If I told you how much energy your neighbors use on average, and whether you fell above or below that average, would that induce you to save more energy? What if, depending on whether you came in above or below average, you got an emoticon on your energy bill? Say, a smiley face if you save more energy than they do, a frowny face if less.

Sounds silly, right? We're all rational people here. We do things for considered reasons, not some cartoon face!

Except not so much. In a 2007 experiment in California, homeowners given an emoticon on their bill in addition to information about their neighbors' energy usage saved 40% more energy than those given information alone. :o

It turns out we're surrounded by cartoon faces, all sorts of cues and stimuli that trigger behaviors without engaging the conscious mind. Most of these automated behavioral reactions evolved over time because they helped human societies function better. But precisely because they have evolved to be automatic, they can lead us astray.

The fact that human behavior is governed in part by automated, non-rational behavioral routines is old news to any number of disciplines, from sociology and psychology to history to neurobiology. It's also well known among corporate marketing departments. But the news has been somewhat late coming to economics, which at least in the Enlightenment west begins with the assumption that human beings are rational actors who weigh costs and benefits and maximize self-interest. The fledgling field of behavioral economics has been trying to change this, incorporating the knowledge that people are Predictably Irrational, as the recent bestseller by economist Dan Ariely puts it. (See also The Myth of the Rational Market by Justin Fox and Nudge by Richard Thaler and Cass Sunstein.)

Understanding human irrational (and arational) behavioral patterns can, among other things, help policymakers design more efficient and efficacious policy interventions. It can help us rectify our collective weaknesses, blind spots, and myopia.

What does this have to do with making buildings more efficient? In my last post on building efficiency, I took a look at a few market failures standing in the way of exploiting the enormous potential of building efficiency. Market failures can generally be solved by properly aligning incentives. Some of the most interesting barriers to efficiency, though, are not market failures but what mainstream economists call "behavioral failures" -- failure to behave like economists say you oughtta. Failure, that is, to behave like a rational actor maximizing self-interest.

Understanding why and how such failures occur, drawing on the latest social psychological research, can help us accelerate the financial savings and greenhouse-gas-emission reductions that efficiency brings. That kind of research peaked around the energy crisis of the '70s but has been anemic and underfunded since. Luckily, the stuff seems to be getting some attention in the energy world. In 2007, the House Subcommittee on Research & Science Education held a hearing on "The Contribution of the Social Sciences to the Energy Challenge." The same year saw the launch of the Behavior, Energy and Climate Change Conference, devoted to "practical application of social and behavioral insights to address our climate challenges." (ClimateWire had a nice write-up of the 2009 meeting, which wrapped up last week.) I expect this will be a fun area of research to watch over the next few years.

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The most puzzling behavioral phenomenon to understand when it comes to building efficiency is that Most People Won't Do Sh*t (MPWDS). "Most people" includes people who could make money by doing sh*t, people who say they will do sh*t, even people who have promised to do sh*t. I've heard from people who write about energy efficiency for a living, know exactly what to do to make their homes more efficient, and still don't do sh*t. It's hard to disentangle the reasons why -- some mix of status quo bias, hyperbolic discounting, and loss aversion to begin with -- but it's clear that public surveys and polls about this tend to be misleading. What people say they're willing to do and what they demonstrate they're willing to do are very different things. Attitudes don't translate into actions.

Politicians and political activists often seem obsessed with massaging public attitudes. Meanwhile, the American advertising industry has transformed the country repeatedly since WWII by attending to how people act. They understand social and behavioral cues, fear and aspiration, emotional triggers.

To see an example of how these social cues work, consider an experiment run by respected social psychologist Robert Cialdini, author of Influence: The Psychology of Persuasion, a work popular among business and marketing students. "A Room with a Viewpoint: Using Social Norms to Motivate Environmental Conservation in Hotels" compared the reactions of hotel guests to three different messages on their towel racks. Michelle Nijhuis summarizes:

First, they tested the familiar exhortations to "Help save the environment" and "Help save resources for future generations." These messages had similar success rates, convincing an unimpressive 30 percent of guests to reuse their towels after one night.

Things improved, however, when the research team resorted to peer pressure. The invitation to "Join your fellow guests in helping to save the environment"--including the justifiable statement that nearly three-quarters of guests used their towels more than once--garnered a 44 percent participation rate after one night. Then, the researchers drew guests’ peers even closer: "Seventy-five percent of the guests who stayed in this room ... [used] their towels more than once," they asserted. With the ghosts of former guests peeping over their shoulders, nearly 50 percent of hotel customers hung up their towels.

There's a simple social psychological phenomenon at work here: the flocking instinct. People want to do basically what People Like Them do. They don't want to be outliers.

And that's not all: they want that conforming behavior affirmed. Remember that smiley face? In another semi-famous Cialdini experiment, "The Constructive, Destructive, and Reconstructive Power of Social Norms" (PDF), a group of utility customers were divided. The first group got straight information about how their energy use compared to similar households -- below or above average. The response was fairly predictable if you understand that human beings are tribal and want to follow the norms of their tribe: they moved toward average. Energy wasters wasted less, but energy savers wasted more, which is known as the "boomerang effect."

The second group of customers was given both information and "an injunctive message conveying social approval or disapproval)." That message? Right: smiley face for the savers, frowny face for the wasters. In the second group, wasters saved more, but savers didn't backslide; their actions saving energy were being reaffirmed by their tribe. On average, the second group of utility customers saved fully 40% more energy than the first.

One remarkable note about both the hotel towel messages and the utility smiley faces: neither approach had ever been tried by the industries. It was not a process of trial and error. The techniques that radically boosted efficacy were a direct result of social psychological theory. Applying social psychology to policymaking can work.

Indeed, it's beginning to be applied. For example, a software startup called Opower is partnering with 21 (and counting) utilities to scale the smiley face approach up. The information they offer utility customers is deceptively simple, but quite effective.

Opower

The behavioral approach is catching on:

This interest in consumer psychology is a new paradigm for utilities, which for years were run by engineers and, says [Opower co-founder Alex] Laskey, "without regard to customers." Tim Stout, vice-president of energy efficiency at [Massachusetts utility] National Grid, admits that most of the company's efforts toward conservation have been tied to infrastructure and hardware--the installation of insulation or weatherization, rebates for more efficient equipment. "When we look at the remaining potential for efficiency," Stout says, "changing consumer behavior is the next wave of savings that needs to be tapped."

This is what it comes down to: those who would tap the potential for building efficiency are ultimately trying to change the way people behave: the way they heat and cool, they way they light, the way they invest. As we've seen, neither knowledge nor willingness is sufficient. A more sophisticated understanding of behavior is required to overcome the barriers to action.

The immediate implication is that the federal government should reconsider the overwhelming proportion of energy research and funding that goes to technology and focus at least a little more on social psychological research and pilot projects that attempt to apply that research in ways that shift consumer and investor behavior. That kind of work is complementary to a technology approach and can substantially reduce its cost.

In the Art of War, Sun Tzu said, "Know the enemy and know yourself; in a hundred battles you will never be in peril." In the battle to drive efficiency, we are our own worst enemy; we must come to understand ourselves.

Related Links:

Why buying cheap energy certificates worsens climate change

Making buildings more efficient: rationalizing retrofit markets

Making buildings more efficient: looking beyond price

Oh...my....God. I just received an email from a Renewable Energy Certificate (REC) vendor called Carbon Solutions Group (www.carbonsolutionsgroup.com) that took my already high (but controlled) blood pressure to new heights.

RECs represent clean energy and can be purchased by entities wanting to claim to be powered by renewable energy. The gist of the Carbon Solutions e-mail (posted at the bottom of this blog) is that there is a misconception about their cost. RECs, the e-mail argues, are portrayed as way too expensive. Further, the U.S. Green Building Council is providing a misleadingly high number for the cost of powering your building with clean energy to help with LEED certification. Actually, the e-mail says, RECs pretty darn cheap.

Hey, great, right? Wrong.

I have been writing and thinking about what it means to actually solve climate for many years. The problem is dire, so we need real solutions, not illusions of solutions. With regard to clean energy procurement, one of the key challenges is that there is a huge gap between what it takes to actually generate clean power, and the perceived cost of "clean power" as purchased through cheap RECs. I thought I put a knife in this horror show ghoul once and for all, but apparently not. So I guess I will have to rain down a rhetorical napalm strike on this argument again. Sigh.

As I've outlined numerous times -- for Climate Progress, twice in Harvard Business Review, in Chapter 7 of my book (Getting Green Done), and which Business Week's Ben Elgin has addressed many times -- the problem is one of basic economics. In order for RECs to drive any sort of change in the world, in order for them to enable new clean energy development and reduce carbon dioxide emissions, they must cost a lot. That's because the REC has to enable clean energy projects to happen by tipping their finances.

As an example, a solar project I helped develop required RECs at $170/megawatt hour of power produced over 20 years to have a marginally positive return on investment. Those expensive RECs, bought by Xcel energy, made the project happen. Without those REC sales, no project. (So there are good RECs, but they will cost you.) The US Green Building Council is actually right in dismissing cheap RECs -- they want you to buy RECs that actually make a difference, not RECs from existing projects or projects that would happen anyway.

Cheap RECs don't do anything to protect the planet because that price isn't sufficient to actually help reduce carbon dioxide emissions. In my view, companies that are selling $2 RECs are helping to delay real, tangible progress on climate change. Well-intentioned businesses that purchase cheap RECs are under the illusion that they have done what it takes to solve climate change with regard to their operations. They have not.

As an example: to zero out the carbon impact of my home this year, I could pursue one of two scenarios. One option would be to install efficient lighting throughout the house, upgrade appliances, and put in a solar array. Total cost would be in the tens of thousands, with lots of time and labor. Alternatively, using $2 RECs, I could drop about ten bucks a year and more than zero out my emissions. Figure it out: which is the real solution?

OK, but let's assume you're a manager who really wants to buy "clean power" in some form. You need to do your due diligence. That should lead you to what's called a forward REC from a high integrity business like Native Energy or Community Energy, now owned by Iberdrola. Here are the questions you need to ask of a vendor like Carbon Solutions Group (and I invite them to respond on this blog):

1) When I buy at $2 REC, does it do anything to change the world? Does it do any thing to reduce carbon dioxide emissions? (The technical way to ask this question is, "Are the RECs additional?")

2) Would the project I am buying RECs from not have happened if I didn't buy the RECs? (We already know the answer--$2/MWH isn't enough money; it's a meaningless addition to the project.) So what is my purchase doing? They will say "incentivizing the producer." Baloney. Will you clean my sink full of dishes for a nickel?

3) Do you sell "forward RECS" (RECs that are part of the economic model of a project and are required to make the project happen, economically) and if so, what might those cost?

4) Where are your RECs coming from, and explain to me the finances of how that project worked and the role the REC played in this. Actually, send me the pro forma for the development, so I can see how those RECs made the project possible.

Below is the e-mail that set me off. But let me conclude with some philosophy. As I've said before, solving climate change is going to be a bitch. If an easy solution presents itself, it is almost certainly too good to be true.

Dear Auden,

Since 2006, Carbon Solutions Group has helped numerous clients obtain Renewable Energy Certificates (RECs) to obtain LEED points... Currently, we are running a 6 part series on some common issues in the REC market today. Through our extensive experience in the LEED market, we have frequently encountered misconceptions about the perceived high cost of Green Power. Below is an example of the cost-effective nature of RECs modified from the LEED NC 2.2 Reference Guide.

Reference Guide uses the example of a 50,000 sq ft restaurant, one of the highest energy consumption ratings per square foot. The process the Guide outlines is accurate, except for their pricing.

50,000 sq ft x 28.7 kWh/sq ft/yr = 1,435,000 kWh/year

1,435,000 kWh/year x 35% x 2 years = 1,004,500 kWh

The USGBC example uses a greatly inflated price of $0.02 per kWh or $20.00 per MWh for a total of $20,090!!!

Using conservative current CSG prices of $0.002 per kWh or $2.00 per MWh, this project would cost only $2,009 with Carbon Solutions Group.

Related Links:

Making buildings more efficient: It helps to understand human behavior

Making buildings more efficient: rationalizing retrofit markets

Is there a tradeoff between economics and the environment?

As I said in my last post, taking energy efficiency in buildings seriously means expanding our policy horizons beyond the blunt tool of raising energy prices. We have to think in creative ways about how to remove market and behavioral failures that inhibit cost-effective responses to today's energy prices. How can we make efficiency markets more rational and robust?

What follows is not intended to be comprehensive, just to call out some of the bigger challenges and a few interesting attempts to overcome them. There are folks out there who know much more about this than me -- I hope they'll comment or email me with things to add.

Immature, fragmented markets

The market for efficiency retrofits, particularly the residential market, is immature and fragmented. Business models haven't fully gelled; economies of scale haven't been achieved. Right now the market involves thousands and thousands of tiny, sporadic transactions, usually involving small-scale buyers and small-scale providers.

One way to address fragmentation is what Bill Clinton's been trying to do through his foundation: create large purchasing pools (in this case multiple American cities) so efficiency products and services can be ordered in bulk, at discount prices. There are other private and public efforts (some I mention below) to try to aggregate purchases, even at the neighborhood level.

Collective purchasing can be a boon to people who find navigating the various products and services involved bewildering. And large, reliable purchase orders allow consolidation and efficiencies of scale on the supply end, which further lowers prices. We won't know the full potential for building efficiency until there's a Wal-Mart for energy services. (It's worth noting there are some big names getting into the biz, including Fortune 500 companies like Masco Corporation.)

Financing

Another sign of immature markets is the paucity of financing. Efficiency investments are extraordinarily secure, predictable, and, over time, profitable. The problem is "over time." Upfront costs tend to be high, and lending institutions don't have much experience with efficiency financing, so they're gun shy. It can be difficult for individuals or businesses to come up with that initial chunk of money; even when they can, it's not like long-term, moderately profitable investments are the apple of American capitalism's eye, especially in a recession. The key to overcoming high upfront costs is finding financing mechanisms that can spread them out.

One of the coolest new ways to do this -- referenced in passing in Leonhardt's column -- is a model born in Berkeley, California: property assessed clean energy (PACE) loans for small-scale renewables or efficiency. Under a PACE program, loans to building owners are paid back out of property taxes. That means when the property is sold, the loan goes with it, which solves two problems at once: it virtually eliminates upfront costs, and it addresses the fear of building owners that they'll pay for efficiency improvements but won't stay long enough to reap the benefits. The idea is so manifestly sensible that it's gone viral: the New York state legislature passed a PACE bill this week and there are indications it may go national through the recently unveiled Recovery Through Retrofits program. (If it goes national, loans could be backed by Treasury bonds, chopping interest rates by half and boosting returns.) PACE is one of the big overlooked stories of 2009 and will emerge as a key clean-energy driver in the next few years.

Other financing options -- both in Merkley's proposal -- include on-bill-financing by utilities and performance savings contracts from energy service companies. PSCs are mostly used in the commercial building market, which is a bit out ahead of residential on this score.

Financing is already one of the key areas of innovation in building efficiency markets, and as those markets mature, that trend will accelerate.

Information and transparency

It's difficult for individuals and businesses to determine how efficient their buildings are, or the most cost-effective way to increase efficiency. Information is hard to get and prices are opaque. There are tons of ways to tackle this problem.

One is to try to make carbon intensity a more salient part of purchasing decisions. As Matt Yglesias mentions here, you could require energy audits as part of the home inspection process. Along with more common testing, you'll need more transparent ratings, perhaps something like California's Home Energy Rating System, so efficiency performance can be compared easily across buildings. You could encourage the use of energy efficient and location-efficient mortgages. You could try to make walkability scores a more standard part of real estate listings. All those changes would, just by better informing consumers, shift purchasing decisions toward density and infill.

A variety of businesses, utilities, and community groups are trying to simplify the informational demands on individuals by packaging energy efficiency services together into a one-stop shopping experience. There are more and more companies springing up to do this, but one non-business model I find really intriguing is Sustainable Works, a new community-owned nonprofit in Washington state. They package efficiency services for homeowners or small businesses, insuring that everything can be paid for out of energy savings. They manage the entire process from audit to financing to final inspection. They only use contractors who pay well and focus hiring efforts on local and disadvantaged constituencies. And they use local partnerships and public events to organize whole neighborhoods to retrofit at once, to save money and foster community cohesion and education.

Most efficiency programs right now, though, are run by utilities. Utilities range widely, so their efficiency programs are a mixed bag, but overall they seem to be robustly cost-effective.

Most of the problems above are reasonably well-understood market failures. Work just has to be done properly aligning information and incentives. But what about when people don't respond rationally to incentives? What about failures that are based in human foibles? I'll get to that next post.

Related Links:

Making buildings more efficient: It helps to understand human behavior

Why buying cheap energy certificates worsens climate change

Making buildings more efficient: looking beyond price

Photo courtesy kimberlyfaye via Flickr Using energy more efficiently in buildings may be the fastest, cheapest way to substantially reduce carbon emissions in the short-term. How can we make it happen?

Last week, New York Times' David Leonhardt wrote a great column about a new proposal bouncing around the White House: "cash for caulkers," a stimulus program to support building retrofits and efficiency. (Leonhardt has more details on his blog.) And as I wrote on Saturday, Sen. Jeff Merkley (D-Ore.) is pushing to have a similar program included in the upcoming Senate jobs bill. So it seems that national policymakers may finally be getting serious about this stuff. Unfortunately, efforts to increase building efficiency face all sorts of barriers: fragmented markets, information failures, misaligned incentives, high upfront capital costs, difficulty finding financing, and more.

As Leonhardt notes, for building owners it's just damn complicated to figure out what auditor to use, which improvements to prioritize, how to fund them, and how to choose between competing products. That complexity is a barrier. It's not just that people won't go out of their way to figure these things out, though. Most people won't do anything. I once talked to a guy from Australia who'd arranged for efficiency products to be packaged, delivered by a single entity, and paid for out of energy savings. All homeowners had to do was call to arrange a day to be at home while the work was done. Tens of thousands of people indicated on surveys that they would take advantage of such a program. When it launched ... only a handful did. A simple phone call was too much!

Conventional economists have trouble grappling with the kind of market and behavioral anomalies that plague efficiency generally and retrofits specifically. Neoliberal economics begins, after all, from the premise that people are rational self-interest maximizers. If that's true, prices reflect willingness to pay. And if that's true, whatever people will pay for efficiency is, prima facie, what it's worth. On this view, the only way to induce people to save more energy is to raise the price of energy. Price becomes the only policy lever that matters.

That kind of econo-centric policymaking is second nature in American politics. Not to pick on Ezra Klein, who's an astute critic of econo-centrism in health care policy, but his comment in response to Leonhardt's story is a good example: "pricing carbon -- either through cap-and-trade or a tax -- would get a lot of people interested in weatherizing their homes without requiring a specific government program to help them do it." In other words, correcting a single market failure -- unpriced carbon emissions -- can obviate the need for additional interventions, all those clunky regulatory and industrial policies. Price can accomplish the same goals more simply and elegantly.

I don't think we should accept that approach, particularly when it comes to efficiency.

How much impact would a price on carbon have? It depends on how easily people can adjust their behavior in response to price signals (what economists call "elasticity of demand"). If people can easily reduce their energy use or switch to low-carbon energy, you don't need a very big price on carbon. If they can't, you have to jack up the price until there's real pain.

Evidence indicates that the elasticity of energy demand is weirdly low. The price signals that already exist aren't getting a rational response. People can already save lots of money by investing in efficiency, but they aren't doing it. They absorb a lot of price pain before they adjust their behavior. They're leaving profitable investments unexploited on a systemic scale, if you believe research like McKinsey's. Why? Credit goes to the inhibiting presence of a variety of market and behavioral failures. Because of these failures, even with a jacked-up energy price, even with stimulus money dumped on the market, progress on efficiency will be slower than it should and could be.

Which raises the question: why should price-based policies be our exclusive focus? Why not instead, or in tandem, try to increase elasticity of demand? If the federal government wants to get good job and economic results from its stimulus investments -- and it surely does -- it should not only spend the money, it should start attending seriously to the project of meliorating the market and behavioral failures in efficiency markets.

How do we remove the barriers? It turns out we know a decent amount about them but comparatively little about how to overcome them. A great primer on this is "Energy Efficiency Economics and Policy" from Resources for the Future. It's a survey of research on efficiency economics, market and behavioral failures therein, and policies to address those failures. When assessing such policies, the authors say a lot of things like, "Data indicating the cost-effectiveness of these programs are not readily available." And, "These net benefit estimates have to our knowledge not been subject to independent verification in the economic literature." We've had three decades of cheap energy, so there's been little reason to focus on accelerating efficiency; our know-how froze in the 1970s.

What's clear is that getting the most out of efficiency will not only mean federal policy but state and local policy, public-private partnerships, new financing models, new models of information sharing, and much more creative thinking. Because we know so little, there's a lot we can learn quickly with an all-hands-on-deck effort.

More on (non-price-based) ways of rationalizing and accelerating efficiency markets tomorrow, with a focus on retrofits.

Related Links:

Making buildings more efficient: It helps to understand human behavior

Why buying cheap energy certificates worsens climate change

Making buildings more efficient: rationalizing retrofit markets

Last week, Senate Majority Leader Harry Reid met with the chairs of six committees that might have some hand in developing the clean energy bill. The question at issue was whether the bill should be pushed back in favor of a short-term focus on finance reform, jobs, and the deficit. Though John Kerry argued vigorously that the clean energy is a jobs bill that won't grow the deficit, it looks like he lost out and there will be some kind of standalone jobs bill in the interim.

Sen. Jeff Merkley (D-Ore.) is now advocating that any jobs bill include support for building retrofits to create jobs and reduce energy bills. What he's got in mind is a variation on his S. 1574: Clean Energy for Homes and Buildings Act of 2009. It's designed to overcome the main barrier to retrofits involving energy efficiency and small-scale renewables: financing. Most such investments are predictable and profitable over time, but they involve high upfront costs.

The "cash for caulkers" program the White House is floating would effectively dump a bunch of stimulus money on the retrofit market -- which is good! it needs money -- but Merkley has something more ambitious in mind. The idea would be to have the federal government offer loan guarantees or other credit assistance in order to leverage private investment far beyond what the feds can provide directly.

Here's the background, from Merkley's office:

In recent years, a number of innovative financing models have emerged to allow consumers access to loans that they can pay off using all or part of the energy bill savings they see as soon as the retrofit is completed. Some cities and states are encouraging property-tax-based financing, where the building owner gets a loan from the local government and repays it through a property tax surcharge. Some utilities (in some cases in partnership with cities or states) are offering on-bill-financing, where the loan is repaid through a surcharge on the utility bill. Some private companies can offer building owners performance savings contracts or, in the case of solar electric systems, leasing arrangements to that the cost is paid off in monthly payments, out of the savings on the utility bill.

The challenge with all these options is finding stable backing and/or collateral for the loans. That's what Merkley wants the jobs bill to do:

By offering direct lending, loan guarantees, or other credit support, the federal government can leverage private capital and state and local investment. If, for example, $2 billion were restored to the loan guarantee program, between $20 and $40 billion in financing could be provided, which would leverage even more in state, local, and private funds.

This is a way of using the power of the feds as lever rather than a hammer.

There are devils in the details. Thanks to the money already going to efficiency from the American Recovery and Reinvestment Act (ARRA), potentially more if cash for caulkers is implemented, the existing retrofit supply pipeline is fairly jammed up. It's a relatively immature market, populated with mom-and-pop outfits and eager startups. There's only so much money it can effectively use.

And the money needs to get used immediately. For obvious reasons, Congressional Dems are very keen to creates jobs in the short-term, oh, say, before the 2010 midterms. Because of this time pressure much of the retrofit work -- the financing, the loans, the contracting, the billing -- will have to be done through utilities, which are already set up for this kind of thing and which reach virtually every American consumer. (Allowance value under the cap-and-trade system ought to be going to utility efficiency programs too, but that's a separate issue for now.)

Over time, as the market matures and scales up, it would be better to shift the resources from utilities to private market actors, which tend to be more innovative and entrepreneurial. There are many market failures in efficiency and retrofits waiting to be solved, and stable federal backing will accelerate the process of overcoming them.

We need to start thinking of efficiency, in all its forms, as a clean, cheap, renewable, domestic source of energy. If we want to rapidly scale it up -- and to hit ambitious emission targets, we'll have to -- it needs what other energy sources get: predictable, long-term government support. It's an oil well that will never run dry. In fact, efficiency-oil gets cheaper the more we drill. So drill, baby, drill!

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One last thought: Merkley's idea would do real, positive work in the here-and-now. When voters see clean energy and efficiency working, they become more open to the grander initiatives: comprehensive climate bills and international treaties and such. Rather than forever raging against the dimming of those grand hopes, green groups should focus on making tangible, visible progress. Take the hill by inches. It wouldn't take much for one of these big green groups or coalitions -- Clean Energy Works? Apollo Alliance? 350? -- to make a celebrity out of Merkley's bill; make it a symbol of all the ways we can create jobs and save money by going green. In the end, caulk trumps rhetoric.

Related Links:

Making buildings more efficient: It helps to understand human behavior

Why buying cheap energy certificates worsens climate change

Approaching Copenhagen with a Portfolio of Domestic Commitments

For the last year and a half, Ken Ward and Andrée Zaleska have been rehabbing a 100-year-old former neighborhood store in the Boston neighborhood of Jamaica Plain. They're converting it into a home for their combined family, a community gathering place, and a zero-carbon demonstration home to inspire others -- and sharing their journey in the special series Coming Home: Chronicling the (re)invention of the JP Green House.

The firm overseeing the project, Placetailor, specializes in creating homes on the Passive House model, in which supertight insulation and careful use of passive solar create a building that requires no heating source. The JP Green House will be one of the first Passive House rehabs in the U.S. Photographer Leise Jones has documented the work of as it progresses, and shares some of her images here.

Related Links:

Making buildings more efficient: It helps to understand human behavior

Why buying cheap energy certificates worsens climate change

Making buildings more efficient: rationalizing retrofit markets

The New York State Legislature has not, of late, been able to agree on anything--the budget, same-sex marriage, and even, for awhile, which party was in the majority.

But there is one thing they are unanimous about: clean energy finanancing.  Last night, by a vote of 192-0, the famously combative body passed S66004-a/A 4000A-a, a bill that enables municipalities in the state to set up special financing districts to help residents finance investments in energy efficiency and solar. 

Called property assessed clean energy (PACE), it's a model that allows cities to issue bonds to help residents finance investments in energy efficiency and solar, and pay off the loans through a property tax assessment.

With New York, 15 states now allow these programs.

And if you are in New York, the next step is to get your town to set up a program.  Step-by-step guide here.

Related Links:

Making buildings more efficient: It helps to understand human behavior

Why buying cheap energy certificates worsens climate change

What Do Coal and Dirty Dorm Rooms Have in Common?

On Friday, Matt Yglesias made the point that only socialist state control seems capable of creating a robust nuclear power industry. After all, the only countries building nuke plants these days are the ones where governments are making the decisions. David Frum replied with a series of wildly overbroad assertions ranging from false to highly misleading, with no evidence or links to support them. (Nuclear power has an impressive effect on conservative error-to-word ratios.) Matt replied in turn, and in doing so echoed a familiar misunderstanding:

That said, obviously you need a certain amount electricity that can be relied upon irrespective of how windy it is or whether the sun is shining. So I’d happily see the nuclear share of the pie grow at the expense of coal and oil as the provider of that baseload electricity.

This notion has really grabbed the public imagination. It's become conventional wisdom that the grid can only incorporate a limited amount of renewable energy; ergo, we need coal and nuclear power plants for "baseload" electricity. Clean energy skeptics wave the word "baseload" around like a talisman.

There's far less to the claim than meets the eye, though. As Amory Lovins points out, it's a category error: baseload is a characteristic of aggregated demand, not of any particular kind of supply. He distills the counter-argument:

Baseload: The electricity system doesn’t rely on any plant’s ability to run continuously; rather, all plants together supply the grid, and the grid serves all loads. That’s necessary because no kind of power plant can run all the time, as Stewart says they must do to meet steady loads. I repeat: there is not and has never been a need for any particular plant or kind of plant to run all the time, and none can. All power plants fail, varying only in their failures’ size, duration, frequency, predictability, and cause. Solar cells’ and windpower’s variation with night and weather is no different from the intermittence of coal and nuclear plants, except that it affects less capacity at once, more briefly, far more predictably, and is no harder and probably easier and cheaper to manage. In short, the ability to serve steady loads is a statistical attribute of all plants on the grid, not an operational requirement for one plant. Variability (predictable failure) and intermittence (unpredictable failure) must be managed by diversifying type and location, forecasting, and integrating with other resources. Utilities do this every day, balancing diverse resources to meet fluctuating demand and offset outages. Even with a largely (or probably a wholly) renewable grid, this is not a significant problem or cost, either in theory or in practice—as illustrated by areas that are already 30-40% wind-powered.

Right now our power system might be characterized as Security Through Oversupply. We've built enough power plants to create the maximum level of power we might ever need at a given point in time; but since "peak load" times are relatively brief, most of the time dozens and dozens of large power plants are cycled down, sitting idle. As population and per-capita power use rise, the size of peak load is rising as well. The STO response is to build more plants.

The alternative will be Resilience Through Diversity: just-in-time, just-enough power from multiple, redundant, diverse sources spread over large geographical areas, managed by a reliable, intelligent power grid incorporating distributed storage. Peak load will be shaved by load spreading and efficiency; failures will be localized and self-healing rather than cascading and catastrophic; intelligence will replace brute power.

Utilities face, imminently, some very large investment decisions. Should they invest in nuclear and "clean coal" power because they will "have to" have some baseload power on the grid in 10-15 years when the plants are completed? No. For the next decade it will be a huge challenge just to get to the level of renewables integrated in Spanish and Italian grids today (30-40 percent). In the ensuing time, an enormous amount of money and engineering will go into grid resilience and intelligence. It is far too early to predict what level of renewables will be "impossible," but whatever that level turns out to be, it is certainly far distant.

This is the green pitch to utilities: Rather than spending the next decade or two building nuke and CCS plants, with all the attendant management hassles, public opposition, lawsuits, and cost overruns, why not spend it reducing demand, creating a more resilient grid, and diversifying the generation portfolio? The former is just a more expensive version of what exists now. The latter is a revolution, a platform for innovation that will make the internet look like, um, the electricity industry.

A pitch isn't enough, though. For a fusty industry like utilities, revolution is to be resisted, not celebrated. The key is not just asking utilities to use full cost accounting, but to start building such accounting into markets via regulation, legislation, and large-scale investment. Once the financial and legal incentives are correctly aligned, even utilities -- slow and regulator-dependent as they are -- will respond. Until then, until they really start trying, we shouldn't trust them about what parts of the old system are "necessary" in the new.

(For a longer and more detailed response to the "baseload" shibboleth, see Lovins' "Four Nuclear Myths" [PDF].)

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Freeing the grid

The Natural Resources Defense Council, along with our fellow efficiency advocates, announced the results of successful negotiations with the lighting industry on standards for street lights and parking lot lights.

Standards on outdoor lights are such a no-brainer because these lights stay on through the entire night. Daylight Saving Time brings an early end to the day and an early start to burning electricity for streetlights. More efficient technologies pay off quickly in this high use application and the savings rack up.

Thanks to this standard, you will save money everywhere you drive or park your car. The lights along streets, highways, and in parking lots will be covered. Basically all the bright lights on poles (or walls) are going to stop wasting so much energy. These lights are currently not subject to any efficiency requirements and therefore the performance is all over the map. With new super efficient technologies, like light emitting diodes (LEDs) and ceramic metal halide (CMH) lamps, the potential savings are gigantic.

You may recall that I blogged early this year about a last second amendment to the House Climate bill (the American Clean Energy and Security Act of 2009) that severely and arbitrarily limited the excellent standard on street lights, and this agreement is the next step in the fight for more efficient outdoor lighting. The agreement isn't as good as the original language, but it does have a lot going for it and will still save a tremendous amount of energy and money

ACEEE crunched the numbers, and the standard will save 25 to 42 Terawatt hours (billion kWh) per year by 2030. This is the same amount produced by 6 to 10 dirty coal-fired power plants. This shakes out to carbon savings of up to nearly 8 million metric tons a year (the same as about 5 and a half million cars off the road), and is worth $2.8 billion to $5.1 billion annually saved on energy costs in 2030.

The standard is structured so that,

We need to stop wasting money and pumping carbon into the atmosphere with inefficient lights. And don't forget, we all pay to run these lights eventually, whether through the utility, city, or county. It's time stop throwing that money away.

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Making buildings more efficient: It helps to understand human behavior

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Making buildings more efficient: rationalizing retrofit markets

A diverse coalition of nearly 200 business, labor, civil rights, and environmental groups have sent a letter to Sen. Barbara Boxer (D-CA), chair of the Environment and Public Works Committee (EPW) urging her to support an important energy-efficiency provision that would:

What is this magical provision?  As the letter explains:

We are writing to request that the climate bill require an investment in energy efficiency equivalent to at least 1/3 of the value of the total allowance allocation given to electric utilities.  Such an efficiency investment will create hundreds of thousands of new jobs retrofitting millions of buildings nationwide, and benefit consumers by lowering electricity costs by billions of dollars, as residential, commercial, and industrial consumers typically save in the range of $2 to $4 for every $1 invested in energy efficiency.  It would also help decrease greenhouse gas emissions and thus reduce the market clearing price of carbon.

Following is a joint statement from the broad-based coalition:

"We believe that the adoption of an additional electric utility, energy-efficiency measure in the Clean Energy Jobs and American Power Act will reap tremendous benefits for our economy and consumers.

Energy efficiency is the fastest, cheapest and cleanest way to reduce our carbon pollution. We urge the Environment and Public Works Committee to act now by adopting this provision to create jobs, reduce pollution, and save consumers and businesses money."

For more on benefits of efficiency in the climate bill, see:

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Making buildings more efficient: It helps to understand human behavior

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Making buildings more efficient: rationalizing retrofit markets

If you're like me, and spend a lot of the day drinking coffee and getting increasingly paranoid with the creeping suspicion that solving climate may not be possible, it's good when you find glimmers of hope in the wreckage. One of those glimmers (actually more like a tractor beam) is called Energy Trust, an organization in Oregon that, if widely copied, would move us well on the way to solving climate change.

I recently spent a few hours with my friend Greg Stiles, who helps run their business sector programs, and I was blown away by their creativity and success. Here are some tidbits: Energy Trust is funded to the tune of $130 million annually through a public purpose charge on Oregonians' utility bills. That alone is arguably part of a solution to climate change -- it's a price signal on energy costs that will force people to conserve. (By the way -- it's also a sign of things to come, and the program's enormous success puts the lie to the delusional notion that to solve climate we need to make energy cheap (that might happen one day, but first it will have to get expensive. No freebies on this one, techno-optimists.)

Two programs caught my attention. The first is one approach to solar electric installations. Most utilities offer rebates for residential and commercial systems, and that's it. The problem is that these systems, even with good rebates, are still frickin' expensive. (As an example, I'm putting 4.5 kW on my roof, and with three different rebates and a hell of a deal from my installer, I'll see a return on my investment of 6 percent. It's OK for me, but not for most.)

What Energy Trust did is a form of "end-use, least cost" planning, a term Amory Lovins coined. They asked: "What do we want, and what is the cheapest way to get that?" What they wanted was clean energy, in the form of solar on people's roofs. So they brought together everyone interested into a bulk purchase. Then they bid the contract in one huge chunk. Economies of scale enabled everyone to get what they wanted -- their own system, on their own roof -- but at a 25 percent discount. Brilliant, right?

But we aren't going to solve climate change with brilliance, we're going to solve it with applied common sense. The next smart innovation came in the form of lighting retrofits. I've banged my head against this problem for a long time, and if I were to implement a program, I'd do the same dumb thing I always do -- go to the owner of a property and try to convince him or her to upgrade. But that's the wrong approach.

Energy Trust recognized that first, owners don't listen to the random enviro dude. They listen to their contractors. And they know that only electricians have the time or interest to care what a T5 is vs. a T12, and to note the rebates available for a switch.

By reaching out to contractors and electricians with info on the best technology and the rebates available, Energy Trust created a free, motivated sales force, and one that could actually get the retrofits done. Granted, Energy Trust has lots of money to make these improvements happen, and it comes out of customers' pockets. But that's what it's going to take -- a tax.

Remember -- solving climate change is going to hurt. And a few dollars on your utility bill is not the kind of pain I'm talking about. That's a pleasure.

Meanwhile, with that public purpose charge, Energy Trust is achieving the holy grail of energy geeks: they are helping utilities actually meet growing demand with efficiency, not new power. The utilities love it so much they are kicking in more of their own money to fund the program. The customers get disproportionately good service and love that. And I love it because it gives me a massive dose of that heroin-like drug -- hope.

Related: Portland weatherization program gives top billing to labor standards and community benefits

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Making buildings more efficient: rationalizing retrofit markets

Clean Energy Works Portland is a groundbreaking new program that enables Portland residents to improve the energy efficiency of their homes and pay for the improvements over time through their utility bills.

A contractor performing a blower door test to identify air infiltration and leakage throughout a home.Energy Trust of OregonBut the most exciting and unique aspect of the program is the Community Workforce Agreement that was developed by representatives of labor unions, community groups, businesses, community colleges, and other stakeholders. It is a comprehensive plan to make sure that new jobs created by Clean Energy Works Portland are high quality, career-track jobs that offer family-supporting wages and benefits, and that they go to local residents from diverse backgrounds.

"We wanted to have this project reflect some higher set of goals beyond just retrofitting homes and reducing carbon emissions," said Derek Smith of Portland's Bureau of Planning and Sustainability, the city's go-to person on the Clean Energy Works Portland program.

The program uses $2.5 million in Energy Efficiency and Conservation Block Grant funds the city received through the American Recovery and Reinvestment Act as seed money to start a revolving loan fund that will enable Portland homeowners to improve the energy efficiency of their homes at no up-front cost. The energy improvements that will be available to homeowners during the pilot phase of the program, which will cover 500 homes, include insulation, air sealing, duct sealing, and improvements to space heating and water heating systems.

The Energy Trust of Oregon will schedule home energy assessments for interested homeowners and help them choose the energy saving options that best meet their needs. To pay for the improvements, homeowners will receive low-interest, long-term loans and will pay them off via their monthly utility bills.

Once the pilot phase is completed next summer, some 100,000 homes in Multnomah County, which encompasses the city of Portland, could qualify for the program.

A state law, Oregon's Energy Efficiency and Sustainable Technology Act of 2009 (HB 2626), made the Portland financing mechanism possible. "Portland is the first pilot project for this new statewide, low-interest loan program for weatherization work that you can pay back on your utility bill. That's how we're going to spread this idea around the state," said Barbara Byrd, who wears many hats in Oregon, including secretary-treasurer of the Oregon AFL-CIO and coordinator of the Oregon Apollo Alliance, which strongly supported passage of HB 2626.

Fifty-five direct jobs will be created by the pilot program, but many more are expected to be created after the pilot phase. In order to make sure those jobs will have good wages and benefits and be accessible to community members with previous barriers to employment, the city pulled together approximately 60 stakeholders to develop a Community Workforce Agreement that would complement Clean Energy Works.

Smith of the Portland Bureau of Planning and Sustainability said he got the idea to bring labor and training standards and community benefits into the program from being part of the Green For All "community of practice." The community of practice connects people throughout the United States who are working on green jobs programs and helps them share their learning experiences with others in the field. Green For All is a partner in Clean Energy Works Portland, along with the Energy Trust of Oregon, Portland General Electric and others.

Maurice Rahming, president of the National Association of Minority Contractors of Oregon, participated in the Clean Energy Works Portland stakeholder meetings that culminated in the Community Workforce Agreement. "I think it's a tribute to the mayor that he got minority contractors involved early on, rather than having them involved at the very tail end. It shows he's looking to diversify the contracting pool," Rahming said.

"Construction isn't always the most diverse workforce that's out there, and we wanted to set up an understanding that let's have the workforce and the contractors reflect the city of Portland," he added.

In addition to minority contractors, the stakeholder meetings included many groups that offer pre-apprenticeship training to prepare people in basic work skills so that they can then enter training programs that teach skills specific to an occupation. These groups included the Native American Youth and Family Center, which offers employment training courses to Native Americans; and Oregon Tradeswomen, which offers women training courses to prepare them to enter the building and construction trades. Pre-apprenticeship training programs like these will funnel participants into weatherization technician training courses linked to Clean Energy Works Portland.

Many labor unions also participated in the development of the Community Workforce Agreement, including the Laborers union, which is about to begin offering training courses in weatherization that will be available to graduates of the pre-apprenticeship programs described above. "A part of what we wanted to see [in the Community Workforce Agreement] was that people were going to get quality training, because then they're going to come into the market with better skills, and that's a chance for them to get their wages up," said Al Davita, the training director of the Laborers Training Program in Oregon and southern Idaho.

Davita said the Laborers will be providing three levels of training in weatherization-an 80-hour entry-level class for weatherization installers/technicians that will require 80 hours in general residential construction to get into the class; a 40-hour weatherization supervisor training; and a 40-hour energy auditor training. This means that trainees who become weatherization technicians through Clean Energy Works Portland will be able to move into other careers with additional training.

"Our plan is to recruit people who are out of work, give them quality training so they can go out and do this work, but also give them a career pathway so that they can potentially stay in weatherization for the next 20 years or may be able to move into commercial building construction or demolition, where the wages are higher. So we're looking to give people the chance to change their lives," Davita said.

After five weeks of meetings, the stakeholders came to consensus on a Community Workforce Agreement for the Clean Energy Works Portland pilot program that lays out requirements for worker training, wages and benefits, local hiring, contractor standards and more. Key goals and targets of the agreement, which was passed by the Portland City Council on September 30, include:

Local hire: at least 80 percent of employees used in the pilot program will be hired from the local workforce.

Family-supporting jobs: workers will earn no less than 180 percent of the state minimum wage.

Diverse workforce: historically disadvantaged or underrepresented people, including people of color, women, and low-income city residents, will perform at least 30 percent of total trades and technical project hours.

Diverse business participation: twenty percent of the dollars that flow through the project will go to businesses owned by historically disadvantaged or underrepresented people.

Prevailing wage: contractors will pay wages that are at least 180 percent of Oregon state minimum wage or the prevailing wage for weatherization work, whichever is higher.

Worker training: contractors will hire 100 percent of new weatherization employees from designated training programs until 50 percent of the contractor's non-supervisory work hours are performed by these training program graduates.

Labor peace: contractors will sign a labor peace agreement that includes a majority sign-up provision (meaning that contractors will respect the will of the workers if a majority of them signs up to form a labor union).

The Community Workforce Agreement also sets up a system of "best value contracting," which means that contractors wishing to join the pool of qualified contractors for the Clean Energy Works Portland program will be scored on a range of attributes. They will earn points for having a successful track record of hiring and retaining historically disadvantaged people; having a plan for establishing sub-contracting relationships with businesses owned by people of color and women; and hiring graduates of pre-apprenticeship training programs, among other criteria.

Clean Energy Works Portland's criteria for qualified training programs requires the programs to have at least three defined partnerships with state recognized pre-apprenticeship programs or signatory community organizations that service underrepresented populations, and to make sure a majority of trainees are women, people of color, low-income people or people from disadvantaged communities.

"In Oregon, a state with one of the highest unemployment rates in the country, Clean Energy Works Portland stands to provide a scalable national model by leveraging federal recovery dollars to put people back to work and achieve significant carbon reductions," said Portland Mayor Sam Adams. "With our community workforce agreement, we have the ability to promote social equity in a measurable way, providing an opportunity for under-employed youth and adults to gain career training in the sustainable building industry, and ensure that Portland stays at the forefront of the green economy."

For other cities that are considering designing programs similar to Portland's, several of the people who participated in the process that created the Community Workforce Agreement emphasized the importance of involving stakeholders early in the process. "My bottom line advice is that if you want to do this, you have to involve the stakeholders from the very beginning of the process," said Barbara Byrd. "It's not something the city can put together and ask people to sign on to. It was the involvement of the stakeholders that not only created the workforce agreement, but will also make sure it works."

Rahming said that the early involvement of minority contractors will help them be able to participate in the program. "In contracting, time is everything," Rahming said. "A lot of times, larger companies can put proposals together more quickly, because they have more staff. This time, because the project was presented to my contractors at the front end, it will allow them to be able to meet the wage and benefits and training requirements."

Now that the Community Workforce Agreement is in place and the pilot program has already begun converting loans for homeowners, some of the same people who were involved in the stakeholder process will oversee how the program is run.

"The side benefit of this whole effort is energizing a community," Smith told Oregon Live in a recent interview. "People are really interested in this. It's good for the economy. It's good for their home energy bills and (the environment). It seems like one of the promises of the new clean economy could be realized here."

For more information about Clean Energy Works Portland, go to www.cleanenergyworksportland.org.

Read the Community Workforce Agreement.

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Making buildings more efficient: It helps to understand human behavior

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Making buildings more efficient: rationalizing retrofit markets

The media has been taking the Department of Energy (DOE) to task over a recently released audit by the Inspector General (IG) which highlighted some well known shortcomings in the Energy Star program. The conclusions were not surprising -- there needs to be more testing of products to ensure compliance with Energy Star requirements and the efficiency levels required may be too weak. The new DOE has vowed to take care of these problems, and in fact the Environmental Protection Agency (EPA) and DOE, which jointly manage Energy Star, agreed to increased testing and quicker updates in a Memorandum of Understanding that was released a few weeks ago, actually before the IG report.

There isn't any real reason to lecture the agencies at this point, since they are addressing the major issues and are moving forward. When you have a program like Energy Star that has been saving energy and putting money in consumers' pockets for decades, it is better late than never. And the bottom line is still the same -- you are much better off buying an Energy Star product than anything else. The agencies are now going to make sure you will save even more.

As part of the agreement, EPA will be taking the lead on all Energy Star specifications, which is a significant change. There are over 60 products that can earn Energy Star, meaning over 60 different decisions have to be made about what level of energy performance to require. Now with the new agreement, it also means that there are at least 60 different markets to monitor so that the requirements can be changed if the market share of Energy Star grows to over 35 percent. That is a lot of work.

EPA also recently released their market share report for 2008, and it shows that some products are already well over the 35 percent threshold and perhaps in need of a revision. This data is great for an advocate, as it tells you how the market is transitioning to more efficient products. Market share over 35 percent does likely mean Energy Star has become too easy, but it also might mean that energy could be saved with a new federal minimum standard. If Energy Star has 90 percent market share, then the maximum level of efficiency that is "technically feasible and economically justified" (where federal standards must be set by DOE) is at least this high. If the market share is low, then incentives or education might be needed to encourage folks to invest in more efficient equipment. Lots of food for thought here.

A few numbers that jumped out at me,

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At today's hearing on the Kerry-Boxer bill, Sen. Inhofe (R-Okla.) was spouting the usual lies about the high cost of the policy. Kerry responded:

That's good, but he could have said so much more. Even with those shortcomings of economic models, the costs turn out to be "modest," in CBO chief Doug Elmendorf's words.

For more on why economic models overestimate the cost and underestimate the benefits of green policy see: "Why we overestimate the costs of climate change legislation."

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On ‘climategate’

Joe Romm draws attention to some extremely interesting thoughts from Glenn English, head of the National Rural Electric Cooperative Association. NRECA represents 900-plus small, not-for-profit, typically coal-based utilities in the Midwest. We tend to think all coal utilities are after more free allowance allocations under a cap-and-trade system, but as Climate Wire (sub req) reports, last week English said that ...

... "the basis for a deal" on climate would not revolve so much around allowances, but around whether people in coal-dependent regions would get enough help with efficiency retrofits on homes so they can manage potential electricity spikes.

These are words of wisdom, the words of a man whose primary concerns are his region and his people rather than profit. I have no idea how widespread English's view is among coal utility execs -- probably rare indeed among the for-profit set -- but I choose to take great heart from it.

Here's the truth English has grasped: it is better to give people efficiency than to give them cheaper electricity.

Given free allowances, utilities are likely to do one of two things: keep the profit and raise electricity rates anyway (as economists fear), or use it to keep rates down (as economists fear). The former scenario is bad for obvious reasons, but the latter is a more subtle danger. Holding down rates will mute the carbon price signal for dirty electricity -- meaning other forms of carbon (gas, heating oil, etc.) will have to rise in price disproportionately to make up the difference. Neither option serves the purpose of cost-effectively reducing emissions or protecting consumers.

Money invested in efficiency is a different matter: Electricity rates still go up, preserving the price signal, but electricity bills go down, because consumers use less. Here's the thing: even if ratepayers end the month with the same total out-of-pocket expenses (paying the same rate for the same amount of electricity, or paying a higher rate for less electricity), the two investments are not equivalent.

In short, efficiency investment has all sorts of social advantages, multiplier effects, and system-of-system benefits that rate assistance doesn't.

Finally, there's good reason to believe, especially in coal-dependent areas, which tend to have the least efficiency building stock, that efficiency savings can easily exceed the rise in rates that a carbon cap will generate. That means consumers will take money they used to spend on energy and spend it on something else -- and as it happens, a dollar spent spent on energy and a dollar spent elsewhere are not equivalent:

Even if we keep overall consumer spending level, then, it's better for that spending to go to non-energy sectors than to energy sectors. Efficiency shifts spending out of energy.

So, to wrap it up: English is right: the most important thing a federal program can do to "keep consumers whole" while reducing emissions cost-effectively is to invest heavily in energy efficiency. This may be the first and last time I ever say this, but: listen to the coal guy!

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Obama administration officials grateful for early spring

I'm sure Steve Mufson and Juliet Eilperin didn't choose the headline, but whoever did, I think it's a real mistake to refer to the Kerry-Boxer bill as "a bit more ambitious" than its Waxman-Markey counterpart in the House. This became conventional wisdom almost immediately, but it seems to me both wrong and pernicious -- the more Kerry-Boxer is seen as a leftward move from the House bill, the more senators who want to be seen as moderate will want to be seen hacking it down.

There is one way in which Kerry's bill is unambiguously stronger: it retains EPA authority to regulate greenhouse gases under the New Source Review provisions of the Clean Air Act. That's a big deal -- a red line, analogous to the public option in health care reform, for many progressive groups -- but it's basically orthogonal to the bill's substance. (It will not survive the process, I fear, though the public option look like it might surprise us, so who knows.)

The typically cited basis for claiming Kerry's bill is stronger is the fact that the 2020 emissions target went up to 20% from 17%. But:

So, the change in the 2020 target is far less significant than it appears. Offsetting that modest improvement is more than three times the subsidies for "clean coal," more handouts for nuclear and natural gas, and more handouts to Big Ag.

Most importantly, though the significant differences are not in the cap-and-trade portion of the bill but in the energy portion. The bill already passed by the Senate Energy Committee -- the American Clean Energy Leadership Act, or ACELA -- is considerably weaker than the analogous portions of the Waxman-Markey bill. The Renewable Electricity Standard is reduced from the already-weak 20% by 2020 to just 15%. It establishes a woefully flawed Clean Energy Deployment Administration. It would enable offshore drilling. And its efficiency provisions are weaker.

As the EPA says in its analysis (PDF), "EPA expects the impacts (e.g., changes in energy demand and prices) of energy efficiency provisions in S. 1733 to be approximately half those estimated in our analysis of H.R. 2454." Recall two things: one, mainstream economic analysis tends to dramatically understate the value of efficiency; losing half of the efficiency gains in Waxman-Markey is a bigger deal than EPA makes out.

And two, complementary measures -- mostly efficiency -- were expected to generate a huge amount of emission reductions in 2020, as the World Resources Institute illustrates [SEE UPDATE BELOW]:

Losing half those efficiency gains, while it may not show up in the official targets, substantially blunts the bill's impact.

---

So it's time to stop saying the Kerry-Boxer bill is more ambitious than Waxman-Markey. It gives more favors away to more interest groups -- so I suppose you could say it's more politically ambitious. But in terms of the measures meant to drive reliable, cost-effective action in the short-term, the Senate bill is a step backwards.

---

UPDATE: This post contains two serious errors, for which I have no excuse, unless you think writing at 2am with a head cold is an excuse.

First, I say above that methane emissions were moved out from under the cap, and are now eligible as offsets. That's half right. They weren't under the cap in Waxman-Markey, but they were subject to mandatory regulations. Under Kerry-Boxer, those regulations are gone, at least until 2020; reductions from methane will be voluntary and eligible as offsets. That still means fewer total emission reductions by 2020, though the difference is not in capped sectors, but in uncapped sectors.

Secondly: Brad is right -- I totally misrepresented WRI's chart. As Brad says, the complementary policies represented in WRI's graph are not efficiency provisions, but industrial and stationary source performance standards, along with international forestry provisions. As WRI says, "the vast majority of mandatory energy efficiency programs would further regulate capped sectors and thus not achieve additional reductions."

So: the weaker efficiency provisions in ACELA would increase the cost of achieving reductions in capped sectors, but would not increase the amount of emission reductions.

Anyway, apologies for the errors, and thanks to Brad for the catch.

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Making buildings more efficient: It helps to understand human behavior

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Approaching Copenhagen with a Portfolio of Domestic Commitments

Climate Corps. Photo: Environmental Defense FundBack in May I wrote about the Environmental Defense Fund's (EDF) Climate Corps, a cadre of 26 MBA students who were then prepping for summer internships at Fortune 500 companies. Their mission was to green up corporate operations to save money and cut carbon emissions.

With winter on the way and school back in session, I checked in to see how successful the Climate Corps was at combining the students' financial smarts, technological know-how -- half are engineers by training -- and environmental ethic.

Pretty successful, it turns out. According to EDF, the interns identified energy efficiency measures that will collectively save an estimated $54 million at 22 companies (and one university), including eBay, Dell and Sony Pictures Entertainment. That translates into 100,000 metric tons of greenhouse gases avoided a year with an annual energy savings of 160 million kilowatt hours.

A couple of caveats are in order. Energy efficiency programs were already under way at many of the companies. And whether the projected $54 million in savings will actually be realized won't be known until the energy efficiency efforts are completed -- actual results may vary.

Still, anything close to $54 million is quite a return on investment, given that the companies altogether spent only $260,000 on intern salaries during the 10-week program.

But the long-term payoff is likely to be the emergence of a new corporate class- - the green financial engineer -- and future CEOs -- who reflexively view environmental performance as a bottom-line concern.

"Many of these companies have people working on energy efficiency but it really helps to have another set of eyes on the ground," says Millie Chu Baird, the Climate Corps project director. "Even if a company thinks it's doing everything it can, we found often it can be doing more."

That was networking giant Cisco's experience. Last year, Climate Corps intern Emily Reyna made the business case for installing intelligent power strips in the company's labs to reduce electricity consumption. That will save an estimated $8 million annually with an 18-month payback period.

This year, intern Sarah Shapiro helped implement the power strip project while spearheading an initiative to cut power use by raising the ambient air temperature in the labs and in the chilled water that cools equipment. Projected savings? $1.8 million a year.

A Cisco manager had done a back-of-the-envelope analysis of such a project's potential, but it was Shapiro's job to gather the data to make the financial case for such an initiative.

"I spent a lot of time banging on doors and hanging out in data center to get the data," says Shapiro, who is pursuing dual degrees from the University of Michigan business school and its school of natural resources.

"Day to day there was a lot of talking to relevant people at Cisco, a lot of energy managers, human resources and workplace management," she added. "I worked a lot with energy folks to provide financial perspective on initiatives they were already working on."

And that's the missing link in a lot of corporate energy efficiency programs, according to Rob Rolfsen, who oversees Cisco facilities as director of workplace resources.

"Labs represent two-thirds of our carbon footprint," says Rolfsen. "Sarah brought a business side approach and could work with the engineers to develop a business case for what we wanted to do."

Shapiro's classmate, Ryan Whisnant, found that being a liaison between the gear heads and the number crunchers allowed him to exert influence in subtle ways. Posted to SunGard, a $5.5 billion software and IT services company headquartered outside Philadelphia, Whisnant went for a meet-and-greet with a facility manager and mentioned the lack of energy efficient compact fluorescent light bulbs in the building's lobby.

"The next time I came back I saw that CFLs were in the lobby," says Whisnant. "I found out that after our meeting the facility manager called and said to switch out the bulbs."

Whisnant spent most of his time developing energy efficiency measures for SunGard's corporate headquarters, such as retrofitting lighting, heating, and cooling systems.

"We built a whole financial model on a project-by-project basis in terms of lighting retrofits and to optimize building management systems," he says.

And it's not just forward-looking Silicon Valley-type tech companies that have embraced the Climate Corps. Among those cashing in on the interns' expertise: TXU, the coal-dependent utility once the bête noir of the environmental movement, supermarket chain Stop and Shop/Giant and even the NBA basketball team, the Houston Rockets.

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Norton hit Congress to testify about the value of green building in 2008.globalwarming.house.govA major investment in making affordable housing greener—a $4 billion investment, to be precise—was announced Wednesday. The injection comes courtesy of Enterprise Community Partners, a 25-year-old non-profit dedicated to community development and affordable housing. With heavyweight partners including NRDC, HUD, and the Home Depot Foundation, Enterprise—which was founded by the grandparents of actor Edward Norton, who sits on its board—has set its sights on overhauling the entire affordable housing stock in this country.

Well, in that pebble-in-a-pond sort of way. The actual $4 billion will be split, with $2.5 billion going toward the construction or retrofit of 75,000 units across the country, and $1.5 billion going toward research and systems reform work. Through its work with state and local governments, Enterprise Green Communities hopes to have an eco-influence on hundreds of thousands more units, and leverage lots of dough. If that’s not enough, its leaders are calling for the country’s entire affordable housing stock—around 30 million households—to be green by 2020.

It’s the kind of energetic, solution-y plan that makes you have real hope for a millisecond. Even if the 30 million households vision doesn’t pan out, there’s real progress to be made. As speaker after speaker pointed out in a conference call this morning (in which Norton was supposed to participate, but he wasn’t there, not that it’s the only reason certain people called in, ha ha, but where was he?), this isn’t greening merely for the sake of environmental progress—it has tangible effects on the health and quality of life of residents, as well as holding the potential for green job creation, energy savings, and significant carbon reduction.

In fact, Enterprise has just rolled out the results from its work over the last few years. In conjunction with its splashy announcement today, it released a report called Incremental Cost, Measurable Savings: Enterprise Green Communities Criteria. Not the hottest title, but it gets at the point that green builders and fans of retrofitting try to make day in and day out: choosing greener options doesn’t cost that much more, and it saves a hell of a lot over the long run.

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State of the Climate Movement: Can fasting and asceticism save the world?

Doug Letterman via flickrPop quiz: What saves money, saves energy, creates green jobs, fights climate change, can fix the economy, will make America great again, and is both a floor wax and a dessert topping?

Answer: It’s weatherization! And both the U.S. government and the European Union are embracing its potential.

In a report released today, Joe Biden’s Middle Class Task Force (which, hello: still a terrible name) recommends steps toward a national retrofit program, citing a potential $21 billion in annual energy savings and 40 percent cut in energy use. Specific proposals include: an Energy Star-style labeling program for existing homes; a national home energy performance measure; municipal financing that attaches retrofit costs to homeowners’ tax bills; and national standards for workforce training and certification.

“These recommendations can pave the way for a self-sustaining retrofit market, a market that can reliably cut energy bills while also creating good green jobs and saving consumers money,” says the report. Hear that? Weatherization will save us all.

Next step? Another task force! Yesssss. The interagency Energy Retrofit Working Group will submit an implementation plan to Biden in thirty days. At which point he will create a subcommittee to ... oh hell, just go add some insulation to your attic. We’ll let you know when the good stuff comes.

Meanwhile, across the pond, a draft EU report recommends retrofitting 15 million buildings in Europe over the next decade as part of an “energy efficiency action plan” aimed at cutting energy use by 20 percent. The European Building Initiative would generate about $19.7 billion in savings and could create 300,000 jobs a year, the report estimates: “Investing in energy efficiency in buildings can play a key role in the EU’s economic recovery.”

Hear that? Go on, repeat after me: Weatherization will save us all.

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Last week the Department of Energy (DOE) and the Environmental Protection Agency (EPA) signed a Memorandum of Understanding (MOU) on the Energy Star program. Who runs Energy Star, the extremely successful program for promoting efficient appliances, equipment, and buildings, and how they run it has been a point of tension between the agencies that are jointly tasked with administering the program. Consumers now look for the Energy Star label when making a purchase and manufacturers strive to make sure their products qualify - a credit to both agencies. Success has caused growing pains and disagreements between the agencies.

Joint administration of the program will continue, however the new MOU may signal an end to some issues that have bubbled up repeatedly. Recent examples include,

Now that both agencies have staffed up after the administration change, they clearly would like to put the past behind them and move forward. The MOU is designed to clarify roles and responsibilities as much as possible and put forward a framework for expanding and enhancing the program. There may be some skepticism that after decades of uneasy relations that these issues will finally be resolved, but after taking a look at the MOU and talking to staff, it seems to me that they should be given the opportunity make this agreement work.

In a nutshell, the MOU clarifies which agency is the lead in which area. In the past DOE and EPA split up the specifications for various appliances. DOE covered the more traditional products, such as refrigerators, water heaters, and windows, while EPA covered all consumer electronics. EPA also managed Energy Star for buildings while DOE conducted its own building efficiency work that was only loosely related.

EPA will now be taking the lead on all appliances and equipment specs while DOE will take more of a leadership role in buildings. DOE will also expand the National Building Rating Program (which would determine how efficient a building is and distill it into a rating) and manage all test procedures and metrics, all of which feed into Energy Star.

The MOU also clarifies how Energy Star specifications will be set, and does so in a way that NRDC has advocated for in the past. The baseline to participate in the program will be set where approximately the most efficient 25% of the market (flexibly defined, depending on the product) will qualify. Once the market share of Energy Star products reaches 35%, the specification will be revisited. Specifications for products with long useful lives will be revisited automatically every 4 years, while products where technology is evolving rapidly (TVs and other consumer electronics) will be revisited every 2 years. We agree with this proposal and think this will help keep the label fresh and usable for consumers.

There will also be testing of products "off the shelf" for enforcement, meaning someone will go out and buy one at the store and see if it works as advertised. Products will also be tested in accredited laboratories to determine if the product qualifies in the first place, rather than just letting manufacturers self certify. With these changes, consumers should feel very confident that they will save money and energy if they purchase an Energy Star appliance.

Lastly, the agencies are proposing an "Energy Super Star" for the most efficient 5% of products. This is very new, and everyone has some questions about how it would work but the idea certainly has merit. Legislation currently under consideration in Congress would create something similar by designating "Best-in-class" appliances at about the same efficiency level. Regardless of how it is done, it seems that the very best appliances will be identified in some way.

The agencies have put forward a framework for improving and enhancing Energy Star and this is a very positive development. It may take some reworking of legislative language in Congress to make it a reality, but the new EPA and new DOE should be given a chance to make it work. Government agencies working issues out on their own is preferable to Congressional intervention every time, as changing laws is difficult and time consuming. If the agencies follow through, the Energy Star program will become even more successful and help make efficient appliances and buildings the rule, rather than the exception.

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