GAAG Insight–Does Cap and Trade System works for improving building efficiency

By Phillip Arnett, Lafayette College

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           In 2009, The House of Representatives passed a bill entitled the “American Clean Energy and Security Act,” also known as the “Waxman-Markey Bill” for its two authors, Henry A. Waxman and Edward J. Markey, both of whom are Democrats. The bill passed in The House of Representatives, but was never brought to the Senate. The bill’s main goals were to “create clean energy jobs, achieve energy independence, reduce global warming pollution, and transition to a clean energy economy” (American Clean Energy and Security Act, 2009). In order to accomplish these goals, the bill proposed a number of policies, chief among which was the introduction of a cap and trade system, under which corporations would need to buy allowances for their pollution, and could not exceed greenhouse gas emissions above the level of the allowance that they paid for. By design, the overall amount of carbon emissions allowed would wane over time, thus making the amount of permits issued for purchase smaller, causing their prices to rise, and hopefully forcing businesses to adopt more efficient practices to reduce their overall carbon footprint.

        Although this was the highlight of the bill, there were a number of additional initiatives that were proposed to also limit further energy use. The one of most import to us is “Title II: Energy Efficiency – Subtitle A: Building Energy Efficiency Programs,” which first mandates that all residential buildings must be retro-fitted to meet existing energy codes prior to their sale (Sewalk, Throupe). The baseline code that the bill refers to comes from the 2006 International Energy Conservation Code, which sets building codes for residential and commercial spaces. This building code stipulates a number of energy usage reducing measures including standards for insulation, air leakage from windows and doors, efficiency of heating and cooling systems, and efficiency of recessed lighting. The main objective of this portion of the bill is to have a “30% reduction in energy use relative to comparable building constructed in compliance with the baseline code, effective upon enactment of the Act,” which was proposed in 2009. From there, the next goal was for a 50% reduction in energy use by 2014 (5 years later) for residential buildings, and a 50% reduction in energy use by 2015 (6 years later) for commercial buildings. After that, the bill sets a goal of 5% energy reduction for every year following 2015, until 2029.

       In order to aid in this, the bill proposed that each state be mandated to establish a SEED Account (State Energy and Environmental Development), with which they could subsidize either new construction or renovation of buildings to meet the existing energy codes. This SEED account would also be used to subsidize any costs that may stem from the enforcement of these energy codes, in order to make sure that building owners are compliant in implementing energy reduction measures, and are on track to meeting the energy reduction goals stipulated above (American Clean Energy and Security Act, 2009).    In addition, Section 209 of the bill grants the Secretary of Housing and Urban Development (HUD) to issue regulations that prohibit “any private contract, lease, or other agreement from impairing of a residential property owner or lessee to install, construct, maintain, or use a solar energy system on that property.” This section directly promotes the use of solar energy in electricity production by going further and mandating that any application for the building and installation of a residential solar panel be treated the same as an application for any architectural modification.

       Beyond this, the bill requires that the EPA (Environmental Protection Agency)  Administrator and the Secretary of Housing and Urban Development to allocate funds that would subsidize the installation of energy efficient residential water systems, as well as other items such as lighting and wood stoves. Furthermore, this fund would also allow the EPA to continue to run their education system rooted in identifying appliances as “Energy Star” appliances, so that consumers may make well informed decisions when purchasing new appliances, and choose those which consume less energy (American Clean Energy and Security Act, 2009). Originally, the program which identified energy efficient appliances with an “Energy Star” approval came from the Energy Policy Act of 2005 (Energy Policy Act of 2005 Pub.L.109-58), and its funding would continue through the American Clean Energy and Security Act of 2009.

       Although the bill stipulates that subsidies would be offered to building owners who are forced to make renovations to meet existing energy codes, it has been found that unless there were even greater subsidies or tax cuts for individual homeowners, the cost of renovations would far outweigh the savings in energy costs following the completion of the renovation (Sewalk, Throupe). However, the same report finds that the measures stipulated in the proposed bill for efficiency of newly constructed buildings are feasible, and do make economic sense. These measures include meeting the standards of the 2006 International Energy Conservation Code, as well as installing energy efficient lighting, efficient HVAC systems, efficient appliances, and increased insulation. Therefore, if we were to adopt this policy as our own, it would behoove us to amend the policy to allow for greater government subsidies for building renovations, to help owners cover the costs even more.

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