November 1, 2010 - From the October, 2010 issue

Cary Lowe Opines on How To Save the Economy; Save Energy

Cary Lowe is a land use attorney and planning consultant. This article is adapted from an article that originally appeared in the San Diego Union-Tribune, making the case that with the right policies and focus on older residences and commercial buildings, we can reduce global warming, energy demand, and water use while creating jobs and generating revenues. The full report on which the article is based may be obtained from the author at [email protected].

Cary Lowe

California is under mandates to reduce greenhouse gas emissions, increase energy efficiency and reduce water demand. At the same time, the state economy is struggling-particularly the construction industry, which has seen a 75 percent drop in building permits and 400,000 jobs lost.

With the right focus, we can simultaneously save both the environment and the economy. The answer lies in our older residential and commercial buildings. California currently has approximately 13.4 million homes and about a half a million commercial buildings. Most were not subject to any energy or water efficiency requirements when constructed.

Homes built in the last few years use 25 percent less energy and account for nearly 25 percent less greenhouse gas emissions than ones built as recently as 1990. Retrofitting homes built before 2006 to current efficiency standards would similarly slash their energy use and emissions, without even taking into account potential gains from converting to sustainable energy sources. Adherence to the state's new Green Building Standards Code would result in a 35 percent reduction in the carbon footprint of commercial buildings.

Simply retrofitting a typical existing single-family home with new heating and air conditioning systems and improved insulation, at a cost of no more than $10,000, depending on the age of the structure, would reduce greenhouse gas emissions for that home by about one-third. Rebates and other incentives could cut the actual cost to homeowners in half.

Retrofitting would produce immediate benefits. Reducing annual electrical consumption by one-third for the average household, which uses about 5,900 kWh per year, would cut their annual cost for electricity by about $375. A household currently using 10,000 kWh annually would save about $940 per year from a similar percentage reduction.

The opportunities are even greater when it comes to water use. A typical new single-family home consumes about 59,000 gallons of water annually for indoor uses. That will go down to about 47,000 gallons under new efficiency standards taking effect in 2011. A similar home built in 1975 consumes 92,000 gallons a year or 56 percent more. Either home additionally consumes about 115,000 gallons of water a year for landscape irrigation.

Retrofitting 11 million older homes with water-saving toilets, faucets, and shower heads would reduce consumption by 29,000 gallons a year for each home built in the mid-70s and by 18,000 gallons a year for each one built in the early 90s, for a saving of nearly a million acre feet annually. On top of that, another 16,000 gallons per home, or a total of 650,000 acre feet, could be saved annually by reducing outdoor irrigation. Water efficiency measures in commercial buildings can reduce water consumption by at least 30 percent, thereby saving another 200,000 acre feet annually.

Such conservation, carried out statewide, would be more than enough to offset all the current natural and legal restrictions on water supply.

For the typical single-family home, the reduction in indoor water demand would result in a saving of about $170 per year. That can be increased significantly by reducing landscape irrigation.

Those environmental gains are only half of the picture, however. Equally exciting is the beneficial effect this activity would have on the economy. Ten direct jobs are created for every $1 million invested in energy efficiency upgrades. An aggressive program aimed at retrofitting the 9.2 million less efficient residential units over the next ten years could generate a staggering 920,000 construction jobs. Investing another $1,650 apiece for water efficiency improvements to 7.5 million homes would generate another 124,000 construction jobs. That does not even include upgrading the commercial building stock.

Construction work has a multiplier effect that creates at least one additional full-time job in the general California economy for each new construction job. Consequently, this program could generate a total of over two million jobs and about $210 billion in economic value.

Then there are the benefits to state and local governments, particularly since this activity can be achieved with minimal use of public funds.


Retrofitting all pre-1983 homes with the minimum energy-efficiency improvements described above would increase the residential property tax base by about $90 billion as properties are reassessed over time and (except for improvements exempted from tax) eventually could generate at least $900 million annually in additional property taxes to support schools, public safety, and other local government services.

Assuming a comprehensive retrofitting program for residential structures alone, carried out over ten years, if even half of the total investment represents the value of the materials and equipment, will average at least $9 billion per year. That would generate an average of nearly $800 million per year in additional sales taxes.

The potential employment generated by the proposed programs could produce an aggregate increase in income of $5.2 billion per year over ten years. That would generate an average of as much as $113.8 million per year in additional state income taxes.

The increase in the property tax base for commercial buildings, as well as the sales and income taxes generated, although more difficult to estimate, also will be substantial.

There will be other significant financial benefits. Generating new jobs will reduce demand for unemployment insurance payments and various forms of public assistance. At the same time, there will be a reduced need for construction of new water storage and transmission facilities and new power generating and distribution facilities.

The California Public Utilities Commission has adopted a goal of a 40 percent reduction in energy consumption in existing homes by 2020. An initial level of activity already is occurring, but achieving the full level of potential benefits will require a substantial increase in activity to jump start such an ambitious program on a statewide level and carry it out over the next decade. During that time, most of the jobs created by retrofitting activity can be expected to convert into jobs in new construction or other sectors of a rising economy.

The state is hoping to stimulate these efforts through a new statewide program-Energy Upgrade California-a collaboration of several state agencies, utility companies, local governments, and private sector contractors. This program aims to provide or facilitate financing for a broad range of residential and commercial energy and water retrofit programs, provide the public with a comprehensive information source, assist lenders with information and access to subsidies, standardize qualifications for contractors and establish worker training programs.

Successful implementation of both Energy Upgrade California and other, existing programs will require expansion of efforts now occurring on a limited scale in several other areas: (i) utility company financing for energy-efficiency improvements; (ii) similar financing for water-efficiency improvements; (iii) implementation of the Property Assessed Clean Energy (PACE) program, providing low-interest loans for installation of sustainable energy systems, to be repaid through property assessments; (iv) exemption of a basic level of energy-efficiency improvements from property tax liability; (v) utility rebates for energy-efficiency improvements; and (vi) regulatory incentives for energy-efficiency upgrades, such as waiver of permit fees and expedited plan checking.

An additional opportunity exists to generate funding for retrofitting activity through mitigation requirements attached to other environmental programs. Mitigation banks could be established, enabling developers responsible for greenhouse gas or water use mitigation to contribute funds to be applied to large-scale retrofitting programs.

Because the proposed programs consist of incentives rather than mandates, and are largely property-owned funded, there should not be opposition from taxpayer, ratepayer and consumer advocates.

Right now, we have a choice to make about taking serious steps in this direction. Otherwise, years from now, as we continue to despair about our condition, we may still be asking ourselves whether we couldn't have initiated feasible actions to save both the environment and the economy.


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