John Petro
A New Measure of Regional Competitiveness – Energy Efficiency
Here’s a thought: as energy prices inevitably continue to rise once the current recession ends, will a region’s energy efficiency have an effect on its competitiveness? It seems to me that it must.
On Wednesday, New York City Mayor Bloomberg and Speaker Quinn announced a new initiative to increase the energy efficiency of large buildings. These initiatives, if passed, would be a tremendous victory for New York City. Research shows that NYC is already among the greenest cities in the U.S., with its large public transportation infrastructure, smaller home sizes, and efficient land use patterns.
But of course New Yorkers can do more to reduce their greenhouse gas emissions. Because so few New Yorkers drive, the vast bulk of the city’s greenhouse gas emissions come from buildings – about 80 percent of our emissions, in fact. In addition, New York’s building stock is pretty old. The median age of a building in the city is 75 years and 43 percent of the city’s buildings were completed before 1939. These are buildings that could benefit from the latest energy efficient boilers, windows, and lighting fixtures. This is why making the city’s buildings more energy efficient is so important.
The benefits of the new initiative are plain enough and should be celebrated: greenhouse gas reductions, reducing strain on the electrical grid, consumers saving money, and creating green jobs. (It was disappointing to see this headline from Metro: “A Greener Building May Spell Rent Hike.” Read the story and you’ll find out that rents aren’t likely to go up because of the initiative.)
But Mayor Bloomberg went on to say, “This will significantly improve our economic competitiveness…” Partnership for New York City President Kathryn Wylde added, “By ensuring that all buildings are more energy-efficient, the Mayor’s plan will make New York a more efficient and economical place to do business.”
A metropolitan region’s competitiveness is measured in many ways – workforce skills, school quality, crime rates, taxes, transportation infrastructure, proximity to markets, etc. However, it’s quite possible that as energy costs continue to rise, and as the federal government puts a price on carbon, a region’s energy efficiency will also be an indicator of its relative competitiveness. In this sense, New York will have an advantage in a post-carbon economy, especially if the city is successful in making buildings more energy efficient.
The city’s initiatives, by making energy efficiency audits mandatory in buildings over 50,000 sq. ft., could go a long way towards improving the efficiency of large buildings. However, in order to advance these gains in smaller buildings, especially in the outer boroughs, the city should look at Berkeley, California’s model of municipal financing for energy efficiency improvements. The model works like this: the city raises bonds that will be used to finance solar power or energy efficiency projects. Property owners apply for the program and the city covers the up-front costs. These property owners then pay back the city over a 20 year period through their property tax bills. This model poses little to no liability or exposure to the city's general fund and the city is able to implement the program with almost zero budget impact.
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Posted at 4:45 PM, Apr 24, 2009 in
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I guess we will have to disagree as to whether Mr. Bloomberg's green building program would be a "tremendous victory" for NYC. As I read the proposals, even if fully implemented, they will little to achieve significant greenhouse gas reductions for NYC and will not meet the goals of PlaNYC 2030.
There are a number of problems with the Bloomberg plan: wholesale exemption of smaller buildings, energy audits which are susceptible to gaming, requiring projects which have a very quick (five year) pay back period. If this is what you call a great victory, have a bridge to Brooklyn you could buy; you could even put a toll on it.
In my view, Mayor Bloomberg's program is so light green you could even call it yellow.
Posted by: Daniel Millstone | April 25, 2009 07:59 AM
Let's call this initiative what it is: the most ambitious effort of any state or local government in the U.S. to retrofit older buildings to be more energy efficient. It's not just the audits, its also the requirement to meet the newly established energy code whenever renovations take place.
These initiatives alone are not meant to reach the PLANYC goals of 30 percent reductions, but will go a long way towards meeting that goal - a 5 percent reduction in citywide emissions. Five percent in a city as large as New York is a victory not just for the city, but the country.
You mention that audits are "susceptible to gaming." If that is the case, I don't suppose you see the need for any type of regulation, since the effectiveness of all regulations are dependent on their enforcement. By this logic, requiring emissions testing for automobiles would be a weak policy, since auto mechanics could fudge the results.
As for smaller buildings, I have put forward a model policy that could address this issue.
In the end, the fact that you refer to the program as solely Mayor Bloomberg's, when Speaker Quinn also had a role to play, might indicate your true distaste for the green building initiatives.
Posted by: John Petro | April 25, 2009 02:59 PM
It's not as though these are bad bills but they represent a weak effort where strong action needed. Further, there seem to be substantial holes in the regulatory structure. I advocate substantially greater regulation with a significantly better funded NYC DOB which, as I see it will have great difficulty with this new task.
I don't mean to deprive Council Speaker Quinn of credit but of blame. While both she and Mayor Bloomberg announced this package of bills for the NYC Council, the content is in line with that predicted by the Mayor's energy minions. Perhaps you've been closer than I to all this. What were Ms. Quinn's contributions here?
I will need to review the four bills again carefully but I am told that they reach perhaps 2% of the NYC building stock. I am told that if they work perfectly the bills will generate somewhat less than a five per cent green house gas reduction -- but have not done the math myself. Retrofitting NYC buildings could make a significant reduction in greenhouse gas emissions. This program, as I see it, doesn't do it.
Because base lines the energy audits are essentially uncharted territory which will be explored by the landlords' contractors, they will have financial incentives to distort the audit findings. In the best of all possible plans this would call for a clearer energy code and government agencies better able to enforce it. I may have missed the places where these issues are addressed/
By the way, how will energy code compliance fit with MCI? Will building owners be able to (as they do now on other "improvements") inflate their energy investments and recoup them twice? The maximum base rents of stabilized apartments are increased by such Major Capital Investments? Will owners get both the benefit of using less energy and increased rents?
In closing, it is not that these bills seem evil or wrong-headed per se. As I read them, they are just not nearly enough.
Posted by: Daniel Millstone | April 25, 2009 05:19 PM
Consensus is that emissions need to go down by 80% by 2050. If the 5% reduction is matched by many other similar projects worth 5% each then it's worthwhile, but by itself, it doesn't do much. The city can probably achieve bigger region-wide reductions by tolling bridges and funding the MTA properly, which is where Bloomberg and Quinn should focus their political capital.
Posted by: Alon Levy | April 25, 2009 07:22 PM
On another, more contrarian note: since New York is far more energy-efficient than its suburbs, it's possible the best way of increasing regional energy efficiency is to encourage more construction in the city proper and less in the suburbs, and encourage business to stay rather than relocate to edge cities. The traditional ways of achieving these are relaxing zoning restrictions, cutting taxes, and reducing economic regulations. There are probably more effective and humane ways of doing that than what the Ed Glaesers of the world would prescribe, but it's necessary. For instance, the city could,
- Repeal historic preservation laws, which mainly protect the native upper middle class,
- Institute a commuter tax if possible, in lieu of income and sales taxes on residents,
- Upzone neighborhoods across the board, e.g. by committing community boards to find ways of increasing housing density by 1-2% a year,
- Specifically upzone neighborhoods with underused transit infrastructure,
- Offer inducements to developers to finish half-built projects, for example by taxing buildings under construction that remain unfinished at the same rate as finished buildings, and
- Possibly, gradually replace rent control with subsidies to low-income renters.
Posted by: Alon Levy | April 26, 2009 09:17 PM
Daniel, you raise a number of points but let me just address two of them. First, the new initiatives would cover only a small number of NYC buildings, but I think the reasoning is that larger building owners would be more able to finance these improvements than small building owners. That's why I think we should be looking at introducing municipal financing for smaller buildings like in the Berkeley model. However, improving efficiency in the City's largest buildings will still make significant improvements. Remember, the city is introducing requirements, not optional improvements.
Second, you raise the question of what effect the improvements will have to rent stabilized apartments. The Post raised this issue, but the Speaker has already said that they would not allow a bill to pass that would increase the rent of stabilized apartments. I believe that this will be the case.
Posted by: John Petro | April 27, 2009 12:25 PM
I think that a change in state law might will be necessary to protect rent stabilized or tenants from MCI increases. Is there a more expert opinion in the house?
NYC could, without great hardship and with only small effort, facilitate affordable financing for greening smaller buildings.
Posted by: Daniel Millstone | April 27, 2009 08:13 PM
Hello. Thank you for this great info! Keep up the good job!
Posted by: heating systems | September 8, 2009 09:13 AM