ClimateWire, 24 September 2009 - The world is on the verge of seeing building efficiency in the same way that it sees building safety codes -- as the default choice, not a pricey burden, according to the chairman of a major energy efficiency company.
"We don't think about market solutions to building life safety. At all. We just don't. We're going to have building life safety, and the cost is modest," said George David, current chairman and former CEO of United Technologies Corp. He said building efficiency is "in the same character of life safety, which is a standard we accept in our world."
David, whose specialty includes elevators, observed that most people don't worry about safety when they get into one. That's because there are widely accepted and enforced standards for making elevators safe, he said -- and no one complains about them.
But while these regulations have had a century to become standard, he said, building efficiency is just beginning to be seen as an obvious investment.
David's remarks at the Peterson Institute for International Economics came as a new economic analysis found vast energy savings in the world's building sector, with 80 percent of the cost of efficiency improvements recouped within 20 years.
The report, The Economics of Energy,, written by Trevor Houser of the Peterson Institute, found that the worldwide building sector is the cheapest source of emissions cuts, and that it can cut one-third of global emissions with investments that largely pay for themselves.
Houser used a model created by the World Business Council for Sustainable Development, a business group that has done comprehensive studies on buildings in the world's six biggest energy markets. He found that across rich and poor nations, the average cost of cutting a ton of carbon from buildings was $25.
A better payoff than most personal investments
That made buildings a relatively cheap way of cutting 8.2 billion tons of CO2 emissions -- the share recommended by the International Energy Agency -- below business as usual. Trying to squeeze the same cuts out of industry or transportation would cost $210 or $300 a ton.
Capturing the efficiency gains in buildings may prove tricky, Houser said.
To economists, it's a perfect conundrum: Most people live and work in buildings where certain upgrades could make more money than most personal investments -- such as a 401(k), Houser said.
Yet many efficiency investments remain untapped, or, as the economist would say, the $20 bill remains left on the sidewalk.
Houser listed the well-known barriers that have kept people from picking those bills up. Some building owners bear the cost, but don't receive the benefits; some people can't afford the up-front payments, even if they will save money in the long run; others need investments to pay back within a couple years, faster than efficiency can yield.
But at the report's release yesterday, Houser and David said they doubted the notion that putting a price on carbon is the only way to break these barriers down.
Big potential, even without a carbon price
A large number of efficiency investments, they said, are already economical even if there isn't a price on carbon, so a price won't necessarily make those investments happen.
Houser simulated what would happen worldwide if it cost $30 to emit a ton of CO2: Emissions would be cut by less than a billion tons -- well short of the 8.2 billion tons recommended by IEA.
Skip Laitner, who heads economic analysis at the American Council for an Energy-Efficient Economy, agreed. He said it's already possible, even without a carbon price, to make buildings 30 percent more efficient, with paybacks coming within five years. And he pointed to some commercial property owners already reaping these gains, even as Congress has yet to pass carbon legislation.
Handling 900 million buildings worldwide and the host of barriers to efficiency, David said, will take other policies on top of a carbon price.
"Because the market doesn't work already, and adding a carbon cost isn't going to make it any better. So what are you going to do when you've got 900 million people to deal with?" he said.
New programs with utilities and home lenders can get at part of the problem. But a bigger bang awaits in building codes, David and Houser said.
They argued that these codes would draw out the investments necessary to meet the IEA goal. In the United States, it would cost the buildings industry 10 percent more than it would have otherwise spent, but all of it would be recouped.
"By comparison," Houser wrote, "meeting building fire codes in the United States requires a 5 percent investment premium, none of which is recuperated through future cost savings."
This article is reproduced with kind permission of E&E Publishing, LLC.
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