I am speaking at the Green Legal Matters conference in New Orleans, April 26-28, 2010 with many friends of GBLB, like Chris Hill of Construction Law Musings, Timothy Hughes of Virginia Real Estate, Land Use & Construction Law blog and Scott Wolfe of the Wolfe Law Group. Come and join us, and eat some crawfish!
Yesterday, I wrote about Senator Merkley's new set of incentives to encourage green commercial building retrofits, and left you with the question of whether these new incentives will actually change behavior. An interesting article came out today on CNN.com which highlights a barrier to incorporating green building technologies into building projects:
Appraisals for newly built green homes do not fully reflect the cost of green technology, and the lower appraisal values mean buyers often cannot get the full financing they need from banks.
In essence, according to this articel, the cost of incorporating the green features is not covered by a commensurate increase in the purchase price, causing homeowners to avoid incorporating costly green technologies, even if they represent savings in the long run.
This is the perfect opportunity for designing a targeted grant or financing incentive. The government agency could look at the difference in the appraisal of homes without green technologies, homes with green technologies, the cost of those technologies and the ultimate payback, and design an incentive to make up the difference. A great example would be providing financing for green renovations at a lower rate than standard renovations. Unfortunately, most incentives are not designed around barriers to entry and cost data, but are essentially throwing some non-targeted amount of money at the problem without analyzing would be the best amount and struture to really change behavior.
Last week, Senator Jeff Merkley of Oregon introduced S.B. 3079, the Building Star Bill, to:
To assist in the creation of new jobs by providing financial incentives for owners of commercial buildings and multifamily residential buildings to retrofit their buildings with energy efficient building equipment and materials and for other purposes.
In essence, Building Star provides rebates for retrofitting commercial and multifamily buildings in existence as of December 31, 2009 with energy efficient components, like insulation, window, doors, HVAC equipment, etc. the rebates are structured as follows:
The Building Star incentives can be combined with other incentives, like the existing deductions for energy efficient buildings.
The Building Star program also provides for a loan program administered by the states to provide loans for energy efficiency upgrades.
So the question becomes, will this incentive program be significant enough to cause building owners to invest in these energy efficiency measures.
Last week, the USGBC announced its list of the Top 10 Pieces of Green Building Legislation in the 111th Congress. Top of the list were the American Recovery and Reinvestment Act, better known as the Stimulus Bill, and the American Clean Energy and Security Act, better known as Waxman Markey. I have posted about these pieces of legislation extensively--here for Waxman-Markey posts and here for ARRA posts. So I was interested to see what the rest of the list had to offer in terms of overall perspective on Federal regulation of green buildings:
1. It's all about incentives.
Heaven forbid that Congress should force anyone to do anything. With the exception of Waxman-Markey, the bills selected by the USGBC are all incentive based, providing funds for energy efficiency, water savings, etc.
2. It's not very innovative.
There are only two bills on the list which I consider to be innovative or interesting. The Federal Personnel Training Act of 2010 (yet to be introduced) which focuses on training federal personnel to operate and maintain high performance buildings, and S. 1619, the Livable Communities Act of 2009 which seeks to establish an Interagency Council on Sustainable Communities and provides $4 billion in grants to incentivize integrated community planning and implementation of sustainable projects. I like the first bill because it recognizes the need to raise the skills of implementing federal employees to realize the benefits of high performance buildings, and I like the second because it recognizes the linkage between planning and sustainability.
3. Building Codes are not addressed.
Waxman-Markey, and its Senate counterpart The American Clean Energy And Leadership Act, both have some provision for creating a national energy efficient building code. The other bills, however, do not attempt to address the key policy lever of building codes to enhance sustainable construction and save resources. This is probably because of the enormous political fight involved, both in wresting control of building codes away from states and local governments, and with the private interests involved in the building industry.
Frank Sherman, U.S. Green Officer at TD Bank sat down with GBLB to discuss TD Bank's announcement that it would be carbon neutral.
GBLB: What is the motivation behind TD Bank's green initiative?
Frank Sherman: Lack of Federal leadership leaves it up to private enterprise. Right now, the private sector is going to have to pull us through in the short term. Our green initiative is work we have been focusing on for a year and a half internally. The driver stems from TD Bank Financial Group in Toronto. Their senior leadership made the decision to become carbon neutral as a company. Their initial commitment early last year or late 2008 was to become carbon neutral by end of October of 2010. The US has follwed suit, and because the timing for the creation of TD Bank NA (the combination of Commerce Bank and Bank North) we were running a few steps behind.
GBLB: Were there any roadblocks to becoming carbon neutral?
Frank Sherman: We started analyzing the carbon neutral commitment over the past year, right at the time there was a lot of stress in the financial institutions. We had to look at "What is the impact this has on the company?" It made us try to really understand the company to figure out what can be achieved, to take action based on what we have done rather than just promises. It is as much a commitment going forward. We are fully aware that there is a lot we can continually do to improve, but you have to stake your claim and people can hold you accountable and we can hold ourselves accountable.
GBLB: What is TD Bank going to do going forward?
Frank Sherman: We are not doing anything now that is too far outside the norm for progressive corporations. We are making commitments to reduce carbon outputs. Given the trajectory we are on now, first and foremost is to reduce our carbon footprint and buying renewable energy credits and supporting renewable energy in US and Canada, and lastly to invest in carbon offsets.
We understand that we will always be judged by NGOs as not doing enough. It is not always useful to have a conversation when people think two different things. We accept the fact that others choose to go father or define environmental impacts differently. As we grow as a responsible corporate citizen, that is not to say we won’t take responsibility for secondary emissions. But, one step at a time was our way of approaching this.
GBLB: What sustainable projects are you looking into as an investment for TD Bank?
Frank Sherman: We are exploring how to balance the economics of buying carbon in quantity with investing in projects that effect our carbon footprints. For example, we bought a block of offsets from RGGI, we have balanced that with one landfill gas capture projects in New Jersey and a waste incineration project in Florida, both in areas where we do business. We are considering getting involved in projects protecting forests. We are looking at a potential carbon sequestration project in Pennsylvania. I look at carbon offsets as an investment project. We are looking to avoid emissions, and the investments we have made are ideally placed in the places where we do business.
We offset 203 million KwH, or 203,000 RECs. We purchased 31,000 metric tons of carbon offsets. That is based our 2008 greenhouse gas inventory. Our 2008 emissions equalled 121,000 metric tons of GHG emissions.
We measured our GHG emissions based on direct emissions of fossil fuels, electricity, fleet vehicles, fossil fuel impact of biz travel, leased space. We used a similar approach based on scope of emission we can control.
GBLB: What are you doing in terms of green building?
Frank Sherman: We identified green building as one way of addressing some of our sustainable goals right out of the gate. We began to thign about high performing green buildings as we started the process of reimaging our brand as America’s most convenient bank. We are doing all of our new branches green—but 2010 is a transition year with some in the pipeline. By the end of 2010 and going into 2011 we will be building green buildings almost exclusively.
Jennifer Simon practices environmental law at Obermayer Rebmann Maxwell & Hippel, LLP. She focuses her practice on alternative energy project development, permitting, and O&M with an especial emphasis on offshore renewable energy projects. She maintains a blog on offshore renewable energy at www.offshoreenergy.blogspot.com
Yesterday, Shari suggested that Obama’s “last ditch effort” to enact a watered-down energy/climate bill is just not worth the effort. As Pennsylvanians, Shari and I both live in a state that has identified “clean coal” resources (like coal gasification) as renewable resources, so we know a thing or two about ineffectual climate policy. Given Pennsylvania’s apparently futile approach to climate change, I am not surprised that Shari is uncomfortable with President Obama’s proposed energy/climate bill. However, I would suggest that this bill could provide the foundation upon which a comprehensive legislative solution could be built.
Congress has been dithering around with potential climate legislation for more than half a decade while various government entities have questioned whether climate change science is accurate, whether regulations can be effected under current statutory schemes (e.g., the Clean Air Act), and whether the costs of regulation outweigh the benefits of saving life on planet earth. Meanwhile, emissions from energy generators, buildings, and mobile sources continue to rise and the predictions of dire consequences attributable to climate change continue to become direr and more imminent.
In the late 1970s, scientists announced that the dangerous thinning of the earth’s atmospheric ozone layer was due to anthropogenic causes, legislators and regulators were equally paralyzed by competing interests and apathy. But in 1978, EPA took an affirmative—if not remotely comprehensive—step by banning aerosol chlorofluorocarbons (“CFCs”). As social consciousness and international pressure increased, this initial regulatory ban on aerosol CFCs ultimately led to the U.S. signing and ratifying the 1987 Montreal Protocol—a far reaching and comprehensive international treaty which will likely yield statistically significant improvement over the next 50 years.
Climate change, like ozone depletion—or healthcare for that matter—is a hot button issue where legislative consensus is a near impossibility. But we need to start somewhere, don`t we?
According to EENews, the Obama administration is trying a last ditch effort to get a hybrid energy/climate bill passed:
President Obama is striving for consensus on a path forward that can deliver substantial greenhouse gas emissions reductions and satisfy concerns in the Senate about energy security. In an address to the nation's top CEOs at a Business Roundtable meeting scheduled for Wednesday, Obama is expected to discuss his energy plans. According to several sources, one of the proposals under discussion is to find ways to incentivize coal-burning power plants to switch to cleaner-burning natural gas.
Economywide cap and trade or carbon tax? Maybe not. More nuclear, probably and more "clean coal" investment, almost assuredly. So why pass this watered down, milquetoast version of a climate and energy bill?
There are times in lawyer's lives when they must adopt a different hat--after all the risk identifying and negotiating and hand wringing is over, there must be a signature on the dotted line. A lawyer must advise their client that the deal is as good as its going to get, that the settlement is worth the risk. Because no one can predict the future, there is no absolute guarantee that the deal that is struck in advance of events is as good as what could happen if events are allowed to unfold and decisions are made based on actual events. But dealmaking has value--it allows parties to have security and allows disparate parties to come to terms that are acceptable to all, if ideal for none.
But I wonder if this is that deal. Let's say Obama inks this settlement, shepherded on the Republican side by Senator Lindsey Graham. The question must be--Will the environment really benefit, not Did We Get Something Passed. Doing something is not always better than sticking to your guns and fighting on. The best lawyers--and politicians--know when the deal is as good as it's going to get. I don't think we're there yet.
A study out of the Government Accountability Office (GAO) reports:
As of 31 December 2009, according to data available to the Department of Energy, about 9,100 homes had been weatherized out of a planned 593,000
The pricetag for weatherizing 9,100 homes? Over $57,000 per home.
According to the Home Energy Saver website, sponsored in part by the Department of Energy and Environmental Protection Agency, the average cost of the top 10 home energy upgrades is just $3,960, a difference of over $46,000 per home.
Part of me doesn't care. According to Keynesian thinking, just spending stimulus money and fast, it doesn't matter how, is key to stoking the economy. But there is part of me which envisions the thousands of additional homes which could have been weatherized had the government been more efficient in its spending.
I have previously posted about the hazards of ossified building codes when confronted with new green technologies. Waterless urinals appear to showcase this issue dramatically. Last week, Chicago's city government announced that it was ripping out the waterless urinals installed in City Hall.
The problem is that Chicago's building code requires commercial buildings to use copper pipes in indoor plumbing. But the U.S. Army Corps of Engineers specifically states that drainpipes for waterless urinals "cannot be made of copper pipe, which corrodes."
This has led to a stinky situation--"with the corrosion causing urine to build up in the wall behind the men's room."
Building codes are not the only issue which has plagued waterless urinal installation. According to the Philadelphia Business Journal, in Philadelphia's Comcast Center,
Philadelphia's Plumbers Union Local 690 did not want to install the waterless urinals because it would have required the laborers to do less work, according to published reports. As part of the compromise, the two sides have proposed that Liberty and city officials monitor performance of the urinals.
The compromise that was reached was that the Union installed piping in the walls that would allow for conversion to flush urinals if there are problems with the waterless ones.
When new technology meets old infrastructure--be it copper piping or entrenched union interests--the results can be...stinky. In addition to the stench, who pays for removing the urinals and converting to ordinary fixtures? What happens if removing the waterless fixtures makes a building lose its LEED status? Who is at fault for causing the waterless fixtures to fail? The installers? The architect? The owner/user?
I will make an admission. I took tax in law school, and, it was the academic equivalent of having my left arm sawed off without anaesthesia. Why? Mostly because things which should have been clear seemed hopelessly obscure. Now I deal with advising clients on incentives available for sustainable projects, and the tax code and I have had to battle to a stalemate. At least, I battle, and the tax code just sits there impentarably.
One of the features which is particularly difficicult is the relationship between 26 USC 45, which deals with tax credits for producing renewable energy (the "production tax credit" or PTC), 26 USC 48 which deals with tax credits for investing in renewable energy equipement (the "investment tax credit" or ITC) and the Renewable Energy Grant created by the ARRA. All three of these relate to businesses which have installed renewable energy technologies, like solar, wind and geothermal. It should be clear and easy to understand which ones apply to your business and what the incentive will be. As with all things related to the tax code, however, it is not.
I am going to attempt to clear up some of the obscurity, but, as with all information on this blog, it is for informational purposes only, not legal advice; and you should consult your legal and financial advisor to provide you with proper advice for your business.
| Title | Applies to | Amount of Incentive |
| Production Tax Credit |
|
1.5 cents per kW of power generated at a qualified facility for the 10 years beginning on the date the facility was placed in service AND sold to an unrelated person during the taxable year |
| Investment Tax Credit |
|
30% of the cost of the "energy property" for solar and small wind, 10% for geothermal and other renewable sources |
| Renewable Energy Grant | Applicable property under Section 45 or 48 | 10% or 30% of the basis of the property, depending on the type of property placed in service during 2009 or 2010 or after 2010 if construction began on the property during 2009 or 2010 and the property is placed in service by a certain date known as the credit termination date |
The incentives are mutually exclusive--The PTC and the ITC cannot both be taken, and they can be swapped for the REG, but you cannot take the PTC/ITC and the REG.
In plain english, it appears that the PTC is designed for renewable energy sources where the power is designed to be sold to others as a Renewable Energy Credit, and the ITC is designed for renewable energy sources where the power is used on-site. The Renewable Energy Grant allows companies which have invested in either type of renewable energy capacity to receive cash, as opposed to a tax credit, which is helpful particularly if the company has no tax liability or a tax loss.
There are some resources available to help you sort through this morass. The DSIRE database has quick summaries of available state and federal incentives. The Utah Clean Energy site has a nice summary of the renewable energy features of the ARRA. The DOE site has a useful summary of renewable energy incentives for businesses as well.
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