rationalizing the costs that are involved. One way of doing the latter is to be deliberate and meticulous in pointing out (and quantifying if you can) the multiple benefits produced by a campus climate action commitment and program. These are real and important and include:
- Truly relevant public service on behalf of saving the planet for our children and future generations
- Graduating students who will be part of the solution to climate change and not be part of the problem
- Academic enrichment for students and faculty
- Improved recruitment and retention of new students and faculty who increasingly will be looking for colleges and universities that embrace sustainability and serious climate action.
- Physical plant benefits from upgrades to the campus physical plant, e.g. from newer equipment which uses less energy and costs less to operate, reduces maintenance requirements and costs, and may also enhance comfort and safety and thus improve academic and research productivity
- The possibility of attracting more research dollars for what will undoubtedly be a burgeoning field of study
- Substantial public relations and public image value
- A sense of relevance and pride from being on the cutting edge and among the leaders tackling the problem of climate change
The above, of course, is no substitute for a sound CAP financial plan but being clear about the important multiple benefits of this endeavor will take some of the bite out of discussions about the costs. A smart financial plan will prioritize cost-effective emissions mitigation measures, sequence and schedule them to maximize synergies and savings and allow some measures to pay for others, identify obvious and unusual funding sources, and use creative financing techniques to make serious climate action affordable.
8.2 Funding Sources
Projects, measures, and programs that reduce GHG emissions can be paid for by a variety of funding mechanisms including:
- Self-financing performance contracts
- Revolving funds that are replenished by savings generated by conservation measures as well as perhaps annual budget allocations
- Grants from government, foundations or business partners
- Energy efficiency and renewable energy incentives provided by government or utilities
- Borrowed money from tax-exempt bonds or other types of borrowing
- Financial instruments specifically designed to promote renewable energy development
- Alumni donations and other fundraising
- Student activity fees and graduating class gifts
Affordability is a key factor that weighs heavily on whether a CAP actually gets implemented. This means minimizing costs while chasing all available dollars.
AASHE maintains a list of campus revolving funds. For more information on financing on-site renewable energy technologies, see The Business Case for Renewable Energy: A Guide for Colleges and Universities by Andrea Putman and Michael Philips (2006), Alternative Energy Economics by Michael Philips and Lee White (2009), and the Database of State Incentives for Renewables and Efficiency. In April, 2011, the ACUPCC launched the ACUPCC Financing Sustainability Project webpage with a suite of information and resources about different financing options.
This guide was produced with financial support from the American College & Univerisity Presidents Climate Commitment.