This week, I posted an online conversation with James Bedell and Chris Hill about the stimulus package.
On Friday, we sat down and had a lively debate on KCast, a podcast brought to you by Konstructr, the social network for the building industry brought to you by one of the brightest lights in the online work, Vik Duggal.
You can access the podcast here.
Paul Krugman, my absolute fave, had a very insightful piece on how the centrists killed the efficacy of the stimulus package. He comes at it from a more economic, and less environmental, standpoint, but arrives at the same conclusion I did.
My friend Chris Hill over at Construction Law Musings commented directly on James Bedell and my dialogue from yesterday.
Thanks so much to James Bedell for his thoughtful response to my Senate stimulus package piece. You make the point:
Perhaps we should take the president at his word. That the primary purpose of this bill is to get people to work, to stimulate demand in the economy and break the downward trend. Not fulfill the agenda of the liberal left in one massive bill passed within 3 weeks of taking office.
My difficulty is that once you have passed a $1 trillion (there, I said it, everybody ok?) stimulus package, there will be little capital--fiscal or political--left over to apply to other projects. Obama will have essentially spent all of his favors passing the stimulus package, and not be able to get solid legislation through on energy efficiency, green building codes, etc.
Yesterday, I posted a piece on the Senate stimulus package, arguing that it failed to provide the green basis for a thriving future economy.
James Bedell, one of my Twitter buddies (he is @jamesbedell, and you should be following him if you are a tweeter) wrote this thoughtful response on Konstructr.
First of all let me say if you’re on twitter and not following @sharishapiro you’re missing out on some of the best info and opinion on green building to be found. Her recent blog post Proposing a Band Aid, Where a Transplant is Required is a thought-provoking piece about the short comings of the forth coming stimulus package the president is helping to push through congress. To quote:
The problem with the stimulus package and the proposed amendments is not the amount of the allocations, or even the worthiness of some of the programs, like higher education and healthcare. Rather, it is the fundamental perspective on the American economy that it represents.
I just wonder if we in the green building community have lost our sense of scope when it comes to change and nature of government in the US. While I share a desire to see the future of energy use and building in the US forever altered and I believe we need the federal government’s help in getting there, I can’t help but wonder if our disappointment is misplaced. Didn’t we used to think that the government’s role was in passing legislation, not funding every green project we ever imagined?
The fact is if the economy hadn’t slid into this horrendous tail spin we would never see a spending/stimulus bill this massive coming from Washington, and in truth it wouldn’t have been warranted. Perhaps we should take the president at his word. That the primary purpose of this bill is to get people to work, to stimulate demand in the economy and break the downward trend. Not fulfill the agenda of the liberal left in one massive bill passed within 3 weeks of taking office.
Read the rest of James' post on Konstructr
The Senate is proposing to give the United States a bandaid, when a transplant is required.
I was disappointed when the House’s version of the Stimulus Package was released with only $95 billion allocated to green initiatives out of $550 billion in expenditures (and another $275 billion in tax cuts), but the Senate version is far worse. By my reading, only $67.2 billion of the $885 billion Senate stimulus plan is now allocated for green initiatives:
|
Energy Efficiency for DOD Facilities |
$3.20 |
|
Water Infrastructure |
$4.60 |
|
Public Transit |
$8.40 |
|
Energy Investments |
$51 |
|
TOTAL GREEN STIMULUS |
$67.2 |
Instead of a down payment on our future, the Senate bill sprinkles most of the stimulus money throughout the existing economy, with $13.9 billion in Pell Higher Education grants, $13 billion "to help close the achievement gap and enable disadvantaged students to reach their potential," $5.8 billion to "fight preventable diseases and conditions." Some money is clearly not green at all—like $27 billion in highway funding.
There are also major bucks for residential real estate proposed. According to CNN, Senate Budget Committee Chairman Kent Conrad, D-N.D., said he would propose an expansion of a temporary $7,500 first-time home buyer credit so that it applies to all purchases of primary residences, and some Republican senators have called for an increase in the credit to $15,000. Senate Republicans are likely to introduce a provision that would encourage lenders to offer a 30-year fixed rate mortgage at 4%.
The problem with the stimulus package and the proposed amendments is not the amount of the allocations, or even the worthiness of some of the programs, like higher education and healthcare. Rather, it is the fundamental perspective on the American economy that it represents.
Read the rest of this article at Greenerbuildings.com
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.
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.
Yesterday, the house came out with its allocation of the American Recovery and Reinvestment Plan, or the new stimulus package. This package was supposed to be "green". It is not.
The best indication of this is that the allocation for public transit, $10 billion, was $5.6 billion less than the allocation for a $500 increase in Pell higher education grants. I do not think that higher education grants are wrong, but a $500 increase in individual Pell grants just isn't going to have the impact that, say, $26 billion in public transit funding would have for the environment, jobs, dependence on foreign oil, etc.
The total allocated dollars for green programs is $95 billion out of $550 billion in expenditures (and another $275 billion in tax cuts). Of that:
| Green Stimulus Allocations | $b |
| Energy Transmission | 32 |
| Energy Retrofits | 22 |
| Public Infrastructure Energy Savings | 31 |
| Public Transit | 10 |
| Total | 95 |
As the Green Wombat wrote
It’s a start, but that’s less than 7% of the entire stimulus package (or, about enough to pay for the Iraq war for five months, or somewhat more than what the federal government is spending to bail out Bank of America).
Green Wombat calculated the allocation for green as $54b, but even at my more generous $95b, it is simply not enough to be game changing.
Here is a handy chart with all of the allocations from the New York Times blog.
I look at a lot of green building regulations, and I have devised the rule of the first dollar--regulators should be putting the first dollar of tax payer money into the most cost-effective initiative, to ensure that those initiatives that have the greatest cost-benefit calculus get funded first and most robustly.
This week Obama has come out with some of the details of his green financial stimulus plan. In Obama's speech yesterday, as well as in his Obama/Biden plan unveilied during the campaign, he proposed:
He also outlined the benefits of these programs
[S]aving consumers and taxpayers billions on our energy bills. In the process, we will put Americans to work in new jobs that pay well and can’t be outsourced – jobs building solar panels and wind turbines; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain.
Energy efficiency efforts work with the rule of the first dollar--according to Energy Star estimates,
Compared with standard homes, ENERGY STAR qualified homes use substantially less energy for heating, cooling, and water heating-delivering $200 to $400 in annual savings. Over the average 7 to 8 years you may live in your home, this adds up to thousands of dollars saved on utility bills.
In this study, the RAND Corporation analyzed California's energy efficiency initiatives and concluded that
In California, improvements in residential energy intensity and energy prices have reduced the average energy expenditures per capita in real terms since 1980...Low-income households derive the greatest benefit from reduced energy expenditures.
RAND also noted
The most important benefit for California is the impact of energy efficiency improvements on air pollution emissions. If energy intensity in the state had remained at 1975 levels, air emissions from stationary sources in the state would be approximately 50 percent greater than current levels.
Energy efficiency measures equalled savings and environmental benefits.
The analysis with respect to greening federal buildings is similar. According to the Alliance to Save Energy
The federal government is the nation’s single largest energy consumer and energy waster. In 2005, the federal government consumed about 1.6 quadrillion Btu (quads) of energy at a cost of $14.5 billion. This is 1.6% of all energy used in the U.S. American taxpayers pay about $4 billion annually just to heat, cool, and power the 500,000 federal buildings and facilities.
So, each dollar saved on energy on public buildings is a taxpayer dollar saved, and a reduction in the quantity of resources requried to heat, cool, and power those facilities.
The analysis on the tax cuts, however, is not as sanguine. According to Nobel-Prize winning economist Paul Krugman
First, if the government spends money, that money is spent, helping support demand, whereas tax cuts may be largely saved. So public investment offers more bang for the buck. Second, public investment leaves something of value behind when the stimulus is over.
Krugman argues that tax cuts in the first year may be beneficial in providing a quick hit to the economy, whereas public works projects take time to get started, but Obama's proposal of 40% tax cuts seems like too much. Obama can see similar upfront benefits from providing food stamps and unemployment benefits, for example. Alternatively, he could provide vouchers for energy efficiency improvements through private vendors.
In short, green is green, tax cuts not so much.
Over my first few cups of coffee this morning, I had an odd sensation. What could it be? That slightly warm feeling eminating from my heart--oh, now I remember, hope! That's what it is. Not a lot of hope (although as I write this the dow is up 133 points), but certainly a few rays...
1. Industry organizations and utilities are embracing energy efficiency measures, including enhancing building code requirements. According to Greenerbuildings.com
Environmental and energy groups, including the association that represents almost 70 percent of the country's utilities, are urging swift passage of a stimulus package that includes provisions for energy efficiency programs that they say would help jumpstart an economic recovery through the creation of green jobs.
Most significant from a green building law perspective, is that these groups are advocating for block grants to state and local governments to "be contingent on adoption of regulatory changes that make building codes tougher — and "major investments" in energy efficiency projects by utilities easier. "
2. As I predicted in my post Pink is the New Green, energy efficiency is at the top of the legislative agenda. It is being incorporated into the stimulus package, and local municipalities are embracing it as well. Washington DC updated its building codes to ASHRAE 90.1 2007 and included some new green provisions.
3. The Bicycle Commuter Act passed--A benefit originally proposed seven years ago by .S. Rep. Earl Blumenauer, D-Ore. provides $20/month to those who commute primarily by bicycle.
Of course, we are still waiting to see what the green provisions of the economic stimulus package will be, but these actions are very positive signs of change in our national zeitgeist.
Change.gov, Obama's transition site, had a message from the President-Elect today about his plan for economic recovery. Top of his list was greening federal building stock:
First, we will launch a massive effort to make public buildings more energy-efficient. Our government now pays the highest energy bill in the world. We need to change that. We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs. That won't just save you, the American taxpayer, billions of dollars each year. It will put people back to work.
Interesting that green building infrastructure for the federal government is the first component in Obama's plan.
Shari focuses on energy, environmental and building code policy, representing international companies, non-profits and trade associations in their policy and communications campaignsMore...
