photo credits
Photo Credit: © Daniel J. Sheridan, 2011. All rights reserved. This is a photograph of the recently constructed Frick Chemistry Building at Princeton University. Sustainable building features include a photovoltaic panel array that generates power while providing shade to the glazed atrium roof, a gray water system to collect and recycle storm water for non-potable uses, and landscaped rain gardens and bio-filtration areas. For more information concerning Princeton's commitment to creation of a sustainable campus environment, visit www.princeton.edu/sustainability/
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A Conversation at the Crossroads of Law and Sustainability

Category: Energy Efficiency

Green Jobs Forum Makes Greenbuild Debut

Greenbuild 2011, the tenth annual U.S. Green Building Council’s premiere educational event and product expo, got underway yesterday in Toronto.  I must say it’s impressive.  Attendance is nearly eight times that of the inaugural event in 2002, and the number of exhibitors has increased fourfold.  If anyone still thinks green building is a passing fad, they should get on a plane and come to Toronto. Corporate event sponsors from industry powerhouses such as Kohler, Hermann Miller and Steelcase and participating industry partners such as BOMA and the World Building Council for Sustainable Development reinforce the sense that this movement has truly come of age and is here to stay.

I’m not really the intrepid reporter type, but since I am here I thought I would share some of the highlights from the conference. I haven’t (yet) figured out how to be in several places at once, so I can share only about those sessions I attended.  For those of you interested in keeping up with other Greenbuild news, check out the posts under Twitter hashtag #GBNEXT .

This year marked the addition of a new Greenbuild program: The Green Jobs Forum.  Kimberly Lewis, VP of Conferences and Events for USGBC, received  well-deserved kudos from Rick Fedrizzi (Founder and Co-Chair of the USGBC) and others for launching this program and for keeping the issue of green jobs front and center.  Fedrizzi kicked off the opening session of the forum with a dual message.  First, he firmly rejected the current political paradigm that pits economic growth against environmental stewardship. Second, he implored forum attendees to have a “bias toward action”, and cited as an example former President Clinton who, according to Fedrizzi, was relentless in his drive for results over commitments at last month’s annual meeting of the Clinton Global Initiative.  Fedrizzi’s sentiments were echoed and expanded upon by Bracken Hendricks, Senior Fellow at the Center for American Progress, a Washington think tank which co-sponsored of the forum.  The opening session also featured presentations by Michael Thompson, Councillor of the City of Toronto, Ken Neumann, National Director of the United Steelworkers Canada, Robert Peck, Commissioner of the Public Buildings Service of the U.S. General Services Administration, and Dan Esty, Connecticut’s Commissioner of Energy and Environmental Protection and author of the book Green to Gold. Peck made an interesting observation about the “green jobs” label itself, and predicted that within five or six years the label will become less and less relevant as familiarity with sustainability and green building concepts become necessary core competencies across the entire real estate and construction  industries.  Esty highlighted Connecticut’s approach to financial support for development of sustainability technologies and green building, an approach that does not pick winners or losers, but creates opportunity for as many ideas as possible.  According to Esty, markets, not governments, are much better equipped for the task of determining winners.  To implement this approach, Connecticut recently launched the nation’s first Green Bank, which has been hailed as a true innovation in the sphere of public-private financial cooperation to support the development of green technologies and industries. Esty also laid down his own challenge to industry: focus on the problem to be solved, and don’t presuppose that existing solutions are the only answer. People want cold beer and hot showers – not fridges and hot water heaters. Now there’s a man with his priorities in order!

Following the opening session, there were several breakouts.  The first one that I attended was entitled “Moving Investment Capital – Commercial Real Estate Finance and the Green Economy”.  This terrific panel which was moderated by Ashok Gupta of the Natural Resources Defense Council, included Duane Desiderio, VP and Counsel of the Real Estate Roundtable, Bob Hinkle of Metrus Energy, Claire Broido Johnson, GM of Serious Energy Capital, and Maria Vargas, Deputy Director of the U.S. Department of Energy’s Office of Systems, Analyses and Planning.  Desiderio led off the panel with a discussion of current Roundtable initiatives to improve government support for green building by, among other things, expanding the availability of the current 179(d) tax deduction to include existing buildings, and by urging changes to the current DOE loan guarantee program (yes, the same one involved in the Solyndra debacle) to emphasize retrofits, not just new technologies.  Next, Johnson and Hinkle each described new models for financing energy efficiency improvements offered by their companies.  While the models have some similarities, they are both innovative entrants to the market previously monopolized by Energy Service Companies (ESCOs).  Both emphasized flexible, deal by deal underwriting which is “supplier agnostic”, distinct advantages to the ESCO model.  The goal of these product offerings is to solve the internal hurdles faced by key decision makers inside of any enterprise (most notably, capital commitments), and drive broader market penetration for these types of deals.  Finally, Director Vargas described DOE’s Better Buildings Challenge, and articulated the Department’s ambitious goal of improving energy efficiency in commercial buildings by 20% by the year 2020, generating over $40 billion in annual energy cost savings. During the Q+A, yours truly posed a question about driving energy efficiency retrofits into the mid and lower ends of the commercial real estate market.  All of the panelists expressed some dismay at the pace of progress in these market sectors, and mentioned some of the structural barriers with which we are all familiar, including non-aligned lease arrangements, an appraisal community ill-equipped to handle green building
valuation, and general market ignorance, malaise or both. However, there was clear recognition that these all are solvable problems, and that persistent outreach and education from the green building community will be key to eventual success in these market sectors.

The final breakout session I attended, entitled Understanding the Performance of the Green Building Economy, featured an equally impressive panel moderated by Chris Pyke of the USGBC, including Jonathan Flaherty of Tishman Speyer, Timothy Howell, Vice President of Sustainability for Ecological, Mike Zatz, Manager of USEPA’s Energy Star Portfolio Manager, and Bill Sisson, Director of Sustainability at United Technologies Research Center.  The focus of the panel was benchmarking of energy performance and transparency and disclosure of performance data, an issue I addressed in an earlier blog post in the context of the ASTM’s recently promulgated standard on building energy performance assessments. The discussion was lively and informative, and addressed many of the challenges posed by New York City’s ordinance that mandates disclosure of energy performance data for commercial buildings containing at least 50,000 gross square feet. Leasing was again discussed as a primary topic of concern, especially in the context of multi-tenant facilities.  But all panelists agreed that the pent up demand for energy efficiency modeling, benchmarking and improvement is both real and large, and will be the source of a great many new jobs.  As one of the panelists noted, if you have a child going off to college and thinking about engineering, this is a great career opportunity.

Although I learned much, my biggest takeaway from the green jobs forum is that the participants in the green building movement are not concerned solely with creating the next architectural wonder or “net zero” carbon emission buildings.  No, there are many smart and devoted people who care deeply about the employment and other challenges that we now face as a nation, and who are working diligently to unleash the full economic power of green building to help us face those challenges.  Soldier on, good people!

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FINANCING FOR GREEN BUILDING AND ENERGY EFFICIENCY MAKES INCREMENTAL GAINS

Access to financing continues to challenge the green building movement. The Environmental Defense Fund provides an excellent discussion of these challenges in its recently released whitepaper entitled Show Me the Money – Energy Efficiency Financing Barriers and Opportunities.  Overcoming these challenges over the long term will require sustained commitment by the lending and appraisal communities, among others.  There are, however, three recent developments specifically addressed to the issue of green building and energy efficiency financing which signify some positive movement.

The first of these is the launch on May 31 of an energy efficiency improvement initiative coined “Green Refinance Plus”.  The program, jointly administered by FHA and Fannie Mae, aims to make available additional financing proceeds to owners of older multi-family affordable housing properties to support the installation of green systems and appliances.  The goal of the program is to reduce both energy use and greenhouse gas emissions and generate contemporaneous savings on utility bills. Read the rest of this entry »

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Green Building and Carbon Offsets – A Missed Opportunity?

Like many other New Jersey business people and professionals who have spent the better part of their careers working in a state known for its progressive environmental policies, I was surprised by the recent announcement that New Jersey would withdraw from the Regional Greenhouse Gas Initiative, or RGGI, at the end of 2011.  And as I have reviewed the policy debate surrounding this decision, I am again puzzled by our (collective) resistance to policies and programs that attempt to impose real economic consequences associated with our energy choices.  RGGI is a cooperative 10-state “cap and trade” arrangement through which regulated power sources  in these states (i.e. those with a generating capacity of 25 megawatts (MW) or greater) are required to hold RGGI-auctioned carbon allowances equal to their anticipated CO2 emissions over a three-year period.  The agreed “cap” is a 10% reduction from 2005 levels of CO2 emissions by the end of 2018.  The allowances can be “traded” by the regulated sources, and can be used across state lines (i.e. allowances are valid in any participating state, not just the state from which it was initially auctioned), thus creating a “single regional compliance market” for CO2 emission targets.

In his statement announcing the withdrawal, Governor Chris Christie conceded that “it’s time to defer to the experts” on the issue of human contribution to global
warming (a welcome departure from his previous statement which seemed to question the validity of the scientific community’s consensus on this point).  He nonetheless concluded that RGGI was “ineffective” in reducing greenhouse gas emissions and is “unlikely to be [effective] in the future.”  The metric he cited in support of this conclusion is the relatively low price of carbon allowances auctioned through RGGI ($2.00 per ton, in contrast to the projected price of $20-$30 per ton when New Jersey initiated its participation in the program). Because of this, “RGGI does nothing more than tax electricity, tax our citizens, tax our businesses, with no discernable or measurable impact upon our environment.”  While there is lingering debate about the causes of the low price (most often attributed to the slow economy and the increased reliance on natural gas) and the relative benefits of participation in RGGI, it is worth noting that even with the crash in carbon allowance prices (at the most recent auction only 30% of available allowances were actually purchased, all at the reserve price of $1.89 per ton), as of this past February, the RGGI participating states have raised over $885 million to fund other strategic energy programs.

One of the additional benefits initially touted for participation in RGGI was the availability of “offsets” through which regulated power plants could meet up to 3.3% of their total compliance obligations “outside of the energy sector”.  There are six categories of potentially qualifying offset projects, one of which is
“energy efficiency” i.e. the “reduction or avoidance of CO2 emissions from natural gas, oil or propane end-use combustion due to end-use energy efficiency in the building sector” .  When Maryland joined RGGI, Stuart Kaplow was enthusiastic about the potential benefits of this offset category to the green building sector, but correctly cautioned that “the efficacy of green building as an offset will depend heavily on yet to be issued state regulations.”  In fact, it does not appear that a single RGGI participating state has developed implementing regulations to support this (or any other) category of CO2 offset.  I can only assume that the primary reason for this is that the overabundance of allowances at (relatively) low cost creates no real economic incentive to pursue offsets as an alternate compliance path.  In other carbon trading markets in which green building offsets are recognized and utilized, there is the additional challenge of verification.  As Shari Shapiro aptly noted more than a year ago, “[n]othing will erode the credibility of a cap-and-trade system faster than discovering that the carbon offsets at the base of the market are fraudulent.”

Of the many perceptions about green building, “increased cost” is perhaps the most pervasive. While those of us conversant in the jargon can quickly launch into a discussion of “life-cycle cost assessment” and “triple bottom line” benefits, the reality is that, for much of the real estate market, “green building” are bad words.  Accessible funding mechanisms to defray increased up-front costs (real or imagined) are necessary to continue to drive the green building movement into new market sectors.  Government funding constraints will continue to inhibit even the most laudable of sustainability goals.  Carbon offsets, however, offer a potential market-based funding mechanism that, if properly implemented, could generate millions to fund green construction. Verification will continue to be challenging, but throughout the sustainability industry new processes, standards and tools are developed on an almost daily basis that can provide a sound framework for audit and verification.

The very existence of a carbon offset market relies upon mandatory carbon emission caps.  While RGGI may not be right for New Jersey, there must be some recognition by our policymakers that it will take money to move us to a renewable energy future.  The current political and fiscal climate seems to facilitate a great deal of foot-dragging, even in the face of ever more convincing scientific evidence that the longer we persist in our energy profligacy, the more challenged the world’s resources will become for future generations.  It’s time to be creative in our approach, and to take advantage of the tools at our disposal.  Are carbon offsets a missed opportunity for green building?  You be the judge.

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