Climate talks mean game on for green building
Last December, 195 countries agreed to reduce carbon emissions to 10 percent of 2005 levels to avert the worst effects of climate change, and the impact on the places we live and work promises to be huge.
The Paris Agreement draws a sharp line in the sand for anyone building, developing or investing in the built environment - create carbon-neutral homes and buildings, or be left behind.
WHAT HAPPENED IN PARIS?
In December 2015, signatories to the Paris Agreement agreed to reduce greenhouse gas (GHG) emissions to limit climate change to no more than 2 degrees (C.) with 1.5 degrees as the desired target.
|Photo via NPR.org|
The United States agreed to reduce GHGs from 26 – 28 percent below 2005 levels by 2025 via the Environmental Protection Agency’s Clean Power Plan (CPP) and the “Tailpipe Rule” – emissions standards for vehicles. Two-thirds of American GHGs come from those two sources – buildings and vehicles. target. Each country will determine its own GHG reduction and ratchet that commitment every five years. Countries must also report their progress in verifiable and transparent ways. The Paris Agreement enters “into force” when 55 countries that emit 55 percent of global GHGs agree to it (the biggies like China, India, Europe and us), and that’s expected within five years.
In order to bypass a stymied Congress, the CPP was named as the regulatory North Star for what comes out of our nation’s power plant smokestacks, and that directly ties to building energy efficiency (how much energy is used) and the “source” energy (gas, electric, renewable, nuclear) that powers those buildings. The CPP is also the American guideline in the Paris Agreement.
UTILITIES BRINGIN’ THE POWER
Utilities will do most of the heavy lifting when it comes reducing GHGs, and this will be tough. In order to drive GHGs down, utilities will have to mothball dirty (coal) power plants, and invest heavily in energy efficiency and renewable energy.
In 2015 alone, $5 trillion in fossil-fuel subsidies was handed out by governments around the globe. As those subsidies vanish, an action forcefully pushed in Paris, the price of oil and natural gas, currently at a 20-year low, must surely rise.
In a panel discussion about the Paris Agreement and utility impact, Tom Kuhn of the Edison Electric Institute said that his investor-owned utility members spent $1 billion last year on energy efficiency and $9 billion on renewable energy. While these numbers are impressive, Edison reports $100 billion in total capital expenditures so that 10 percent spent on renewables and efficiency demonstrates a small percentage on green energy so far.
THE BIG, DA-- DEAL
|Photo via Inverse.com.|
Don’t think for a minute that utilities will allow their shareholder value to dive in spite of holding carbon-intensive assets with diminishing value. The added costs for renewables, efficiency and clean power will be passed to consumers.
That said, there’s already a gear shift with government financial incentives. Congress, gridlocked on almost everything, just renewed the Energy Efficient Property tax credit, a year before its expiration. Congress also reinstated the $2,000 efficient home tax credit, which rewards builders who build significantly more efficient homes.
Building energy codes (governing energy use) are ramping up fast, and places as disparate as Boulder, Colo., and Texas are adopting them. And California has created its own above-code energy code called Title 24. For residences, Title 24 mandates net-zero energy use by 2020, and for commercial properties, by 2030. While I anecdotally hear my Cali colleagues saying “no way” for net zero by 2020, across-the-board net zero in California isn’t far off.
And utilities across the country are scaling back solar rebates to almost nil. That said, solar power is at parity in many markets (Hawaii, California, Colorado) and expected to grow as much as 50 percent this year alone. Solar is the new sexy, and it’s impossible to get conventional bricks and sticks to net-zero without it. All our clients are rolling it into their homes as a non-excisable option – and getting it to appraise for more to capture that cost.
I’ve also got clients essentially giving our utility the middle finger. One builder – niche, to be sure – won’t allow the utility to run gas lines into his homes. Another has created a solar financing company to load up as many rooftops with solar electric panels as possible. And several others have created creative ownership structures that allow them to reap the benefits of heavy investment in green.
|REAL ESTATE IMPACT – A number of our Millennial homebuyers routinely ask about carbon footprint (as well they should). Energy modelers (HERS raters) can provide that data. Ask for it from your rater, and use it in your marketing. It differentiates your property from code-minimum homes.|
What happened in Paris has delineated a simple case of carrot and stick. With heightened awareness about climate change, builders loading up properties with code-minimum systems that hog fossil fuels will fail. And builders who lead the way with clean, efficient homes and buildings will prosper.