Waxman-Markey Bill Highlights for Green Building

Last week, the U.S. House of Representatives passed the Waxman-Markey bill, which sets up a cap and trade market for carbon credits, and also includes a variety of energy efficiency measures which may be the most relevant for the real estate industry.

Thank you to bloggers Shari Shapiro and Chris Cheatham for sifting through the bill and lifting out the important Green Building and Energy Efficiency clauses. To give them their appropriate credit, click here for the full article. After reading the article, I found the following items particularly relevant for real estate:

Section 201 (National Energy Efficiency Building Codes): Sets energy efficiency targets for the national building code: “on the date of enactment of the American Clean Energy and Security Act of 2009, 30 percent reduction in energy use relative to a comparable building constructed in compliance with the baseline code…effective January 1, 2014, for residential buildings, and January 1, 2015, for commercial buildings, 50 percent reduction in energy use relative to the baseline code; and…January 1, 2017, for residential buildings, and January 1, 2018, for commercial buildings, and every 3 years thereafter, respectively, through January 1, 2029, and January 1, 2030, 5 percent additional reduction in energy use relative to the baseline code.” As Shari and Chris point out, this is a significant shift in what has historically been a state and local issue. Definitely stay tuned on this one!

Section 131 & 132: SEED Funds and PACE Bonds: One of the programs that can be funded by these allocation are Property Assessed Clean Energy (PACE) Bonds. PACE bonds involve loans to commercial and residential property owners to finance energy retrofits. Through the interest generated on these bonds, a revolving fund is established to allow for even more retrofits to occur. Already, California and Missouri have announced plans to use funding from the Department of Energy State Energy Program to establish PACE bond programs. Look for more states to jump on the PACE bond bandwagon and use cap-and-trade revenue to fund similar programs.

Section 202: REEP Program: With the American Recovery and Reinvestment Act, the Department of Energy’s State Energy Program received billons of dollars. Under the Waxman-Markey bill, the State Energy Program will again receive billions of dollars for more energy efficiency retrofits. From the Pew Center on Climate Change (PDF):"This section requires the Secretary of Energy to develop a Retrofit for Energy and Environmental Performance (REEP) program to facilitate building retrofit programs for energy efficiency and efficient water use. Funding will be made available through REEP to the State Energy Programs for state and local efforts, including audits, incentives, technical assistance, and training. States are permitted to choose funding mechanisms, with options including credit support, such as interest rate subsidies or credit enhancement, providing initial capital, and allocating funds for utility programs."

The Green Act: On May 7, 2009, Rep. Ed Perlmutter (D-Colorado) introduced H.R. 2336, the Green Resources for Energy Efficient Neighborhoods Act of 2009 (“GREEN ACT”). According to Perlmutter’s office, “The GREEN Act provides incentives to lenders and financial institutions to provide lower interest loans and other benefits to consumers, who build, buy or remodel their homes and businesses to improve their energy efficiency and use of alternative energy.”

The full impact of this bill, or any final version of climate legislation that is signed into law is undoubtedly going to have a profound impact on the real estate industry. These items are a sliver of the legislation that will / would be relevant. I encourage everyone to do their own digging because turning hundreds and hundreds of pages of legalese into concise, actionable, and searchable databases for us to act with good information is going to be the biggest challenge in making sure that our energy efficiency investments pay back in the shortest time possible. The greater the payback that early actors can demonstrate, the more appealing it will be for the masses, which is something we all should strive for!