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During his presidential campaign, Barack Obama detailed an aggressive energy and climate agenda. As president-elect, Obama made it clear that he plans to follow through on his objectives, which include addressing global warming, lessening the country’s dependence on foreign oil, and investing in alternative and renewable energies. Now, as President Obama confronts the challenge of implementing his energy and climate agenda, it’s a near certainty that facility executives will find themselves in the midst of any changes Obama brings about.
Office buildings, schools, medical centers and other facilities are a major part of the plan. Obama wants their energy efficiency improved, carbon emissions reduced, and electricity to come from renewable sources, plus a host of other changes.
“Obama wants to do something about climate change and energy policy and in both cases, buildings are a big piece of that,” says Judi Greenwald, vice president of innovative solutions at the Pew Center on Global Climate Change. “Buildings contribute about 40 percent of greenhouse emissions in the U.S., so you really have to do something about that if you want to do something about climate change.”
The agenda, or at least pieces of it, is expected to be part of an economic stimulus package that could reach as much as $850 billion during a two-year period. Obama has repeatedly said that he wants the stimulus package to include money for environmentally sound technologies and to make federal buildings more energy efficient.
“Obviously Obama is focusing on the environment and creating new green collar jobs,” says Brenna Walraven, managing director of national property management for USAA Real Estate Co. and former chair of the Building Owners and Managers Association (BOMA) International. “The economy is important and the administration will make ‘greening’ and the environment part of a stimulus package.”
Several parts of Obama’s agenda will have a direct impact on the short-term and long-term operations of commercial and institutional properties. The piece that has garnered the most attention, and which is most directly tied to the climate, is the implementation of a cap and trade program to reduce carbon emissions to 1990 levels by 2020 and 80 percent below 1990 levels by 2050. (See “Obama’s Green Promises” for more on Obama’s agenda.)
The cap and trade program would set a yet-to-be-determined limit on carbon emissions, forcing companies to buy and sell allowances to emit greenhouse gases.
The federal government would reduce the number of allowances every year, which would require companies to spend more money either buying allowances or lowering their greenhouse gas emissions. Companies that emit greenhouse gases below a given year’s target could auction their extra allowances on the open market to other companies that have exceeded the target. Obama’s plan calls for taking some money generated by the auctions and using it to develop clean energy and invest in energy-efficiency improvements.
A cap and trade program is basically a price signal to energy consumers that says what the cost of energy is going to be once the environmental costs are factored in, says Roger Platt, senior vice president and counsel of the Real Estate Roundtable. Once that signal is given, it should encourage more investment in alternative and low carbon forms of energy, such as nuclear energy, he says. That will only happen, however, by making those other forms of energy more economically attractive investments, Platt says. Obama said as much in his Dec. 7 appearance on “Meet the Press.”
“So we’re already getting a signal that he will want to be very pragmatic about the timing of cap and trade,” Platt said. “We think there are benefits to price signals, but we also agree with his public comments that the timing for that will have to take into account the economy.”
Cap and trade or any other program that addresses climate change will lead to increased energy prices. Some experts estimate that cap and trade could add 10 to 20 percent to the current cost of energy, says Jeffrey Harris, vice president for programs for the Alliance to Save Energy, a non-profit coalition of business, government, environmental and consumer leaders. Energy costs in states that rely mostly on coal to generate electricity could go up even more, some experts say.
But the net cost of cap and trade can be practically negligible if a facility executive focuses on energy efficiency, says Steve Nadel, executive director of the American Council for an Energy-Efficient Economy, a non-profit organization that advocates energy efficiency. A building that cuts its energy consumption will offset some cap and trade costs, but if a building’s energy rates increase and its consumption remains flat, it’s going to pay more under cap and trade, he says.
Obama Focuses on Energy Efficiency
How Buildings Can Prepare For Cap And Trade