When the American Clean Energy and Security Act (ACES) passed the U.S. House of Representatives in June of 2009, it appeared to many that the United States was on the brink of establishing sweeping energy and climate legislation that would dramatically reduce greenhouse gas emissions using a cap-and-trade program. After ACES and a similar Senate bill got locked up for months, and President Obama came back from the Copenhagen Climate Conference in January with no major progress having been made, many concluded that Americans were not ready for energy legislation.
From today's vantage point, both of these views appear to be false. Congress could pass energy legislation this year, but it is unlikely to include a cap-and-trade system and may not address climate issues, focusing instead on energy efficiency and job creation. For owners and occupiers, Congressional measures are likely to be about enabling energy improvement rather than requiring it.
New State and Local Policies
If the legislative branch is taking its time deliberating, other areas of the federal government are establishing rules that will drive owners and occupiers to focus more strongly on energy and sustainability.
"New policies are emerging quite rapidly on energy efficiency at the state and local level," said Andrew Burr, program manager at the Institute for Market Transformation, a nonprofit that promotes energy efficiency, green building, and environmental protection. "Many of these are not waiting for the federal government to move forward."
"The framing of the argument has really become: How do we restore and maintain American competitiveness in ushering in a low-carbon economy?" said Anne Kelley, director of Corporate Governance Programs at the Ceres network, a leading voice on sustainability in the business community. "There is no doubt in anyone's mind where we need to go on this issue. There's a consensus around energy efficiency and renewable energy being an incredible job-generator and a way to maintain competitiveness."
Burr and Kelly served as guest speakers at a March webinar hosted by Jones Lang LaSalle detailing the impact of current and potential government energy measures on owners and occupiers of commercial real estate. Measures discussed include:
PACE Financing - More than 15 jurisdictions have passed legislation enabling Properly Assessed Clean Energy (PACE) financing, which enables a state or local government to float a bond and use the bond to fund retrofits. PACE removes the barriers of upfront cost and ties the retrofit loans to properties rather than owners, such that loans would change hands along with properties.
Building STAR - A bill was introduced to Congress in March that would increase the rebate and incentives package in the energy-efficient building tax deduction from $1.80 per square foot to $3 per square foot. Proponents of the measure say it would defray about 30 percent of the cost of a wide range of energy-related products and services as well as staff training. It is expected by many to gain broad Congressional support as it would reduce owners' energy bills by $3 billion and would create 200,000 to 300,000 construction and trade jobs across the country, while driving demand for energy-efficient products.
Energy Performance Rating and Disclosure - New York City; Washington, D.C.; Seattle; and Austin, Texas, as well as California and Washington State require commercial buildings to disclose ENERGY STAR ratings in at least some cases. New York's new rules also require energy audits of all large buildings, including corporate-owned facilities. Maryland has introduced legislation, and similar moves are under consideration in San Francisco; Portland, Oregon; and the state of Oregon. Most states and jurisdictions are using the Environmental Protection Agency's ENERGY STAR program to rate commercial buildings, although the Department of Energy has committed to develop new commercial rating and labeling tools for the marketplace.
Regional Cap-and-Trade - One cap-and-trade system is operational in the Northeast and Mid-Atlantic regions and another is in development on the West Coast. Competitive concerns in the face of the recession have caused both systems to lose some momentum.
LEED requirements - Criteria are now in place in 202 cities and counties and across 34 states, many of them encompassing private-sector as well as public-sector buildings, and the number of these laws continues to increase.
SEC Guidance - A Securities & Exchange Commission memorandum in January interprets existing rules regarding public company disclosures relating to climate risk. Companies may be required to disclose risk factors relating to climate change, and to intensify efforts to measure and disclose carbon footprint data.
Other Far-Reaching Measures
In addition to governmental measures discussed in the webinar, other federal regulations and orders may also have far-reaching effects on businesses, as follows:
• An executive order signed in October 2009 required federal agencies to report baseline 2008 greenhouse gas (GHG) emissions by January 4, 2010, and to submit a 2020 GHG pollution-reduction target from the baseline. Based on 35 reduction targets submitted by 35 agencies, President Obama set a goal for the federal government to reduce its GHG pollution 28 percent by 2020, saving $8 billion to $11 billion and reducing emissions equivalent to taking 17 million cars off the road.
• The General Service Administration (GSA) is implementing new standards for buildings occupied by government agencies. All new construction projects and substantial renovations undertaken by GSA - including build-to-suit for lease facilities of 10,000 square feet or more - must achieve LEED Silver certification, with a goal to achieve LEED Gold whenever possible. Also, when GSA client agencies request it, LEED for Commercial Interiors (LEED-CI) "green lease" guidelines may be used in location selection, lease negotiation, and build-out.
The accelerating pace of government measures has become an important factor driving U.S. building owners and occupiers toward enhanced energy efficiency and reduced GHG emissions. Despite the economic recession and the slow pace of Congressional action, the country is clearly moving in the direction of a lower-carbon economy that supports, rather than hinders, business growth and international competitiveness.