It's good news that carbon-reduction advocates are starting to focus on buildings, and that cash-strapped municipalities are coming up with innovative ways to finance improvements in energy efficiency. Buildings account for more than 70% of the electricity used in the United States. Up until now, efforts to reduce carbon emissions have focused on new, green building regulation.
But as a recent Environment article, "Toward a Low-Carbon Economy: Municipal Financing for Energy Efficiency and Solar Power" points out, the time has come to focus on existing housing stock and making home energy efficiency retrofits practical for homeowners. The article, by Merrian C. Fuller, Stephen Compagni Portis, and Daniel M. Kammen, notes that a number of municipalities have pledged to reduce carbon emissions by 70-80%, a lofty goal that is only attainable if realistic incentives are provided to consumers. The authors focus on Berkeley First, a municipal plan that takes a well researched approach to creating incentives to undertake changes to existing buildings, even in a down economy. Among other things, Berkeley First attaches the benefits - and costs - of retrofits to the building, rather than the owner. This makes a world of sense. Homeowners are provided the cash infusion necessary to make key home energy improvements. As the improvements begin to reap returns, the debt is repaid. If the building changes hands before the debt is repaid, the new owner (the one now enjoying the benefits of the home energy efficiency upgrade) undertakes payments. This is a smart investment strategy, and one that seems likely to help well-intentioned homeowners over the hurdle right now, which is key.
We strongly recommend reading the entire Environment article, and in the interim, we draw your attention to the following points.
1. We can't afford to be gluttons. As has often been cited here, buildings account for almost 40 percent of greenhouse gas emissions in the United States. To make matters worse, every year, the cost of that electricity increases by an average of 5 percent, natural gas by 10 percent. Most municipal regulations do not address the buildings we already live in. The authors point out that unless demand for energy in those buildings decreases, the lofty goals of 80% reduction simply will not be met. With both electricity and natural gas costs on the rise, the need to reduce demand is growing.
2. Houses are different from refrigerators. Unlike appliances that may readily be upgraded to a more efficient model, incentives for residential and commercial building owners to invest in energy efficient retrofits need to account for the life of the building, which can be expected to outlast ownership. Consequently, effective incentives for investment need reach beyond ownership as well.
3. We like the bird in hand better than a promise. The genius of Berkeley’s financing model is that it addresses the very human side of financial incentives – a big investment is hard to make, particularly when the economy is rough, particularly when the payback feels like a trickle of sap. (Even if we know... and we do know… that syrup is coming). That said, many of the best retrofits require a wait. The authors describe the process well:
Berkeley First and similar municipal funding schemes address these issues by allowing individuals and businesses to receive initial investment assistance and repay that money over time, as they realize the benefits of the energy efficiency retrofits they made. These payments are passed onto the new homeowner who benefits from the retrofits. To our mind, this makes good sense.
Most homeowners we speak with are keen to make home energy improvements to their homes, and readily make the smaller investments in appliances, bulbs, and monitors that increase the energy efficiency in their homes. Big ticket items may depend on big thinking like this, at the local and federal level.
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