Global leaders are lashing out at the day’s oppressive heat. After a flurry of advisories to cool the region, New York City activated an air-conditioning emergency declaration for its newest developments. The changes prompted critiques like this from U.S. Sen. Chris Murphy: “It’s obscene that the U.S. Environmental Protection Agency would let New York City run an air-conditioning emergency declaration to conserve energy and deal with the summer’s extreme heat.”
Should every American city declare an air-conditioning emergency? Air-conditioning is cheap. It saves money for homeowners, shops, factories, and the federal government. But there is a catch: Being in an air-conditioned space cuts your activity. If you’re lounging on the couch, you’re not using other parts of your home, including the lavatory, and therefore aren’t saving as much energy. Nobody’s doing that. The more efficient buildings become, the more they save for household-style efficiency improvements. But not everyone can afford to put in air conditioning.
The Energy Independence and Security Act of 2007 required that annual energy savings must equal at least 20 percent of the construction costs in new residential and commercial buildings. But figuring out the residential savings can be tough. The majority of buildings are either privately owned or leased. Utilities, along with private buyers, don’t have hard numbers about the efficiency improvements needed to save money for both. Analyses by the Union of Concerned Scientists and the Natural Resources Defense Council estimate that total savings from building efficiency could hit $1.4 trillion in 2030.
With increased efficiency, less energy will be needed to heat and cool the buildings, and more energy will be used for other buildings. That means a certain type of subsidy will vanish: tax breaks for people who build and upgrade efficiency with energy efficiency measures.
Tax credits for building-energy efficiency have varied over the past 15 years, from $300 per building to $2,000 per building. Unsurprisingly, those numbers have trended upward, per a 2010 analysis from the National Resources Defense Council. This map from the same study shows the states with the highest energy-efficiency tax credits.
The legislature in Texas trimmed its tax credit for energy efficiency from $1,000 per building to $500 last summer. The issue: That rate was more expensive than tax credits on property taxes and sales taxes. Georgia eliminated its $1,500 credit in 2014, saving its local economies.
Building efficiency subsidies come in other forms as well. The Green Building Council is a nonprofit that certifies the sustainability of buildings with certain features. You can think of them like grading classes: Those buildings that are certified as sustainable receive a “silver,” “gold,” “platinum,” or “vault” rating, denoting the highest level of energy-efficientness. You can check the grades for businesses in New York and Washington.
Those sorts of ratings allow a homeowner to anticipate whether there are any properties in a city they should be considering for a renovation. A smaller scale version of that rating system exists in other countries: Denmark offers a 30-year gold rating for residential buildings (very inefficient, but easy to renovate), and Puerto Rico’s Environmental Quality Commission offers the highest level, a 60-year platinum ranking for both new and retrofitted homes. So, what is the government doing to ensure that investment in energy efficiency is rewarded?
At the moment, the government isn’t trying very hard.
With the U.S. getting closer to the 20 percent energy savings goal set for 2030, it should have a place to incentivize building-efficiency gains. But the Energy Department isn’t pushing hard enough.
Some legislators have pushed for more tax incentives for saving energy. Rep. Peter Welch, a Vermont Democrat, introduced a bill last year that would offer a $500 tax credit for participating in energy-efficiency programs. Both the House and Senate sent it back to the committee. The idea goes back to the infancy of energy efficiency, in the 1970s, when there was no energy bill. His bill, introduced in January, was aimed at incentives that lowered the energy cost of that average American household, rather than the average American building.