I look at a lot of green building regulations, and I have devised the rule of the first dollar--regulators should be putting the first dollar of tax payer money into the most cost-effective initiative, to ensure that those initiatives that have the greatest cost-benefit calculus get funded first and most robustly.
This week Obama has come out with some of the details of his green financial stimulus plan. In Obama's speech yesterday, as well as in his Obama/Biden plan unveilied during the campaign, he proposed:
- modernizing more than 75% of federal buildings
- improving the energy efficiency of two million American homes
He also outlined the benefits of these programs
[S]aving consumers and taxpayers billions on our energy bills. In the process, we will put Americans to work in new jobs that pay well and can’t be outsourced – jobs building solar panels and wind turbines; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain.
Energy efficiency efforts work with the rule of the first dollar--according to Energy Star estimates,
Compared with standard homes, ENERGY STAR qualified homes use substantially less energy for heating, cooling, and water heating-delivering $200 to $400 in annual savings. Over the average 7 to 8 years you may live in your home, this adds up to thousands of dollars saved on utility bills.
In this study, the RAND Corporation analyzed California's energy efficiency initiatives and concluded that
In California, improvements in residential energy intensity and energy prices have reduced the average energy expenditures per capita in real terms since 1980...Low-income households derive the greatest benefit from reduced energy expenditures.
RAND also noted
The most important benefit for California is the impact of energy efficiency improvements on air pollution emissions. If energy intensity in the state had remained at 1975 levels, air emissions from stationary sources in the state would be approximately 50 percent greater than current levels.
Energy efficiency measures equalled savings and environmental benefits.
The analysis with respect to greening federal buildings is similar. According to the Alliance to Save Energy
The federal government is the nation’s single largest energy consumer and energy waster. In 2005, the federal government consumed about 1.6 quadrillion Btu (quads) of energy at a cost of $14.5 billion. This is 1.6% of all energy used in the U.S. American taxpayers pay about $4 billion annually just to heat, cool, and power the 500,000 federal buildings and facilities.
So, each dollar saved on energy on public buildings is a taxpayer dollar saved, and a reduction in the quantity of resources requried to heat, cool, and power those facilities.
The analysis on the tax cuts, however, is not as sanguine. According to Nobel-Prize winning economist Paul Krugman
First, if the government spends money, that money is spent, helping support demand, whereas tax cuts may be largely saved. So public investment offers more bang for the buck. Second, public investment leaves something of value behind when the stimulus is over.
Krugman argues that tax cuts in the first year may be beneficial in providing a quick hit to the economy, whereas public works projects take time to get started, but Obama's proposal of 40% tax cuts seems like too much. Obama can see similar upfront benefits from providing food stamps and unemployment benefits, for example. Alternatively, he could provide vouchers for energy efficiency improvements through private vendors.
In short, green is green, tax cuts not so much.
Shari focuses on energy, environmental and building code policy, representing international companies, non-profits and trade associations in their policy and communications campaigns
