Today’s guest bloggers are Cliff Majersik and Caroline Keicher from the Institute for Market Transformation.
Sweeping changes to Congress in the mid-term elections may have slammed the door shut on major climate legislation, yet there is still reason to celebrate.
Last week, members of the International Code Council (ICC) approved changes to building energy codes – the CAFE standards of the buildings world – that will require new and renovated homes and commercial buildings to use 30 percent less energy than those built to current standards.
The votes are truly historic. Never in the history of the ICC have such enormous gains in energy efficiency been made in such a short time.
The changes, which will occur in the 2012 version of the International Energy Conservation Code (IECC), leverage sensible and cost-effective strategies to reduce energy, such as increasing insulation levels and lighting efficiency, improving the air-tightness of buildings and ductwork, and requiring check-ups known as commissioning in new commercial buildings, where mechanical systems are prone to underperform. The energy efficiency proposals that were approved were endorsed by a diverse coalition of government officials, business associations and product manufacturers, including the U.S. Energy Department, the U.S. Conference of Mayors, the American Institute of Architects, the Consumer Federation of America, Cardinal Glass and the National Housing Institute.
Homes and buildings account for more about 40 percent of U.S. energy consumption and two-thirds of U.S. electricity usage. American consumers spend more than $200 billion each year paying for energy – that’s more than the total GDP of the nation of Chile.
The changes to the IECC are poised to make an impact across the country. An average home that’s 30 percent more energy-efficient than the current standard returns more than $500 annually in energy cost savings to homeowners even after factoring in the capitalized cost of the improvements, according to a study by the U.S. Department of Energy. That’s money in the pockets of homeowners. About 10 billion square feet of commercial and residential space is built or renovated every year in the United States and will soon be subject to the new codes. The IECC is the basis for the energy code in 47 states and the District of Columbia. The next time you walk into any relatively new home, apartment building, office, grocery store, Wal-Mart or most any other type of building, be aware that some part of the IECC was likely referenced when it was built.
The Institute for Market Transformation, working with the broad-based Energy-Efficient Codes Coalition and the Metropolitan Washington Council of Governments, helped educate local government officials on the 2012 IECC code proposals. More than 60 governmental voting member representatives from the DC metro area – a tremendous showing – traveled last week to Charlotte, NC, to make their voices heard at the code hearings.
But that’s not all IMT is doing to advance building energy codes. The fight isn’t over after changes to energy codes are approved – the codes still need to be adopted, implemented and enforced by states and jurisdictions.
IMT partners with jurisdictions to help them adopt the latest versions of the IECC, and to educate and train local code officials to make sure energy efficiency provisions are enforced. The task is enormous. Throughout most of the United States, building code development, implementation, training and enforcement have long been severely underfunded, with funding for energy codes the most neglected. As a result, many new and renovated homes and buildings do not comply with codes and require far more energy and money to operate than they should.
What’s more, nearly every state pledged to ratchet up local energy code compliance to 90 percent in the coming years as a precondition to accepting stimulus funding for energy projects.
Working with a coalition that included the Building Codes Assistance Project, the Natural Resources Defense Council, the American Council for an Energy-Efficient Economy and the Alliance to Save Energy, IMT recently identified the funding need for states to comply with code compliance targets. We also measured the benefits of better energy code compliance, and our findings were overwhelmingly positive: Every dollar spent on energy code compliance yields $6 in energy savings for consumers, and compliance activities will create more than 20,000 jobs every year.
IMT is also involved in making sure energy efficiency improvements to homes and buildings can be financed. Our recent work has focused on mortgage underwriting and home appraisal, where energy efficiency incentives aren’t aligned with standard industry practices.
There are many costs of homeownership that are accounted for in mortgage underwriting. These include real estate taxes, home insurance, credit card debt, car loan payments, even lost income from maternity leave. Incredibly, energy costs are not on this list, even though the average homeowner spends more than $2,000 annually in utility costs, which is more than the average annual cost of taxes or insurance.
Because energy costs aren’t factored into mortgages, there’s no way for energy savings to be accounted for. In other words, people living in energy-efficient homes that save hundreds of dollars each year in utility costs are not considered safer borrowers than people living in homes where utility costs can be more than twice as high. Mortgage lenders aren’t offering financial products that encourage borrowers to buy efficient homes that save money and energy.
In addition, home appraisers aren’t including the value of efficiency in their appraisals. Standard appraisal forms do not encourage efficiency valuation and appraisers often don’t have access to information that would allow them to compare the benefits of efficiency between homes.
Those are unacceptable disincentives for people to buy efficient homes or make energy upgrades, and for builders to build efficient homes. That’s why IMT has helped put together a proposal known as the SAVE Act.
The SAVE (Sensible Accounting to Value Energy) Act would correct this energy “blind spot” in mortgage underwriting and home appraisal. It would require federal loan programs that are involved through guarantees and other means in more than 90 percent of all new mortgages to assess the expected energy cost savings of homes, and would reform the home appraisal process to begin factoring in energy efficiency value. Consumers will be able to finance the purchase of energy-efficient homes and builders will be incentivized to construct homes far beyond the energy efficiency levels called for in model codes, including the 2012 IECC.
The SAVE Act is endorsed by leading homebuilders and energy efficiency and green building advocates. It is likely to be introduced soon in the U.S. Senate.
The 2012 IECC is a critical first step to make our homes and commercial buildings more efficient, but we must continue making progress in other areas – including code compliance, workforce training, energy transparency and efficiency financing – to achieve market transformation. All of these elements must work together. The whole is greater than the sum of the parts.
The road to a better energy future is before us. The result of last week’s code hearings in Charlotte was impressive, and hopefully a steppingstone to many more successes, even without a climate bill.
– Cliff Majersik is executive director of the Institute for Market Transformation. Caroline Keicher is a program associate with the Institute for Market Transformation.