Often when people think about energy policy, they focus on renewable energy, clean coal and natural gas. But they often forget about commercial and residential building retrofits that improve energy efficiency.
In a recent Newsweek article, former President Bill Clinton laid out 14 steps to put Americans back to work. Two of his proposals related to building retrofits, both commercial and residential. In February, President Barack Obama launched the Better Buildings Initiative (BBI), designed to provide tax incentives and unique financing options to promote building retrofits to improve energy efficiency by 20 percent by 2020.
Building retrofits reduce greenhouse gas emissions, boost economic growth, save building owners money via reduced utility bills and create jobs. Recent analysis suggests that the president’s BBI will create 114,000 jobs in two years, reduce annual energy bills by more than $1 billion and stimulate more than $3 billion in private investment. Moreover, a recent Center for American Progress (CAP) report suggests that “retrofitting 40% of the US building stock will create over 600,000 jobs by 2020.” Residential retrofits will also yield significant job growth (between 600,000 and 1,000,000 new jobs by 2025). Based on this data, it is clear that building retrofits must be a part of U.S. energy policy.
The important question is, how do we fund the retrofits? Clinton highlights the retrofitting of the Empire State Building, which increased energy efficiency by 38 percent and created thousands of jobs. But retrofitting such a building is a huge endeavor with significant upfront capital requirements.
At CAP, where I am a summer intern, we are focused on funding retrofits through the Property Assessed Clean Energy (PACE) program. PACE allows local governments to provide capital (either from the treasury or, in this economic climate, via municipal bond sales) for retrofits and then recover the investments over a 10-20 year period. A company could apply for the low-interest government loans, which offer a long payoff period and allow repayment via property tax assessment. The property tax assessment allows building owners to share the retrofit costs with tenants who benefit from lower electricity bills. PACE offers a no-cost-to-taxpayer financing scheme that helps building owners retrofit their buildings.
In short, Obama and Clinton are right — commercial and residential retrofits are salient pieces of the energy puzzle. Financing retrofits can be expensive, but PACE programs can provide a tool to funding such projects. Building retrofits, financed via PACE at no cost to the taxpayer, can promote job creation, spur economic growth and reduce greenhouse gas emissions.
Raj Salhotra is a junior at Sid Richardson College majoring in classical studies and economics and is interested in public policy and global affairs. He is currently interning with senior fellow Bracken Hendricks and Special Assistant Lisbeth Kaufman of the Center for American Progress as part of the Baker Institute’s Jesse Jones Leadership Center Summer in D.C. Policy Research Internship Program.