Targeted Incentives--Using Government Funds To Fill The Perception Gap
Yesterday, I wrote about Senator Merkley's new set of incentives to encourage green commercial building retrofits, and left you with the question of whether these new incentives will actually change behavior. An interesting article came out today on CNN.com which highlights a barrier to incorporating green building technologies into building projects:
Appraisals for newly built green homes do not fully reflect the cost of green technology, and the lower appraisal values mean buyers often cannot get the full financing they need from banks.
In essence, according to this articel, the cost of incorporating the green features is not covered by a commensurate increase in the purchase price, causing homeowners to avoid incorporating costly green technologies, even if they represent savings in the long run.
This is the perfect opportunity for designing a targeted grant or financing incentive. The government agency could look at the difference in the appraisal of homes without green technologies, homes with green technologies, the cost of those technologies and the ultimate payback, and design an incentive to make up the difference. A great example would be providing financing for green renovations at a lower rate than standard renovations. Unfortunately, most incentives are not designed around barriers to entry and cost data, but are essentially throwing some non-targeted amount of money at the problem without analyzing would be the best amount and struture to really change behavior.