Green Building Law Blog : Green Building Lawyer & Attorney : Shari Shapiro: Calliope Communications, LLC

Welcome back from vacation.  To ease you back into the workday routine, I want to share a post I wrote for RegBlog, the blog of the University of Pennsylvania Program on Regulation, about regulating sharing economy companies like Uber, Lyft and Airbnb. 

In short, the most efficient route to regulating these companies is tweaking existing regulatory structures to accommodate these new models.  This has been the model for years in the construction industry--residential construction is regulated under the same scheme as commercial construction, but with different requirements. 

You can read the whole post here...

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Steven Johnson, in his book Where Good Ideas Come From (read an excerpt here) explained that great ideas, the ones that transform the marketplace, are based on the “adjacent possible:”

The phrase captures both the limits and the creative potential of change and innovation. In the case of prebiotic chemistry, the adjacent possible defines all those molecular reactions that were directly achievable in the primordial soup. Sunflowers and mosquitoes and brains exist outside that circle of possibility. The adjacent possible is a kind of shadow future, hovering on the edges of the present state of things, a map of all the ways in which the present can reinvent itself.

Treehugger reports today that a cutting-edge green community, breaking ground both in its design and its site (it was gentrifying an historically lower income, African-American community) is facing foreclosure. The explanation, in part, is because the development skipped ahead of the adjacent possible:

This was a cutting edge design, by the greenest of cutting-edge architects. Most developers build the same thing over and over again so that they get to know their costs really accurately; when you are the first, you don't. You build in contingencies, and may even benefit from the fact that in a downturn, construction costs drop significantly, but green roofs, solar thermal hot water and other green features cost money. Purchasers are not often willing to pay their full value because they are thinking about investment and resale, and banks don't make it easy to get mortgages on the green goodies, so your margins on a green, innovative or different building are often smaller.

Move one square to the left, and you are a genius. Skip over a square, and you are a failure, ahead of your time. This seems to be one of the classic problems with the green movement. We try to skip over steps, assuming that the rest of society will make the leap with us. Not so. 

With respect to cap-and-trade, there has been significant argument that its advocacy skipped a vital step—linking cap-and-trade to where the American public is now. In the Daily Kos, Frank Luntz, the pollster and wordsmith, had this to say about bringing climate change into the adjacent possible:

Luntz's report, "The Language of a Clean Energy Economy," finds that the majority of the public across the political spectrum is convinced that global warming is happening and caused at least in part by humans. But, Luntz says, talking about the problem won't win support for the legislation that would solve it. Among both Democrats and Republicans polled by his firm, addressing climate change was the least important reason to support a cap-and-trade policy.

So what should environmentalists say instead? Luntz suggests less talk of dying polar bears and more emphasis on how legislation will create jobs, make the planet healthier and decrease US dependence on foreign oil.

In innovation, there are no skipped steps. Moving from the present to the adjacent possible is the only route to transformation, one step at a time. Many have argued that there is no time for incremental change, but moving along the continuum of the adjacent possible does not necessarily mean a lengthy timeframe. Rather, it means linking the next vision to the one we are already connected to. For example, the internet went from text based pages to picture to video to facebook in just over a decade.

Now let me bring this back to law. Laws, regulations and programs promoting green and energy efficient construction must build on the adjacent possible. When they do not, as in the IRS Bond Requirements for the Destiny USA Project (which mandated completely unattainable green features and job creation obligations), they are destined for failure. When they do, like the 1603 grant for solar power (great article on 1603 grant results here), they can spur a whole industry forward and radically reduce the price of solar panels. 

As of February 25, 2011, a total of 7,180 alternative energy projects were funded through the §1603 program, totally $6.4 Billion in Treasury funding...Whereas solar P.V. installations in 2010 grew by 114% over 2009, netting $757 Million in 1603 grants, industry analysts forecast that solar installation will grow by an even larger factor through 2011. Solar has been receiving more attention in recent months from consumers, industry analysts and property owners alike. This attention has raised awareness of the benefits to installing solar, resulting in a spike in ground mounted and rooftop P.V. installation. In 2011 and beyond, the authors are confident improved technology and increased economic incentives will meet with this awareness to result in a marked increase in the amount of cash grants dedicated to solar technology.

The most audacious ideas are those that build on what already works, and makes it better, faster and more impactful. The same is true for regulation. Move forward to the adjacent possible, one step at a time.

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Like the Destiny USA project in Syracuse (which is mired in a controversy over whether the tax exempt green bonds issued for the project should keep their tax exempt status despite the project's failure to incorporate any green features--more about that project is available here), the Georgetown Redevelopment Project in Redding, Connecticut was also selected as a demonstration project to qualify for green tax-exempt bonds under the America Jobs Creation Act of 2004.

According to my research, at least $14.5 million in tax exempt bonds were issued for the Georgetown project. For you bond junkies, the details of the bond offer was:

Georgetown Special Taxing District
Nov 16, 2006 $14,450,000
General Obligation Bonds, Series 2006A (book entry)
Dated Nov 22, 2006.
Due Oct 1, 2036.
First coupon Apr 1, 2007.
Callable Oct 1, 2016 at par.
Purchased through negotiation by Banc of America Securities LLC, as
follows:
Due Amount Cpn Reoffered Ins
10/1/36 $14,450,000 5.125% 5.125%
L.O.: Shipman & Goodwin, Hartford, CT.
F.A.: Lamont Financial Services Corp, Wayne, NJ. 
 

Like the Destiny USA project, the Georgetown project stalled, and is having difficulty meeting its bond obligations.

According to the Weston Forum, the deal to sell the site to a developer fell through in mid-2010:

With the advent of the country’s financial crisis in 2008, capitalizing the project became an issue. That, combined with the delay in state approvals, stalled the project, but the intersection work has since been funded and put out to bid.
 

 As of  July 9, 2010, according to Bond Buyer (subscription required) the Georgetown Special Taxing District in Connecticut received a forbearance on $1.5 million of tax anticipation notes after failing to pay them on time.

The district was unable to pay the notes on June 30 because it had not collected property taxes from a stalled mixed-use development. The project and district are located on a 51-acre tract in the town of Redding in affluent Fairfield County.

The forbearance gave the district two months to figure out what to do without defaulting on bond payments. The failure to make the payment by June 30 constitutes a technical default, according to disclosure documents.  It is not clear whether the bonds were paid, but if they were not, another set of green bonds has gone into default. 

Although the two projects are currently in the same boat financially, they are not equivalent projects.  Unlike the Destiny USA project, which was a large mall extension which was going to be fitted out with green features, the Georgetown Redevelopment Project was actually a thoughtful green project.  It was envisioned as a transit oriented, mixed use redevelopment of a 55 acre, contaminated wire mill site.  The master plan includes residential (including 40 units of affordable housing), commercial and light industrial uses, as well as a YMCA, performing arts center and public open space oriented around a transit station.  A powerpoint of the master plan and description of the project is available here.

The project would have encouraged transit use, created a mixed use community, redeveloped contaminated property and (theoretically) integrated green building and renewable energy features. This is exactly the sort of project which should be encouraged and supported.  

The fact that the Georgetown project has not come to fruition is a bad outcome for the Georgetown project in specific, and green bonded projects in general.  First, this is a good project.  Doing transit oriented, mixed use development is positive for communities and the environment.  So, the fact that it had difficulty meeting its financial obligations and may not come to fruition is disappointing.

On a more global level, projects like Georgetown and Destiny USA make bonds for green projects look risky, which may make financial institutions shy away from issuing and underwriting the bonds.  This will make getting financing for green projects harder than it already is.  Second, it makes the public sector more reluctant to support green projects if they fear that they will not be able to meet their financial obligations. 

To end this on a brighter note, it appears that public entities are continuing with the site and transit work on the Georgetown project continue to progress, even though a private developer is not currently doing the mixed-use component.

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I covered the messy breakdown of the Carousel/Destiny USA project in Syracuse on Monday.  In short, the Destiny USA project was selected as a green "demonstration" project under the 2004 Green Bonds program.  $255 million in tax exempt bonds were issued on behalf of the project, the revenue of which was supposed to be used to implement the green features of the project.  As of now, none of the green features have been implemented, and the developer has intimated that even if the project is fully built out, the green features will not be included.  The IRS will have to decide whether to rescind the tax exempt status of the bonds for failing to meet the green requirements.

I have written at length about creating effective green incentives and regulations (see my Regulating Green Series here).  For me, the most interesting part of this debacle is what it reveals about a major green incentive program.  The Green Bonds program was developed as a part of the America Jobs Creation Act of 2004.  In theory, the program was intended to: 

 finance environmentally friendly development. The objective is to reclaim contaminated industrial and commercial land (brown fields), and encourage energy conservation and the use of renewable energy sources.

Although the goals of the Green Bonds program were clearly noble, as I see it the program was doomed from the start. No market rate project in 2005 could have met all of these requirements.  Thus, the proponents of the projects had reason to overstate the green components of their projects to access $2 billion in tax free capital for the projects. 

According to the IRS Guidance (available here) $2 billion in AAA tax exempt bonds were authorized by the Federal government to be awarded to four demonstration projects.  To qualify for the bonds, the four projects in aggregate had to:

1. Reduce energy consumption by more that 150 megawatts annually compared to conventional generation;
2. Reduce daily sulfur dioxide emissions by at least 10 tons compared to coal generated power;
3. Expand by 75% the domestic solar PV market in the United States as compared to the expansion of that market from 2001-2002, which was 14.424 megawatts (which means an aggregate increase of approximately 11 megawatts, or an average of almost 4 megawatts of PV power per projects);
4. Use at least 25 megawatts of fuel cell energy generation.

In addition, each project had to be at least 1,000,000 square feet or 20 acres and: 

1. At least 75% of the square footage had to be LEED certified;
2. The wood had to be certified under the Sustainable Forestry Initiative or the American Farm Tree System;
3. Reclaim a brownfield site

Beyond the green features, the projects also had to create at least 1000 construction jobs and 1,500 full time equivalent jobs. 

In addition to the requirements of the Green Bonds, the Destiny USA project entered into a Memorandum of Understanding with the EPA (available here and summary below from Syracuse.com) committing to: 

1. Using green building design, construction and operation principles to obtain the highest levels of certification from the U.S. Green Building Council's Leadership in Energy and Environmental Design
   program;
2. Retrofitting more than 100 construction vehicles with diesel particulate filters and using clean fuel, which will reduce emissions by nearly 85 percent;
3. Implementing techniques to reduce idling of vehicles during construction
4. Becoming partners in EPA's Energy Star and WaterSense programs,
   which require the use of energy- and water-efficient appliances;
5. Using over 3,000 tons of coal ash in place of using newly-manufactured Portland Cement, which will reduce greenhouse gases by over 3,000 tons.
    

As a policy measure, the green bonds were destined to be ineffective.  For a green incentive to be truly beneficial, it needs to set out goals that stretch its recipients to higher levels of sustainability, but not so pie-in-the-sky that they create an incentive to greenwash their projects.  This is a tough balance to strike.  Doing so requires that the regulatory bodies have a good understanding of the state of the green market that they are looking to incentivize. It is not enough to throw public money at any project claiming to be green.  The result is projects like Destiny USA, which give a bad name to green building and public financing of green projects. 

By contrast, good investment in green projects can bring real benefits.  I analyzed the investment of ARRA funds in green projects.  Per public dollar, these investments were among the most efficient ways of creating jobs of all of the ARRA money spent. (See my analysis here).  As Congress debates the value of continuing public investment in green projects and renewable energy, the debate must not only be about whether, but how, the support will be crafted and implemented.  The road to green is paved with good intentions. 

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Happy New Year and welcome to GBLB 2011.  When the clocked struck 12:01 on New Year's, two important green regulations went into effect that may have a long term influence on green building and renewable energy.  If successful, either of these regulations would do more to change the green industry than any legal challenge to LEED's legitimacy (see the continued coverage of the Gifford v. USGBC case here and here): 

1. CALGREEN

As I have said before, green building practices are becoming code, and California has (as usual) taken the lead.  California is the only state to have a state-wide green building code, CALGREEN, which went into effect on January 1, 2011.  If California successfully implements this mandatory green building code without siginificant impact on building rates or building costs, look to other states and municipalities to follow.  Implementing green via building code is being made significantly easier throught the creation of the International Green Construction Code (IGCC) which integrates with the ICC construction codes already in place in most jurisdictions. 

An interesting question that has been bandied about is what a green construction code will do to LEED.  California will be an interesting laboratory.  Will developers still seek LEED certification for their buildings when all new construction must be green?  How sensitive is the customer base to "green" vs. "more green?"

      2.     EPA Regulation Of GHG Under the Clean Air Act

EPA limits on greenhouse gases for power plants which also went into effect January 1 (a quick fact sheet from the EPA is available here).   When cap-and-trade or cap-and-tax died in Congress last year, the EPA continued its plan to regulate GHG via the Clean Air Act. There is significant controversy over these limitations, and legal challenges have been filed.  On Wednesday, December 29, 2010, the Fifth Circuit Court refused to stay the regulations, and on Thursday December 30, 2010, Texas filed a petition to the Court of Appeals in the Federal Circuit to stay the regulations.  If the EPA regulations on power plants remain in place, more GHG regulation of other categories will follow, creating the same massive shift in the priority of green tactics to manage GHG emissions that cap-and-trade would have had.

The reason I started this post by saying that these regulatory efforts may (not will) shift the green building and renewable energy industries is because of the massive efforts being undertaken to derail the regulatory efforts. 

According to the Center for American Progress: 

The 20 biggest-spending oil, mining, and electric utility companies shelled out $242 million on lobbying from January 2009 to June 2010. Trade associations that generally oppose clean energy policies spent another $290 million during this time. This is over $1,800 in lobby expenditures a day for every single senator and representative.

Opponents of GHG regulations were successful in killing cap-and-trade legislation in Congress.  In California, a referendum seeking to overturn California's cap-and-trade regulations was on the ballot in the November election, although it was defeated handily.

In the tug of war over between proponents and opponents of environmental regulations, watch these two hotspots in 2011. 

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Guest Post by Stuart Kaplow.  Stuart Kaplow is an attorney, based in Baltimore, with a real estate practice concentrating in green building and sustainable business. His law firm website is www.stuartkaplow.com

Building green is the law in Baltimore City. And while the mandatory requirement for all to build green has been in effect since July 1, 2009, the City has just announced the regulations (that were, arguably, to have been effective July 1, 2009) were promulgated last week, effective September 16, 2010.

Make no mistake, Baltimore City is not green washing. To the contrary, it was an early adopter when it enacted a green building law in 2007 that, today, remains among the most sweeping of that in any major American city.

Baltimore City Building Code, Chapter 37 mandates that all newly constructed, extensively modified non-residential, and specific multi-family residential buildings, that have or will have at least 10,000 square feet of gross floor area, “for which a building permit application is filed on or after July 1, 2009 must achieve a silver-level rating in the appropriate LEED rating system, as certified by the Green Building Council”. (Mandating that privately owned buildings be constructed to a LEED standard is no less controversial than religion or politics.)

”Extensively modified” is a modification that alters more than 50% of the building’s gross floor area (such that many major renovations will have to be LEED silver certified is a big deal).

The City Code further requires that “the Building Official must issue regulations to administer .. [this law and that] those regulations must specify: 1. The LEED rating system, and any equivalent energy and environmental design standard, that applies to each type of covered building.”

As the key component of those regulations, the City has developed its own “equivalent” green building standard, based largely upon the LEED 2009 rating standards, layered with fast, flexible new approaches to sustainability taking advantage of the powerful opportunities and challenges of building in an older urban area. A City checklist of 150 credits (versus 110 credits on a LEED checklist) has been released for new construction.

The game changing regulations create the “Baltimore City Green Building Standards” enabling an applicant to satisfy the law with either at a minimum LEED silver certification or obtain a “2 Star” (on a 5 star scale) City approval under those City Green Building Standards.

Building permit applications are, today, being accepted utilizing the Baltimore City Green Building Standards even in advance of the regulations being final.

There are opportunities to prosper and thrive in the greening of Baltimore. All are welcome.
 

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Several stories recently have highlighted the other side of the regulatory coin--regulations are onlyeffective if they are enforced. 

On Monday, the Department of Energy issued 27 penalty notices to companies for failure to meet energy efficiency and water conservation standards.

According to Green Wombat:

For the first time in 35 years, the United States Department of Energy is moving to enforce decades-old energy efficiency and water conservation standards for products like refrigerators, light bulbs and shower heads.

Baltidome challenged Baltimore's enforcement of the city's green building code with respect to a new development being considered for the city center. 

Whether these enforcement actions are legitimate (Baltimore lawyer Stuart Kaplow did a little digging and reported to me that the senior policy making public official reviewing the project  assured him that the project, as designed, complies with the law), it is worth discussing what impact enforcement of energy efficiency codes, building codes, tree planting regulations and open space requirements THAT ARE ALREADY ON THE BOOKS could have on greening the United States. 

Part of the problem is that putting laws on the books is cheap, and enforcement is expensive.  It requires expertise, personnel, lawyers, inspectors and so forth to make it work.  In this era of contrained resources, it is nice to see that the DOE is enforcing some of its regulations.  Let us hope that other regulatory bodies follow suit, like the Federal Trade Commission, which is in charge of false green advertising claims, but has only filed a handful of enforcement actions over the years.   

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In 2009, Baltimore passed an amedment to its building code requiring public and private buildings above 10,000 gross square feet to "be equivalent to a LEED “Silver” level."  Obviously, the goal was to get buildings in Baltimore to be more environmentally friendly. Fast forward a year, and a controversy is brewing over whether a proposed Big Box project, including a Lowe's and a WalMart is actually green.  There is some rumbling that the project was not green because it was not being certified by the USGBC, and may not be properly managing its wastewater.  According to Baltidome:
 

During community testimony at the hearing, the Planning Commission was presented with concern that the developers were not applying for LEED “Silver” certification for the project and that the proposed development appears to be failing in its method for waste water management of the site. Despite the developer’s assertions, the project may, in fact, be ineligible for LEED “Silver” standards set by the city.

Without deeply analyzing the nicities of wastewater management, the resistance to the 25th street station project appears to be mainly one of local vs. chain.  But I am wrestling with the more baasic regulatory concept of incentivizing inner city development because it is green, even if it does not embrace green building practices.

Work with me here.  Cities are inherently green.  One of my favorite New Yorker articles of all time was David Owen's 2004  piece on why New York City is sustainable.  The argument for 25th Street Station's green cred goes like this "If the 25th Street Walmart project comes to fruition, your average Baltimorean will have greater access to retail within walking or short driving distance.  No need to go to the suburbs to shop, wasting fossil fuel and requiring expensive additional infrastructure.  In addition, it provides an amenity which makes inner city living more attractive."  Weighed against that, of course, is the long distance shipping of goods to WalMart, and potentially the non-green siting and construction practices. But the non-green practices and the long distance shipping would exist wherever WalMart built, in downtown Baltimore or in an exurban location. 

Baltidome is rightly concerned that Baltimore's green building regulations are not being enforced, and there is currently considerable stress on municipal budgets which are leading to green building programs being scaled back.  Are we better off, in an era of severly constrained municipal finances, focusing on incentivizing urban development and renewal than specifying (and enforcing) green building practices?  

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Yesterday, the EPA released its Sustainable Design and Green Building Toolkit for Local Governments.  The Toolkit: 

The Toolkit is designed to assist local governments in identifying and removing permitting barriers to sustainable design and green building practices. It provides a resource for communities interested in conducting their own internal evaluation of how local codes/ordinances either facilitate or impede a sustainable built environment, including the design, construction, renovation, and operation and maintenance of a building and its immediate site.
 

The toolkit can be downloaded here.

The Toolkit was developed by EPA Region 4, and we are very excited to have Karen Bandhauer, an Environmental Scientist at EPA Region 4 for an interview about the Toolkit on August 4.

Today, the Center for Climate Change Law at Columbia Law School issued for comment a draft model municipal green building ordinance.  The Model Ordinance is available for download here.  According to the Center for Climate Change Law:

Unlike other model ordinances that detail technical specifications, this ordinance presents a framework for the implementation of existing technical standards and a streamlined procedure for their compliance and enforcement. The model ordinance accommodates the rapidly developing field of substantive green building standards by allowing for the adoption of new standards within the ordinance’s framework.
 

Notably the Model Ordinance attempts to deal with the issues related to preemption, non-delegation, and antitrust, and a separate analysis document is available on the site as well.

I look forward to working through these documents and commenting on them further, and looking forward to hearing your thoughts on these resources. 

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Comprehensive federal environmental regulation does not come easily.  First, there is the difficulty of crafting scientific regulations.  Then there are the entrenched interests to be combated, both in the private sector, and with the states and local governments who may have had authority prior to federal regulation. Compounding these issues is the high cost of regulation and enforcement itself.  Criticisms abound from the right--too much regulation--and the left--too little.  Even after regulations are passed, the government can expect years of litigation over the implementation of regulations.  What congressman needs that kind of headache?  

It takes a galvanizing catastrophe to catapault environmental regulation to the front of the federal stage.  In 1978, Niagara Falls, New York became the subject of national and international attention, controversy, and eventual environmental notoriety following the discovery of 21,000 tons of toxic waste that had been buried beneath the neighborhood by Hooker Chemical. Residents were found to have numerous health problems, including cancer and mental retardation.  After the dump was discovered and 800 families relocated, Congress was motivated to pass the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or Superfund Act, which requires polluters to remediate toxic sites. 

Deepwater Horizon needs to be this generation's Love Canal moment.  Congress has an unparallelled opportunity to capitalize on the anger, the shock and the awareness of the fragility of the environment currently in the zeitgeist  to pass comprehensive energy legislation.  Thank god, Love Canal moments do not come along often.  It would be a pity to waste it.  

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What a difference the pond makes. 

The E.U. passed strict energy efficiency regulations Tuesday, requiring all new buildings constructed in Europe after 2020 to be virtually carbon-neutral.  The goal, according to Reuters, is to reduce the 36% of GHG emissions attributable to Europe's building stock:

"With buildings accounting for 36 percent of the EU's greenhouse gases, improving their energy efficiency is also crucial for meeting the EU's climate change goals," said Turmes.

Contrast this approach to yesterday's veto by Wisconsin's governor of a bill aimed at making a percentage of public buildings green. The Milwaukee Journal-Sentinel reported:

The measure had directed all state building funds to be used for certifying at least 15% of total gross square footage of working space in state-owned and leased buildings to meet green building requirements.

The reason for the veto? In a letter, Governor Doyle stated that the requirement would:

[R]esult in all current maintenance projects being delayed indefinitely.  In the future, the commitment of all these funds for this single purpose will also sharply curtail the state's ability to build new buildings or maintain its existing facilities. 

I find it difficult to reconcile these two regulatory actions.  On the one hand, Europe has determined that it is not only feasible, but necessary to build its entire building stock to a near carbon neutral level, and Wisconsin has determined that it cannot even make 15% of its public buildings green.  What will the competitiveness of Wisconsin--indeed, the entire United States--be if it is saddled with a portfolio of underperforming building stock contributing to greenhouse gas emissions.

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I have posted on many occasions about the importance of place in green building--green buildings on unsustainable sites are simply not green.  But it is never really true until the Grey Lady--The New York Times--says it is.  Today, on the Times' Freakonomics blog, James McWilliams had a nice little piece on the fundamental issue of building LEED buildings in an unsustainable, car-based infrastructure. 

Take the long view. From the moment of European settlement onward, American faith in Manifest Destiny has inspired aggressive development driven by land acquisition and individual choice. Sprawl started to become ingrained in the American character over two centuries ago and, as a result, middle America has inherited cities that value expansion over intensification.  To an extent, this vexed inheritance turns our cork floors and compost bins into empty expressions akin to the sun-starved solar panels adorning the Merritt Center.

What McWilliams does not acknowledge is the role that regulation and tax policy has had in developing the infrastructure the way it is. Two give just three examples--the mortgage interest tax credit encourages homeownership outside of the urban core. For many years, urban neighborhoods, the most sustainable, were red-lined--you simply couldn't get a mortgage.  Funding highways over mass transit means that more highways are built, making it possible to move further from the urban nodes.  Finally, funding schools through property tax assessments mean that inner cities with multi-family housing and greater rental concentrations will have less money to provide excellent education, driving families with children to the suburbs.

McWilliams uses the passive voice--" Sprawl started to become ingrained in the American character over two centuries ago "--as if sprawl simply appeared, like a cancer on the landscape.  Not so.  Regulatory and monetary policy implemented by elected representatives caused the unsustainable circumstance Americans now find ourselves in.  

 We have seen the sprawl, and it is us.

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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.   

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I had a stimulating (if decaf) coffee with my friend the Green Skeptic this afternoon.  Conversation drifted to how Philadelphia managed to avoid being too overbuilt in the real estate bubble.  Everyone here always complains about how the archaic and endless zoning process and the expensive union labor force hamstring development in Philaldelphia.  And there is no doubt that these factors preclude easy and rapid development and redevelopment of Philadelphia's urban core. 

But, we speculated, did Philadelphia's "Can't Do" Attytood (as they say here) have the unintended benefit of preventing too much over-development that has been seen in places like Phoenix and Miami?  [Today's New York Times even had a story about how Bloomberg's emphasis on development and streamlining permitting may not even have benefited New York. ]

What does all of this Starbuck's infused musing have to do with green building? It stands as a cautionary tale--how fast is too fast?  

In St. Louis, Missouri's "First Green Development" was razed to the ground due to foreclosure:

five banks have started foreclosure proceedings on the project, which was started in August 2006 and appeared to be abandoned during construction.  

Expedited permitting processes for green buildings are an increasingly common non-financial incentive for green buildings, especially for cash-strapped municipalities that can not offer financial incentives or tax credits.  As we seek to encourage green development, does it make sense to ensure that the regulatory process is deliberate enough to prevent overbuilding? Or is that not the appropriate role for building regulation? 

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Yesterday, the Securities and Exchange Commission issued revisions to Staff Legal Bulletin No. 14E (CF).  Why do we care about an obscure SEC procedural document here at GBLB? According to the RiskMetrics Group Blog, an earlier 2005 version of the document

concluded that resolutions [about climate change risk] could be omitted under SEC Rule 14a-8 (i)(7) as ordinary business matters, not suitable for shareholder consideration, if they involve “an internal assessment of the risks or liabilities that the company faces as a result of its operations that may adversely affect the environment or the public’s health.”

In other words, shareholder resolutions seeking information about companies'  financial climate change risk did not have to be addressed by SEC regulated corporation.

The brand spanking new Legal Bulletin 14E changes the metrics for determining when shareholder resolutions regarding climate change risk need to be included in SEC documents:

Henceforth, the bulletin says, in deciding when a company can omit a resolution, rather than focusing on whether a resolution relates to an evaluation of risk, the staff will instead focus on the underlying subject matter to which the risk pertains.

So, if a company has a large financial risk due to carbon belching power plants or portfolios of resource sapping buildings, it is possible that shareholders will be able to call for an accounting of the risk to their investments. 

As Justice Brandeis said, "Sunshine is the best disinfectant."  By allowing shareholders to demand cliamte risk disclosure, companies may be more inclined to undertake risk management strategies--like green building--to ameliorate their risk. 

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On October 5, 2009, President Barack Obama issued an executive order entitled "Federal Leadership In Environmental, Energy and Economic Performance." According to the preamble to the EO, the purpose is to:

In order to create a clean energy economy that will increase our Nation's prosperity, promote energy security, protect the interests of taxpayers, and safeguard the health of our environment, the Federal Government must lead by example. It is therefore the policy of the United States that Federal agencies shall increase energy efficiency; measure, report, and reduce their greenhouse gasemissions from direct and indirect activities; conserve andprotect water resources through efficiency, reuse, and stormwater management; eliminate waste, recycle, and prevent pollution; leverage agency acquisitions to foster markets for sustainable technologies and environmentally preferable materials, products, and services; design, construct, maintain, and operate highperformance sustainable buildings in sustainable locations; strengthen the vitality and livability of the communities in which Federal facilities are located; and inform Federal employees about and involve them in the achievement of these goals.
 

It is further the policy of the United States that toachieve these goals and support their respective missions,agencies shall prioritize actions based on a full accountingof both economic and social benefits and costs and shall drive continuous improvement by annually evaluating performance,extending or expanding projects that have net benefits, and reassessing or discontinuing under-performing projects.

Finally, it is also the policy of the United States thatagencies' efforts and outcomes in implementing this order shallbe transparent and that agencies shall therefore disclose results associated with the actions taken pursuant to this order onpublicly available Federal websites.
 

 Whoa.  I will analyze in later posts the various programs included in the EO, but first it must be recognized that this is an enormous step.  The EO sets out ambitious goals for every federal agency to pursue sustainable priorities, including developing net-zero buildings, and to report on their environmental performance. 

Can the president do this with the stroke of a pen? The answer is a definite maybe. 

Let's start with the basics.  What is an Executive Order exactly? 

U.S. Presidents have issued executive orders since 1789. Although there is no Constitutional provision or statute that explicitly permits executive orders, there is a vague grant of "executive power" given in Article II, Section 1 of the Constitution, and the statement "take Care that the Laws be faithfully executed" in Article II, Section 3. Most executive orders are orders issued by the President to US executive officers to help direct their operation, the consequence of failing to comply being removal from office.

The scope of a president's authority to make law via executive order was analyzed in YOUNGSTOWN CO. v. SAWYER, 343 U.S. 579 (1952)

To avert a nation-wide strike of steel workers in April 1952, which he believed would jeopardize national defense, the President issued an Executive Order directing the Secretary of Commerce to seize and operate most of the steel mills.  

The major distinction drawn in Younsgtown was between law and policy:

The President's power, if any, to issue the order must stem either from an act of Congress or from the Constitution itself. There is no statute that expressly authorizes the President to take possession of property as he did here. Nor is there any act of Congress to which our attention has been directed from which such a power can fairly be implied. Indeed, we do not understand the Government to rely on statutory authorization for this seizure.

So what is the authority under which President Obama issued the Federal Leadership In Environmental, Energy and Economic Performance EO? Um...Um...Um...No specific law or statute is cited, indeed the only legal justification is:

By the authority vested in me as President by the Constitution.

This is not as thin on the ground as it may seem.  When the government acts as a "market participant"--i.e. like a private actor--it has broad flexibility.  For example, government entities acting as market participants are not subject to the same Constitutional restrictions as where the state is governing private entities.  See, e.g. SOUTH-CENTRAL TIMBER V. WUNNICKE, 467 U. S. 82, 93 (1984) (“Our cases make clear that, if a State is acting as a market participant, rather than as a market regulator, the dormant Commerce Clause places no limitation on its activities.”)  The federal government is largely free to make its own requirements for its purchases and projects, which may include setting a standard for its practices, like net-zero.

However, the requirements set forth in the Federal Leadership In Environmental, Energy and Economic Performance EO are likely to be costly, time-consuming and restricting on Federal agencies.  For example, beginning in 2020, all new Federal buildings that enter the planning process are designed to acheive net-zero energy by 2030.  95% of new contract actions must be energy efficient. 

This is not a bad thing--it is very strong and ambitious.  If implemented, it will be a significant step forward in environmental stewardship.  The General Services Administration alone owns and leases over 354 million square feet of space in 8,600 buildings in more than 2,200 communities nationwide.  However, those who seek to challenge this action may argue that it exceeds the authority of the president by putting unacheivable requirements on the Federal agencies, thus preventing them from carrying out their missions. 

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I hate Constitutional law.  Always have.  I was the only one at the University of Pennsylvania law school that did not want to talk about the "big social issues" that are involved in Constitutional law scholarship.  And yet, here I am. 

There was a piece in the Illinois Construction Law blog entitled "Can Specific Government Implementation of Green Building Laws Violate Due Process?"  The example provided was that the Illinois Capital Development Board has implemented guidelines Green Building Guidelines for State Construction

which do not offer the same “out” language of “or equivalent certification” as the Act and instead mandate LEED NC, with no exception for another standard.
 

The best Constitutional argument here is not actually one of "due process", but of impeding interstate commerce by favoring one private actor over another through regulation, a violation of the Commerce Clause. 

However, where, as here, the state acts as a market participant, it is not subject to the same Constitutional restrictions as where the state is governing private entities.  For example, where a state sources exclusively in-state materials for its own construction projects, the regulation is not restricted by the Commerce Clause.  See, e.g. SOUTH-CENTRAL TIMBER V. WUNNICKE, 467 U. S. 82, 93 (1984) (“Our cases make clear that, if a State is acting as a market participant, rather than as a market regulator, the dormant Commerce Clause places no limitation on its activities.”)  The state or federal government is free to make its own requirements for its purchases and projects, which may include setting a standard for its practices, like selecting the LEED standard. 

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I have been watching with interest the voracious appetite for the $4500 "cash for clunkers" incentive program which rewards people for trading in less fuel efficient vehicles for new, more fuel efficient ones.  So many people have taken advantage of the program that it ran out of cash within a week of opening, though the $1 billion appropriation was expected to last until November.  Now the Senate is debating whether to pour an additional $2 billion into the program.

Very interesting, but what does this have to do with green buildings, you may ask.  I see it as a very interesting object lesson for structuring green building incentives.  Green building incentives have been very popular, and are often promoted in lieu of mandatory green building regulations.  What is hard, though, is getting the incentives right.  How much is enough to stimulate green building, while maintaining a responsible public fisc?

Las Vegas famously went very wrong with their original green building incentive program, so much so that it threatened to deplete the finances of the state of Nevada.  Essentially, the problem was the same in Las Vegas as it was for the clunkers--too much money was available from the outset with too few requirements, meaning that the program was oversubscribed.  Instead, a step-wise program would have been more reasonable for both LV and the clunkers. 

So, for Clunkers, if the program had started with a $1000 incentive, and been evaluated after 1-2 months, the incentive could have been enhanced.  Now, reducing the incentive will only garner public outrage instead of benefit. 

The lesson for government entities looking to implement incentive programs? Start out with the lowest reasonable incentive, then evaluate the program after a reasonable period to see if it has been successful.  If not, you can create higher incentives or relax the requirements.  

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By now, everyone has heard of "greenwashing"--a term used to describe the practice of companies disingenuously spinning their products and policies as environmentally friendly.  The new wave of anti-environmental action is more devious, and potentially more destructive.  I choose to term it "greenbashing." 

What is greenbashing? The use of seemingly reasonable arguments about catastrophic costs or unforeseen dangers to undermine progressive environmental programs.  There have been lots of examples of greenbashing lately.  Here are a few choice examples:

1.  Green roofs may spontaneously combust.  In challenging Toronto's recent mandatory green roof by-law, Don Marks, executive director of the Ontario Industrial Roofing Contractors Association, warns that

“I don’t believe that the insurance industry has caught up with the increased risk of fire that may result from improperly maintained green roofs...”

According to engineer Rob Diemer, partner with AKF Engineering, this threat does not comport with reality:

This is a new technology and the codes, insurance companies, underwriters and testing agencies are just now catching up. From what I have seen, we should see code language and testing protocols dealing with wind uplift and fire hazard for green roofing in the near future. In the mean time I think the fire hazards are minimal and depend a lot on the type of roof and plants used.

 

On an extensive roof using shallow, lightweight, mineral based growing medium and sedum plants, there is probably little or no fire hazard. Even if the plants should die due to a prolonged drought, the fuel load of the dead plants is minimal and it is likely that any fire would rapidly consume the plants and die out before damaging the building structure. Intensive roofs using deeper growing medium and larger plants may provide a larger potential fuel base; however, most of these roofs need to be irrigated which would tend to mitigate the fire hazard due to drought induced plant death. As with all things in life there are no guarantees; however, it would appear that the potential fire hazard of green roofs is more than outweighed by the many positive benefits they provide.

2. A national energy efficiency code will catastrophically increase housing prices.  The National Association of Home Builders issued a press release on June 29 regarding the national energy efficiency provisions of Waxman-Markey that Chris Cheatham and I discussed here in our Green Building Guide to Waxman-Markey.  According to the NAHB, requiring increased energy efficiency will have catastrophic effects on affordable housing:

The market is not geared up to supply the necessary materials and equipment, and that's going to drive up costs. The result will be fewer working-class families in these new energy-efficient homes. They'll be relegated to older, less efficient housing stock and face ever higher utility bills.

In addition, a national energy efficiency code would apparently impede regional sustainability considerations: 

Usurping states' rights to determine appropriate building efficiency for homes and buildings within their jurisdiction would result in ineffective application of efficiency standards to address varying climate zones and specific needs, he added.

The reality of the situation is, of course, that builders benefit from lack of regulation. Currently,  thirteen states have no statewide commercial building codes, and fourteen states have no statewide residential building code.  A national energy efficiency building code would impose regulations where none existed before, or more stringent regulations in jurisdictions with lagging codes.  The result might be higher costs of construction--but of course lower cost of ownership of homes in the long term.  

3.  A National Energy Efficiency building code will require huge new federal bureaucracy.  Our friends over at Sullivan Kreiss  reprinted a letter that the International Council of Shopping Centers sent to its members warning of the dangers of a national energy efficiency building code: 

The cost and complexity of this federal takeover of state and local building codes forced ICSC to oppose the overall bill. The specific efficiency targets are too aggressive and the deadlines are too short. In addition, there is no trained inspection force to oversee a national building code, so it will require the federal government to retrain state employees and, no doubt, hire a huge number of new inspectors. Supporters of this new federal program simply refused to negotiate or compromise on the language. As a result, ICSC does not support this provision.
 

Of course, the way that Section 201 is written, building codes will be drafted and implemented by code councils and the states/local governments in the same way they are now, unless those entities fail to develop codes that meet the Waxman-Markey efficiency standards.  Also, the ICSC letter fails to identify how retraining code official in energy efficiency and creating additional green jobs enforcing an energy efficiency code would be a bad thing.  

Greenbashing would be a rational approach to protect vested interests if there was vested interest to protect.  However, according to the Census Bureau, new housing starts in May were down over 45% from 2008 and shopping centers are being decimated as well.  Instead, these groups could embrace sustainable programs to create new demand for their products, and to help the climate crisis which will effect us all. 

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On May 27, Toronto adopted a mandatory green roof bylaw, requiring green roofs on commercial, residential and industrial property. In summary, the bylaw requires

Up to 50 per cent green roof coverage on multi-unit residential dwellings over six storeys, schools, non-profit housing, commercial and industrial buildings. Larger residential projects require greater green roof coverage, ranging anywhere from 20 to 50 per cent of the roof area.

The mandatory nature of Toronto's green roof law kicked up a storm of controversy, with many developers objecting to the increased costs.

According to the Globe and Mail

Steve Daniels, a development planner with the Tridel Group, said a green roof can cost $18 to $28 a square foot on a typical tall condominium building, meaning an extra $200,000 to $400,000, plus maintenance costs.

The question remains: how effective are green building mandates in improving environmental outcomes like improving energy efficiency, water use, etc. ? Are they better than incentives? Less effective? To date, there is no study available on the regulatory effectiveness of green building mandates.  Such analysis needs to be undertaken soon before more requirements--which may or may not be the most effective means of acheiving environmental goals--are enacted.

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The Waxman-Markey Climate Change bill was voted out of committee May 22, 2009, setting the stage for the first national climate change legislation in the United States.  A nice piece on it was done by Treehugger, here.

The Waxman-Markey bill sets up a cap-and-trade system for carbon emissions. Some critics warn that it does not do enough to combat climate change, others complain that it costs too much (although I wonder how inexpensive they expect it to be to relocate residents of coastal areas from Maine to Florida, the Gulf Coast, California, Oregon, Washington, Alaska and those poor souls in Hawaii). These challenges are in some ways expected--the usual challenges from the usual parties.  

What interests me more is the objections to climate change and green building regulations from unanticipated sources.  The Agricultural Lobby and even the House agriculture Chariman (a Democrat from Minnesota) are emerging as big challengers to the Waxman-Markey bill.  Sensing a threat to the ethanol juggernaut, Grist reports House Ag chair Collin Peterson (D.-Minn.) has been "threatening to derail Waxman-Markey unless the EPA completely backs off." 

Homeowner associations are another interesting source of opposition to green regulations and the implementation of green technologies.  Mark Pike at William & Mary wrote an interesting note about the situation and potential legal remedies here.

What do homeowners' associations and the Ag Lobby have in common? Vested interests.  New regulation inherently impinges upon someone's previously vested interests.  It is important to consider not only the obvious sources of opposition to green laws--like energy companies, traditional homebuilders, etc., but also those who have collateral interests in play. 

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On Earth Day, Mayor Bloomberg announced sweeping new green building regulations for New York City.  The proposed regulations would: 

• mandate energy audits in buildings larger than 50,000 square feet once every decade and require retrofits that are deemed cost effective, which is defined as a five-year payback period
• require property owners to benchmark the energy usage of their buildings
• mandate commercial lighting upgrades by 2022
• require compliance with a new energy code after completing a building renovation of any size

On May 12, the Massachusetts Board of Building Regulations and Standards (BBRS) approved Appendix 120AA as an optional appendix to the 7th edition Massachusetts Building Code 780 CMR. According to the BBRS,

the stretch code would be incorporated into the Massachusetts building code as an optional appendix. Towns and cities in Massachusetts would then be able to choose between remaining on the base energy code or adopting the stretch energy code as their mandatory energy code requirement.

Opponents argue

The “stretch code”...will end decades of statewide uniformity under the existing building code and will be in direct conflict with the goals of the statewide code — to provide uniformity, predictability and clarity.

These sweeping regulations are interesting from a couple of different perspectives.  First, they indicate a political willingness to impose stricter--and potentially costlier--regulations on developers, despite the down real estate market.  Second, they indicate a shift in policy making from independent green regulatins to adaptations of the building and energy codes.  It will be interesting to see how these schemes are implemented, and what effect they have on development in these localities. 

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The New York Times reported that Toronto was mulling a mandatory green roof by-law.  Developers in Toronto objected to the green roof mandate, arguing:

 that it would scare away investment due to the high cost of green roofs. Saying green roof installation should be voluntary, building industry representatives told The Globe and Mail that such add-ons could increase construction costs by $18 to $28 a square foot.

In Philadelphia, City Councilman Curtis Jones proposed tying an already existing  ten-year property tax abatement to green building requirements.  Building Industry advocates and Mayor Nutter's office made the same argument that the Toronto developers put forward:

"Restricting the abatement program . . . would likely have the effect of inhibiting development when we need it most," Andrew Altman, deputy mayor for planning and economic development, told Council this month. 

The trouble with these arguments is that they are exactly that---arguments with no basis in fact.  The problem? No facts.  There is no study which can be pointed to, no analysis which has been done which attempts to quantify the effect of green building regulation on development.  Do green building regulations inhibit development? Do they encourage green development? No one really knows for certain. 

In this "money constrained economy" it may be easier for critics of green building regulations to wave the red flag of inhibiting development to prevent further strictures from being put in place.  To effectively counteract this argument, a study needs to be undertaken which compares the development rates in comparable cities which have green building mandates (like Boston or Washington DC) with those that do not.  Controlling for other factors (population, pre-regulation development rates, etc.), it would provide a solid factual foundation for policymaking in this area.

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Most people are thinking about taxes this week.  Today is tax freedom day, the day on which most Americans have earned enough money to pay their taxes for the year, and Wednesday is tax day. In the spirit of this week, a post about taxation. 

How do you influence people to use reusable grocery bags instead of plastic ones? 

There are a few options:

1) Ban customers from using plastic bags

2) Ban stores from providing plastic bags

3) Give away or subsidize reusable bags to customers

4) Give away or subsidize reusable bags to stores

5) Educate stores and/or customers on the benefits of reusable bags

6) Charge customers a tax for the privilege of using plastic bags

7) Charge stores a tax for the privilege of using distributing plastic bages

The first two are traditional, command-and-control regulations.  "Thou shalt not....".  Historically, this had been the model of environmental regulation.  3 and 4 are incentives.  During the Bush Administration, market based incentives and voluntary programs were very much in vogue for environmental protection. 

I believe that all four have their place.  For big, intractable problems with clear environmental consequences, command-and-control is the only way to go.  Incentives are best utilized to correct for market failures, like making solar or wind power more affordable because carbon is not priced in the cost of petroleum.

But I think five through seven--education and taxation are underutilized tools of environmental policymaking.  Miley Cyrus sporting a reusable shopping bag in the new blockbuster film is a way of educating and influencing public action.  Make the reusable tote the new "it" bag.  The green building equivalent is providing education on green building practices, and for government agencies to build green and widely promote their efforts.

Taxation is another great way to influence public choices. By taxing a plastic bag, even a small amount, people are penalized for their anti-social behavior.  We do it with cigarettes, why not plastic bags? Or stick construction? By making alternatives available at the same price as the tax--a 50 cent tax for each plastic bag, and a reusable tote at the same price, people will be more likely to choose the reusable bag. Combined with education on better choices, a penal tax is a very strong policy lever. Portland has sort of done this with the feebate structure, charging builders who want to build traditionally, and remitting that fee for green construction.  But I have yet to see a green building program which taxes builders for traditional construction.  The tax could be tied to the increased public resources needed to service traditional buildings--stormwater management, electricity, etc.

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There has been quite a dust-up over last week's energy efficiency feasibility study by NAIOP, the Commercial Real Estate Development Association.  The study challenged the economic feasibility of developing office buildings with 30% and 50% energy efficiency targets.  Essentially, the study concluded: 

Using energy models, the report found that 30 percent and 50 percent improvements in energy efficiency over code were not financially feasible for most new, Class A office construction. Developers striving for the 30 percent target would not recoup the cost of their initial energy efficiency investments within a 10-year period, while the 50 percent target was far beyond their reach, the study said.
 

The study set off a storm of controversy, resulting in the USGBC and others to decry the methodology and conclusions of the NAIOP study. 

However, the NAIOP study highlights some very important flaws in the current analysis of green buildings. 

1. We need to stop measuring certification, and start measuring performance.  If we had good, apples-to-apples measurements of energy efficiency, water savings, indoor air quality, vehicle miles travelled by occupants and occupant satisfaction which we could compare across building types, it would be easier to deflect the misinformation being espoused by green building skeptics.

2. We need to start incorporating carbon costs. NAIOP's main argument is that achieving 30-50% energy efficiency is not cost effective.  If building carbon costs and other environmental externalities were measured as a component of the cost-benefit analysis, even a flawed study like the NAIOP would have a hard time showing that the costs outweighed the benefits.

3. We need policies which mandate measurement and verification.  In order to collect solid information about building performance over time.  To do so, public policies should incorporate energy efficiency, water savings, indoor air quality, vehicle miles travelled by occupants and occupant satisfaction reporting as components of their green building regulation. 

By effectively incorporating costs and developing solid performance measurements, we can acheive credible green building arguments (as well as improving the performance of the buildings themselves) which will give the green building movement credibility in an age of skepticism. 

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In today's News-Tribune of Tacoma, Washington (admittedly not on my usual roundup of morning papers) there was anop-ed piece by a conservative columnist calling for Washington (state) to roll back "green" requirements for schools because they are not creating the energy savings promised when enacted. 

The 2005 law calls for schools to be designed, constructed and certified to LEED Silver standard.  At the time, the Governor Gregoire's press release stated:

According to the State Board of Education and Superintendent of Public Instruction’s office, use of sustainable building designs result in:

• 20% annual savings in energy costs

• 20% reduction in water costs

• 38% in waste water production

• 22% reduction in construction waste

• A potential reduction in student absenteeism

• A potential 5% decrease in teacher turnover rates

• A potential 5% to 26% improvements in standardized test scores

In an ideal world, meeting LEED Silver standards would result in the predicted energy, water and other efficiencies.  But that is not always the case.  Many factors contribute to efficiency, including construction, operations and maintenance. Further, measurement and verification of energy usage is more art than science--which schools are being compared? by what methodology? Finally, what are the overall environmental implications of the building--were fewer new resources used, for example?

 Many municpalities and companies are using LEED as a shorthand for high performance building to circumvent the difficulties of determining individual targets for resource efficiency and creating long term verification plans. This is shortsighted.  By creating laws which use LEED as a substitute for rigorous environmental standards, well-intentioned municpalities and companies open themselves up to the criticism of the News-Tribune critic--that we shouldn't implement (or we should rescind) green building laws because they don't create environmental efficiency. 

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There has been a lot of discussion about whether the stimulus package includes too much pork, unnecessary spending, etc.  Obama has countered that the bill may not be perfect, but we have to do something.  In short, the country has come up against an age old problem--are we letting the great be the enemy of the good? Do we need to do something, however flawed? 

I engaged in a similar conversation with respect to green building regulation at the William and Mary Environmental Law and Policy Review symposium this past weekend. One of the speakers, Carl Circo, a professor at the University of Arkansas and self-proclaimed "Green Building Pessimist" argued that the green building regulations were insufficient to address the environmental and social problems plaguing us today.

We are indeed using blunt regulatory instruments, like impact fees which may not show the requisite connection between development and environmental damage, LEED-referencing legislation which may not effectively limit energy and water usage, etc.  Unlike the stimulus package, where spending is a one shot deal, with green building regulation, acting is preferable to not acting.  We will achieve three significant goals by passing green regulations,  though they be subject to critical challenges, even litigation: 

1. Obtain whatever environmental benefits come as a result of the regulation--requiring LEED compliance or fees for building conventionally will not set us back environmentally, and we may make incremental progress

2. Provide a basis for measurement, evaluation and tweaking  

3. Provide a working draft for uniform federal legislation (which I believe is coming)

So to municipalities who are considering legislating green, I recommend taking the plunge.  There is no such thing as perfect legislation, and the carbon crisis does not give us the luxury of time.

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On Saturday, I spoke at the truly excellent seminar on green building law and policy "It's Not Easy Building Green" put on by the William & Mary Environmental Law and Policy Review Symposium.  Notes on my presentation and others are available here.

Among the topics discussed was the outcome of the Las Vegas tax credit for green buildings which I first posted on in July 2007. 

In short, Las Vegas passed a tax incentive for green buildings in 2005 -- worth up to 50 percent of the property value for up to 10 years -- to projects that qualify under the Leadership in Energy and Environmental Design standards. Projects meeting the silver level of certification were eligible for a 35 percent property tax break.
 

According to Darren Prum, one of the presenters at the ELPR Symposium, developers soon realized that they would receive up to $3 back for every $1 they spent building green, and applied the tax breaks to construction equipment and other ancillary purchases.  Soon, the  green incentive was slated to cost the state $940 million in revenue over the next decade, and threatened the budget of the state of Nevada. 

To escape the budget crisis, a new bill was passsed which lowered the property tax reductions, and limited the abatement to 10 years.  School taxes were also exempted from the abatement, and sticrt anti-smoking provisions were incorporated. Six projects were grandfathered in.  According to Prum, the reduced price tag of the revised abatement was $493 million. 

Like the famous architecture book which inspired the title of this post, there is much that we can learn from the unique character of Las Vegas, especially as Obama tries to put together green incentives as part of the stimulus package.  Here are some teachings from Las Vegas' initial failed attempt at encouraging green building:

1. Proportionaility is key: Ideally, an incentive should be only $1 over the price which makes the project economically desireable.  If a project is already economically desireable, a financial incentive is not the right tool.

2. Green should be green: Although we should not let the great be the enemy of the good, a green project should have to meet the basic components of energy efficiency, water conservation, sustainable site, indoor air quality, and renewable materials and resources. 

3. Regulatory experimentation will not be without failure: Counties with green regulatory schemes have increased 400% since 2003.  With such a great increase in regulation, there will be failures like Las Vegas, and litigation.  This is part of new regulatory regimes, and is to be expected.  

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There was a nice article on Triple Pundit this AM on the positive impacts on business that the California green regulations have had. 

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Long the city of high crime, poverty and neglect by the federal government which calls it home, Washington D.C. has passed some of the most progressive sustainability regulations in the country since 2006. For example in December 2006, Washington mandated, among other things, that private buildings 50,000 square feet or larger have to submit a checklist of green features by 2009, and meet LEED NC 2.2 standards by 2012. In addition to green building regulations, Washington has enacted comprehensive sustainability legislation, including a Clean and Affordable Energy Act, a Green Summer Jobs bill, a Climate Initiative and stormwater and water quality regulations.

I spend a lot of time counseling legislators on how to get legislation -- often far less comprehensive -- enacted, so I wanted to speak to the team behind the Washington legislation to find out what was working and what was not, and how it all got legislated in the first place. Alan Heymann, public information officer for the District Department of the Environment (DDOE), set up a conference with Brendan Shane, director of the Office of Policy and Sustainability, Shane Farthing, development coordinator, and Stella Tarnay, green building coordinator, for an inside look at the state of sustainability in the nation's capital.
 

Read the rest of this article at Greenerbuildings.com

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To stimulate the green technology, repair infrastructure, fund transit and save the world, tax gas now.  At this moment, the price of gasoline, our carbon based friend, is $46.28.  At this price, green energy technologies like wind and solar are not competitive.  Energy efficiency improvements on houses do not make economic sense because energy is just too darned cheap. Thus continues our dependency on oil which is contributing to global warming and funding our frenemies in the middle east.  What to do? 

Tax gas now.

Here's how to do it:

First, set a price of crude where energy efficiencies will make economic sense.  Then set a floating tax which will tax up to that price point--i.e. up to that price point, the difference between the market price of oil and the set point will be tax revenue,  after that price point, there will be no need for the tax because the market price of oil will be high enough for green to make economic sense, like, say, last summer.  Finally, use the "carbon" tax on crude to fund green initiatives from green jobs to incentives for green builldings. 

But what about the economy? The trillions in stimulus (which are coming) will have to come from somewhere, might as well be a tax on crude which directly links to the problem. 

UPDATE: My friend Chris Hill at Construction Law wrote a very cogent challenge to the economics of the plan.

UPDATE: The Oil Drum had an answer--lower income taxes to compensate for gas tax.

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On December 3, 2008, Portland unveiled its new suite of green building regulations based around a fee and rebate system.  My fellow green building laywer Chris Cheatham over at Green Building Law Update describes the "feebate" system:

Under the Feebate system, all new buildings built to code are assessed a fee.  If a project is built to LEED Silver, then the fee is waived and the owner obtains access to financing options.  Even better, if a project attains LEED Gold, the city writes the project owner a check! 
 

Although the Feebate system is a great idea, Oregon Live reports that not everyone was happy with the program, specifically the homebuilding industry, forcing Portland's mayor to exempt homes from the feebate program

New homes would not get the new fees or rebates. But the city would ask of the homebuilding industry: Meet a citywide goal of getting more new homes certified green each year, or else Portland would impose a fee-and-rebate system to make builders comply.

This is a pretty big compromise, and an interesting precedent for cities looking to emulate Portland's system.  For example, in Philadelphia, retrofitiing and building homes is a large component of the building stock.  If homes are exempted, what impact will that have on the overall efficacy of green building programs? 

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