Construction and use of buildings account for a major share of global warming emissions. Depending on how one calculates, allocating roughly 40 percent of U.S. greenhouse gas (GHG) emissions to this built infrastructure is roughly correct. Heating … cooling … lighting … building materials … etc, it all adds up (and up … and up). A good share of the building GHGs relates back to energy usage — where, after all, does the lion’s share of coal-generated electricity end up other than illuminating our entertainment systems and over-cooling during summer heat?
A simply reality: tremendous room exists for efficiency measures at not just cost effective but, in fact, profitable financial rates of return. That energy efficiency has remained an under-exploited a good example of a win-win-win space for strengthening the economy (and increasing our international competitiveness), cutting into our fossil-foolish addictions, creating jobs (putting people in the building sector back to work), improving our health due to reduced pollution, saving individuals money, and helping address our climate challenges. Paying serious attention to building energy efficiency just makes sense (makes lots of CENTS!) — that this is a great path for sparking serious movement forward in climate mitigation could almost be said to simply be a corollary benefit.
Today, as part of his “Win the Future” campaign introduced during the State of the Union, the President announced a major initiative for improving building efficiency at Penn State University, which is at the center of the Greater Philadelphia Innovation Cluster which was one of the winners of the federal Energy-Regional Innovation Cluster (E-RIC) and which will be focused on energy efficiency.
And right here, right here at Penn State, a university whose motto is “making life better,” you’ve answered the call. (Applause.) So today you’re preparing to lead the way on a hub that will make America home to the most energy-efficient buildings in the world.
Now, that may not sound too sexy until — (laughter) — energy-efficient buildings. (Laughter.) But listen, our homes and our businesses consume 40 percent of the energy we use. Think about that. Everybody focuses on cars and gas prices, and that’s understandable. But our homes and our businesses use 40 percent of the energy. They contribute to 40 percent of the carbon pollution that we produce and that is contributing to climate change. It costs us billions of dollars in energy bills. They waste huge amounts of energy.
So the good news is we can change all that. Making our buildings more energy-efficient is one of the fastest, easiest and cheapest ways to save money, combat pollution and create jobs right here in the United States of America. And that’s what we’re going to do. (Applause.)
The initiative, the Better Buildings Initiative, lays out the following targets:
- A 20 percent improvement in commercial building energy efficiency.
- At least $40 billion per year in reduced energy costs — based on today’s energy prices (not inflated estimates).
Let us be clear: while meaningful to put into place, these are very achievable targets that should be viewed as base minimums rather than stretch goals. (Invisible Energy provides some indication of just how far we could go if we took energy efficiency very seriously.) In other words, we must do at least this much — and we can do so while improving American business competitiveness, putting Americans back to work, and reducing our pollution loads.
That this target is short of what is possible seems to be something President Obama realizes and he wants to push the envelope further. As he said today,
This is where we need you to push the envelope and ask just how efficient can our buildings be. Can they be self-sufficient, producing just as much energy as they consume? What new discoveries can we make? And soon you’ll have a new place to answer these questions, a clean energy campus in the Philadelphia Navy Yard.
What is the President proposing as paths forward to achieve the targets introduced today? What are the proposed tools that will make this happen?
The President’s Budget will propose to make American businesses more energy efficient through a series of new initiatives:
- New tax incentives for building efficiency: The President is calling on Congress to redesign the current tax deduction for commercial building upgrades, transforming the current deduction to a credit that is more generous and that will encourage building owners and real estate investment trusts (REITs) to retrofit their properties. These changes could result in a ten-fold increase in commercial retrofit take up, leveraging job- creating investments.
- More financing opportunities for commercial retrofits: Access to financing is an important barrier to increased retrofit investment in some market segments. To address these gaps, the Small Business Administration is working to encourage existing lenders to take advantage of recently increased loan size limits to promote new energy efficiency retrofit loans for small businesses. The President’s Budget will also propose a new pilot program through the Department of Energy to guarantee loans for energy efficiency upgrades at hospitals, schools and other commercial buildings.
- “Race to Green” for state and municipal governments that streamline regulations and attract private investment for retrofit projects: Much of the authority to alter codes, regulations, and performance standards relating to commercial energy efficiency lies in the jurisdiction of states and localities. The President’s Budget will propose new competitive grants to states and/or local governments that streamline standards, encouraging upgrades and attracting private sector investment.
- The Better Buildings Challenge: The President is challenging CEOs and University Presidents to make their organizations leaders in saving energy, which will save them money and improve productivity. Partners will commit to a series of actions to make their facilities more efficient. They will in turn become eligible for benefits including public recognition, technical assistance, and best-practices sharing through a network of peers.
- Training the next generation of commercial building technology workers: Using existing authorities, the Administration is currently working to implement a number of reforms, including improving transparency around energy efficiency performance, launching a Building Construction Technology Extension Partnership modeled on the successful Manufacturing Extension Partnership at Commerce, and providing more workforce training in areas such as energy auditing and building operations.
Chief Financial Officers (CFOs) pay attention to money. Moving energy efficiency investments from tax deduction to investment credits will make it quite clear to them that they can make some serious green by going green. The fact that energy efficiency often offers far faster returns on investment (ROI) than other investments has a hard time translating through to many in the business community due to stove-piping, a focus on investment growth rather than for controlling business costs, and a lack of understanding as to the opportunities. The shift to a tax credit will break through this perceptual — and, well, substantive financial planning — gap to foster more aggressive business planning attention to energy efficiency opportunities.
Another challenge is the wide variety of building codes around the country and, what can seem like, snail-like process of adapting advanced building codes with stricter energy efficiency guidelines. Well, state and local administrators are also being offered a carrot: pay more timely attention to updating building codes and you’ll be rewarded.
And, well, truth be told is that there is a shortfall of knowledge in terms of energy efficiency opportunities and prioritization. Expanding the competent workforce will ease business and local government implementation of appropriate energy efficiency measures.
The Better Buildings Initiative can leverage energy efficiency measures that the Administration is already executing based, in no small part, on the ARRA $20 billion in funding for building energy efficiency:
- 600,000 residential homes are being retrofit through Weatherization Assistance Program and the Energy Efficiency and Conservation Block Grant programs.
- The proposed HOMESTAR program would provide incentives to encourage homeowner energy efficiency.
- ARRA provided GSA $5.5 billion to improve the energy performance of existing buildings and to start building a new generation of energy efficient buildings.
- ARRA gave the Department of Defense significant funding for ‘greening’ military facilities.
- The President’s sustainability Executive Order directs federal agencies to achieve zero net energy by 2030 while showing constant improvements, as agencies, in energy (and other resource) efficiency from year-to-year.
Of course, these new initiatives will cost money — even as they help businesses and individuals save money to use for things other than unnecessary energy costs. Considering the budgetary environment, spending new money isn’t easy — unless you have a good idea where it will come from:
tax credits mean lost revenue for Treasury. It costs money. Since we’ve got big deficits, we’ve got to pay for it. So to pay for it, I’ve asked Congress to eliminate the billions in taxpayer dollars that we currently give to oil companies. (Applause.) They are doing just fine on their own. (Laughter.) So it’s time to stop subsidizing yesterday’s energy; it’s time to invest in tomorrow’s. It’s time to win the future. That’s what our project is.
The President is quite right. “It is” well past “time to stop subsidizing yesterday’s energy”.
For good reason, the Better Buildings Initiative is already receiving quite positive reaction from across the knowledgeable community.
Ed Mazria, of Architecture 2030, is one of those people truly worth listening to about energy efficiency in the built infrastructure. As he put it in an email earlier today, “This is a dramatic step toward addressing the commercial real estate (CRE) crisis“.
Meg Waltner of NRDC reinforces the value of this approach:
Commercial buildings represent a large opportunity to help rebuild the economy while benefiting the environment. Commercial buildings account for 20 percent of US energy use, while unemployment in the construction sector is at a staggering 20 percent. Promoting efficiency in commercial buildings will increase employment in the construction sector, while cutting businesses’ energy bills, allowing them to hire more workers. Lower energy bills also mean less air pollution that harms human health and the environment.
Here is the White House blog post in its entirety citing some of the enthusiastic reaction that the Better Buildings Initiative has already received:
Today the President announced an ambitious initiative to make American businesses more efficient as part of his plan to ensure that America wins the future by out-innovating, out-educating, and out-building the competition.
In his State of the Union, the President laid out his vision for winning the future by investing in innovative clean energy technologies and doubling the share of electricity from clean energy sources by 2035. Alongside that effort, the President is proposing new efforts to improve energy efficiency in commercial buildings across the country. The “Better Buildings Initiative,” outlined today at Penn State University, will achieve a 20 percent improvement over the next decade, saving companies and business owners tens of billions of dollars a year.
The plan will spur innovation by reforming tax and other incentives to retrofit, creating a new competitive grant program for states and localities that streamline their regulations to attract retrofit investment, and challenging the private sector to invest in building upgrades through a new “Better Buildings Challenge.”
The President has asked President Clinton, who has been a champion for this kind of energy innovation, to co-lead the private sector engagement along with the President’s Council on Jobs and Competitiveness, headed by Jeff Immelt, the CEO of General Electric.
The response has already been overwhelmingly positive. See some statements of support below from various business leaders and advocacy groups:
Jeffrey D. DeBoer, President and CEO of The Real Estate Roundtable
“President Obama’s ‘Better Buildings Initiative’ sets forth an excellent blueprint to re-employ the construction workforce, modernize our built environment, and help ensure our Nations’ energy security. At a time when the real estate sector is still struggling to achieve full economic recovery, incentives to encourage building upgrade projects will leverage private investment, encourage lending, and create well-paying jobs that can’t be exported. Under this Initiative, business owners will benefit through lower energy bills. Further, upgrading our built environment will allow our country to maintain its competitive edge in the international marketplace.” [LINK]
Rick Fedrizzi, CEO and Founding Chair, U.S. Green Building Council
“For all of those committed to the idea that green buildings can create jobs, save energy and save money, this is a great day, and the entire green building movement is incredibly grateful for President Obama’s leadership in this critical step forward for America. It is major steps like these that are necessary to address the challenges facing our environment. We know that green buildings can and should be front and center of any credible jobs creation program. The jobs supported by the green building industry can’t be outsourced, and they are jobs that frequently can build on skills learned in the manufacturing sector… With the incentives the President has outlined, we are confident that these organizations are ready to take green building to unprecedented scale.” [LINK]
Mayor Michael Bloomberg, New York City, NY
“President Obama’s energy efficiency agenda is ambitious, his plan will spur improvements that pay for themselves through lower utility bills and help clean the environment, and I look forward to working with him on it. The Better Buildings Program recognizes the critical role that cities play in fostering energy efficiency and I hope that it will inspire and empower local governments to create innovative programs to save energy and money.
“New York City has already launched many of the initiatives proposed as part of the Better Buildings Program, which will help us achieve our PlaNYC goal of a 30 percent reduction in greenhouse gas emissions by 2030. Seventeen of our universities have joined a challenge to reduce their emissions by 30 percent by 2017, and as part of our Greener, Greater Buildings Plan, we require public benchmarking for large buildings and certain improvements, which will spur private sector investments. Our ongoing effort to update our building code, which will require significant energy and resource efficiencies for new construction and retrofit projects, will enable New York to compete in the President’s ‘Race for Green.’” [LINK]
Ray H. Mackey, Jr., Chair, Building Owners and Managers Association International
“We applaud President Obama’s new energy policy to improve energy efficiency in commercial, multi-family and institutional buildings. The initiative includes the critical business incentives, such as the commercial building tax credit and loan guarantees, that are key to meeting the energy efficiency goals of the plan. BOMA International has been a leader in energy efficiency for years, launching the 7-Point Challenge in 2007 which asked members to reduce energy consumption by 30% by 2012.” [LINK]
Michael Sullivan, General President of the Sheet Metal Workers’ International Association
“The need to put this country back to work and the need to retrofit our country’s industrial, commercial, institutional and residential buildings are two problems that, when combined, present an obvious solution. We support the President’s initiatives in this regard.” [LINK]
Michael O’Brien, President of the Window and Door Manufacturers Association
“WDMA is pleased with the Administration’s renewed focus on job creation through energy efficiency. We look forward to working with the Administration and Congress to craft a program that will create meaningful incentives for building owners to improve their properties’ energy performance. Encouraging homeowners to upgrade windows, doors and skylights is an important strategy to reduce energy use, and WDMA continues to advocate for a bipartisan and common sense energy policy that emphasizes cost-effective building efficiency measures. WDMA will continue to be at the forefront of the issue.” [LINK]
Eileen Lee, Vice President of Energy and Environment, National Multi Housing Council (NMHC) and the National Apartment Association (NAA)
“We commend the Obama Administration for its focus on energy efficiency in commercial properties, including apartments, and for taking an incentive-based approach to achieving meaningful reductions in our building energy usage…We support the President’s plan to reform the existing Section 179(d) building efficiency tax incentive, which has largely gone unclaimed by property owners for many reasons. Changing the deduction to a more generous tax credit and creating more incentives for owners to undertake costly retrofits on existing properties are welcome changes. The President’s plan would also wisely ensure that Real Estate Investment Trusts (REITs) can take advantage of the credit…The President’s plan will help advance the rental housing industry’s sustainability efforts to the next level by attracting more investments in building efficiency.” [LINK]
Clark Manus, President, American Institute of Architects
“We applaud the President’s ‘Better Buildings’ initiative, which mirrors directly what the AIA has been advocating. As a profession, architects are already helping make the President’s goals a reality. Because of their leadership role in the built environment, architects are in an ideal position to help implement the President’s initiative. In order to reach the President’s ‘Better Buildings’ goals, there is a crucial need for design experts to apply their experience, innovations and talents to current practices so that one of the major sources of energy use – the building in which we work – can be addressed…As the President said today, the United States can ‘out-build’ the rest of the world. And architects are the catalysts for winning that contest.” [LINK]
Lauralee Martin, CFO and COO, Jones Lang LaSalle and Dan Probst, Chairman for Energy and Sustainability Services, Jones Lang LaSalle
“This proposal is exactly what’s needed to jump-start major energy and carbon reduction initiatives and to create jobs and efficiencies that enhance our global competitiveness.
“These incentives are a big winner for U.S. businesses and their competitiveness as well as the environment. Building owners and managers are already making low-cost adjustments to energy strategies in order to reduce operating costs and attract tenants by being ‘green.’” [LINK]
Bracken Hendricks, Senior Fellow, The Center for American Progress
“President Obama’s unveiling today of an array of ambitious and achievable energy efficiency savings incentives and targets for our nation’s commercial-building owners could not be better timed. This new administration program, announced in the president’s speech today at Penn State University will result in thousands of new jobs for construction workers hard hit by the Great Recession and housing market travails, $40 billion a year in energy savings for U.S. commercial-building owners, and substantially less greenhouse gases escaping into the atmosphere to warm our planet.” [LINK]
Bjorn Stigson, President, World Business Council for Sustainable Development
“This initiative by the White House shows serious action on President Obama’s commitment to clean energy, a central part of his recent State of the Union address. Energy efficiency has long been called the ‘low-hanging fruit’ of clean energy, and this new program demonstrates that the United States is serious about continuing to be a major player in the global green race.” [LINK]
Reid Detchon, Executive Director, The Energy Future Coalition
“These steps are precisely targeted to unlock the tremendous energy savings available in commercial buildings throughout the country – from office buildings to fast-food restaurants. Our Rebuilding America initiative has brought together building owners, contractors, and trade unions around just this kind of ambitious agenda.” [LINK]
Jason Hartke, Vice President of National Policy, U.S. Green Building Council
“The 5 million+ commercial buildings and the 120 million existing homes in the U.S. today are, by and large, squandering away precious energy and resources. With policies like the one introduced by the President today, our homes, hospitals, schools and offices can be turned into structures that will lessen our dependence on fossil fuel, increasing national security. This also frees up those wasted dollars for growth in the private sector and for groceries in America’s households. We are laser-focused in doing what we can to move this important initiative forward as fast as possible.” [LINK]