Kick-starting Energy Efficiency and Green Building in the Commercial Sector

by Pete Atkin
January 30, 2009

As the draft stimulus package (the American Recovery and Reinvestment Plan) winds its way through Congress, experts are noting that as expected there is a strong emphasis on energy efficiency and green jobs in the package, with a number of items directed at the building sector. Laudable as the proposals are, incentives targeting energy efficiency improvements in the commercial building sector seem to come up short.

The majority of the proposed stimulus dollars aimed at the building sector are focused on public building retrofits ($6 billion for federal building energy efficiency projects) and weatherization and efficiency in various parts of the housing sector (~$9.5 billion). These incentives have the potential to result in considerable environmental benefits while stimulating significant activity in the building retrofit sectors -- energy service companies, engineering consultants and energy efficient product manufacturers should be gearing up for significant work, particularly on the 75 percent of public buildings that President Obama has stated he wants to make more energy efficient.

The proposed stimulus appears to fall short in the commercial building sector (which includes roughly $4 trillion worth of buildings), however, where the historical tenant-landlord split incentive problems mean that a large effort is needed to change business as usual. While roughly $7 billion in State Energy Program funds and Energy Efficiency and Conservation Block Grants could be used at the state and local levels to impact the commercial building sector, there are many other programs that will likely consume a considerable portion of these funds leaving only a small portion for the commercial building sector. Savvy real estate owners and investors who already have an eye on energy efficiency will likely be able to identify and become eligible for additional incentive programs in their area, but it is unclear if the incentives will be widespread enough to change behavior among the majority of owners and operators who have not already seen the value in energy efficiency and adopted property management practices to reduce their energy use.

While the debate on the stimulus will surely go back and forth in the coming days and the proposals for building sector energy efficiency incentives will be adjusted, it is becoming increasing clear that the commercial real estate industry is sailing into a much larger financial storm.

Full article: GreenBiz