Green Building Law Blog : Green Building Lawyer & Attorney : Shari Shapiro: Obermayer Rebmann Maxwell & Hippel Law Firm : Environmental, LEED

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. 

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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.

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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Many of my readers have requested a clip of Green Building Law Blog's appearance on MSNBC discussing the amount of stimulus funding going to green projects.  The link is below:

http://www.msnbc.msn.com/id/21134540/vp/34016904#34016904

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In July, I wrote an analysis of the “green” spending in the American Reinvestment and Recovery Act—ARRA, also known as the “stimulus bill.” I concluded that as of July the spending on green programs accounted for only .28% of the total allocation for those programs in the ARRA-- $33.2 million had been paid out for green stimulus programs, and an additional $307 million in public transit dollars.

So…where are we four months later? More money has been paid out--about $1.5 billion--but it pales in comparison to the $83.8 billion  paid out in tax benefits as of 11/06/09, and spending on non-green projects.

Here are the stats in detail:

Energy Efficiency/Renewable Energy--Department of Energy

As of 7/17/09 the Department of Energy had paid out $264,457,144. $16,796,000 had been awarded for energy efficiency and renewable energy projects, of which $3,189,150 had actually been awarded. BOTTOM LINE IN JULY: $3 million

As of 11/06/09, the Department of Energy had paid out $1,346,197,498. $16,796,000 had been awarded for energy efficiency and renewable energy, of which $10,651,341,856 had actually been awarded, and $347,779,891 paid out. BOTTOM LINE IN NOVEMBER: $347.8 million.

Increase from July: $344.8 million.

High Performance Green Buildings--General Services Administration

As of 7/17/09 overall the GSA has paid out $12,743,040. of available $656,418,268 of which $6,807,468 has been paid out for federal buildings, which includes high performance building projects. According to the GSA, $4,500,000,000 was appropriated by Congress, $318,750,279 obligated to date (contracts awarded) and $230,771 outlayed to date (work completed & paid).
 

As of 10/06/09 overall the GSA has paid out $333,444,141, of which $67,324,333 been paid out for federal buildings, which includes high performance building projects.

Public Transit--Department of Transportation

As of 7/17/09 the DOT has paid out $773,662,175 of a total available $22,188,399,591. For rail and other transit funding, including Amtrak, obligations of $3,921,784,326.72, outlay of $306,918,718.00 (this includes state block grants).  BOTTOM LINE IN JULY: $307 million in public transit funding outlaid as of 7/17/09.

As of 10/30/09 the DOT has paid out $5,551,384,466 out of a total available $30,514,836,708. For rail and other transit funding, including Amtrak, obligations of $7,539,142,781.45, outlay of $824,343,952.21 (this includes state block grants).  BOTTOM LINE IN NOVEMBER: $824 million in public transit funding outlaid as of 10/30/09.

Increase from July: $517 million.

Everything the EPA Is Doing--Environmental Protection Agency

As of 7/17/09, EPA has paid out $30,515,805 of the $5,713,481,497 it was allocated. Assuming that all that the EPA does is in some way green related, and this is a big assumption on my part, as much of the EPA funds have been dedicates to water resources and cleanup of hazardous sites, that adds another $30 million. BOTTOM LINE IN JULY:  $30 Million

As of 11/06/09, EPA has paid out $365,636,685. Assuming that all that the EPA does is in some way green related, and this is a big assumption on my part, as much of the EPA funds have been dedicates to water resources and cleanup of hazardous sites, that adds another $366 million. BOTTOM LINE IN NOVEMBER:  $366 Million

Increase from July: $336 million.

So?

The overall spending—i.e. money that has been paid out for green projects—in the first 10 months of 2009 amounts to over $1.5 billion. This is not nothing, and a vast improvement from the summer. On the other hand, $83.8 billion has been paid out in tax benefits as of 11/06/09, and allocation on highway infrastructure by the Department of Transportation alone was $20.2 billion of which $3.7 billion has been paid out. 
 

**A word about methodology--all of the above statistics were gleaned from Recovery.gov , the Recovery websites of the individual agencies, and my personal agency contacts.  For the DOT recovery site, go here.  For the GSA recovery site, go here.  For the DOE recovery site, go here. For the EPA recovery  site, go here.  There is a wealth of information available, and I welcome any input or different statistical or mathematical analyses from the Green Building Law Community.**

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I know, I said I was going on maternity leave, but before I do so, I will appear on MSNBC tomorrow, November 17, 2009 at 2:30 E.S.T. to discuss green spending through the American Reinvestment and Recovery Act, also known as the stimulus bill.  My original post on this topic is available here. 

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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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Yesterday I was asked whether enough support was being given to develop the green building industry in the United States.  It led me to wonder where the so-called "green" stimulus package had wound up six months later.  I had criticized the stimulus bill for being less green in reality than in rhetoric here.  The answer to where we are now that the bill is being implemented? A light shade of chartreuse, not the deep forest I would have preferred.  By my calculations, a total of $33.2 million has been paid out for green stimulus programs, and an additional $307 million in public transit dollars, of the allocated $119 BILLION.  That is .28% of the total allocation by my calculations. 

Here are the stats in detail:

 The allocations in the Stimulus Bill for categories which include green:

• Infrastructure funding has been allocated $111 billion (this includes transit)
• Energy has been allocated $8 billion. 

[Please compare this to the $288 billion for tax relief].

Energy Efficiency/Renewable Energy--Department of Energy

As of 7/17/09 the Department of Energy has paid out $264,457,144.  $16,796,000 has been awared for energy efficiency and renewable energy projects, of which  $3,189,150 has actually been awarded.  BOTTOM LINE: $3 million

High Performance Green Buildings--General Services Administration

As of 7/17/09 overall the GSA has paid out $12,743,040. of available $656,418,268 of which $6,807,468 has been paid out for federal buildings, which includes high performance building projects.

UPDATE: The GSA provided me with specific information on the High Performance Building Program.  According to the GSA, $4,500,000,000 was appropriated by Congress, $318,750,279 obligated to date (contracts awarded) and $230,771 outlayed to date (work completed & paid)

BOTTOM LINE: $230,771

Public Transit--Department of Transportation

As of 7/17/09 the DOT has paid out $773,662,175 of a total available $22,188,399,591. For rail and other transit funding, including Amtrak, obligations of $3,921,784,326.72, outlay of $306,918,718.00 (this includes state block grants).
BOTTOM LINE: $307 million in public transit funding outlaid as of 7/17/09.  

 Everything the EPA Is Doing--Environmental Protection Agency

As of 7/17/09, EPA has paid out $30,515,805 of the $5,713,481,497 it was allocated.  Assuming that all that the EPA does is in some way green related, and this is a big assumption on my part, as much of the EPA funds have been dedicates to water resources and cleanup of hazardous sites, that adds another Bottom Line $30 million. 

So what do all these numbers mean? 

I think, as I did when the ultimate stimulus bill was passed that the overall amount is not enough.  What we know now is that the money is being spent slower than anticipated.  If the concept was to stimulate the economy in 2009, $33.2m probably is insufficient.  The entire practice of architecture is dying on the vine, without help there will be few innovators left to help green the next building wave.  Something needs to be done to facilitate getting the green stimulus dollars to those projects that need them--I have heard of LEED projects which are dying because they cannot access private funds--sooner rather than later.

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I have written before about the conflict between local and federal regulation of green building.  But the issue of jurisdiction is not restricted to intergovernmental conflict.  At the federal level,  resources for green building are being largely handled by the Department of Energy, and not by the Environmental Protection Agency. 

The DOE runs the Energy Star program, for example.  In its page on "buildings" the DOE states:

The Department of Energy, through the Office of Energy Efficiency and Renewable Energy’s (EERE) Building Technologies Program works closely with the building industry and manufacturers to conduct research and development on technologies and practices for energy efficiency. The Department also promotes energy and money-saving opportunities to builders and consumers and works with state and local regulatory groups to improve building codes and appliance standards.

As you might expect, the DOE information is all about energy efficiency.  By contrast, the EPA has an informative page about green buildings, including information on water efficiency, sustainable communities, indoor air quality, waste reduction, toxics reduction and other considerations.  In short, the EPA takes into consideration the multi-faceted ways in which buildings impact the environment. 

Why should you care? On the EPA page regarding funding for green building projects it states:

EPA does not currently provide funding to support green building projects.

In the stimulus bill, which, you recall had $60 billion for "green" programs, the EPA was allocated exactly $0 for green building, and a measley $7 billion over all.  Don't believe me? Look at the EPA's own assessment of the stimulus money.  By contrast, the DOE was allocated $32.7 billion, with $5 billion for weatherization alone. 

The government agency charged with protecting the environment was essentially shut out of the "green" stimulus bill, and as a result, I wonder whether the overall environmental impact of buildings will be promoted effectively through research, incentives and other mechanisms.

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