What Cash For Clunkers Can Teach Us About Green Building Incentives

Posted on August 3, 2009 by Shari Shapiro

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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