How Energy Efficiency Can Ensure the Green Recovery Will Leave No One Behind

How Energy Efficiency Can Ensure the Green Recovery Will Leave No One Behind. By Charles K. Ebinger, Director, Energy Security Initiative
Brookings, Jan 16, 2009

Thirty two years ago this past October, Amory Lovins, in his Foreign Affairs article “Soft Energy Paths: The Road Not Taken,” alerted the world to how energy efficiency and conservation can transform the way the global economy wastes energy through over-reliance on centralized facilities requiring the movement of energy over long distances from where it is produced to where it is consumed. The potential of energy efficiency and conservation is demonstrated by the fact that since 1980, California has kept energy consumption flat – even as the state’s population doubled. Similarly, while the United States has dawdled in its promotion of energy efficiency, Europe has made its economy nearly twice as energy efficient as ours.

Despite notable advances in the efficiency of energy production, transportation and consumption, President-elect Obama needs to make energy efficiency and conservation the cornerstone of both his economic stimulus program, which is designed to revitalize the American economy and create American jobs, and his Energy Efficiency Plan, designed to address climate change while improving the security of the nation’s electricity grid. These programs, taken in tandem, will provide jobs, put more money in consumer wallets, reduce the need for additional expensive generating capacity to meet peak load electricity demand, and reduce carbon emissions.

While TARP 1, 2 and 3 were designed to stabilize financial markets and get our credit markets working again, to date they have been singular failures given Congress’ inability to force the Treasury to make the extension of credit to homeowners a mandatory obligation for receiving $360 billion in tax payer “investments.” Given that FERC Chairman Joseph Kelliher has stated that, with an investment of $220 billion over ten years, the nation’s electricity infrastructure could be rebuilt into a fully-integrated national grid, one has to query whether the American taxpayer got the “biggest bang for the buck.” A national electricity grid will provide thousands of construction jobs, allow the full utilization of the nation’s wind and solar resources, reduce the need for fossil fuel plants, and lower carbon emissions.

To insure that not only the middle class but also those making $50,000 or less benefit from the stimulus programs, President Obama’s economic revitalization plan should include the expenditure of $150 billion, supplemented by requisite state and municipal policies to affect the following policies:

• Seize all abandoned buildings in the United States’ four poorest cities (Miami, Newark, Cleveland and Detroit) – on a pilot program basis and under a new eminent domain federal statute to be passed by Congress – and retrofit them with the most commercially cost-effective energy efficiency construction, lighting and appliance technologies. Upon completion, lease them for 40 years to credit-worthy families making under $50,000 per year at rates not to exceed 15% of after-tax family income indexed for inflation.
• Refine a model program in effect in Berkeley, California by enacting a low-interest (2%) 30-year loan for up to 100% of the cost of home and small business energy retrofits that will save at least 35% of total energy utilization against the average consumption of the previous 3 years. Such loans would lead to new technological innovations as local small business entrepreneurs respond to these incentives by creating jobs, putting money into consumers wallets from the energy savings achieved, and revitalizing work in communities across the nation.
• Enact a low-interest loan (5% indexed for inflation for a period of 30 years) under a new “Revitalize American Home and Hearth Act,” with the government fronting the capital cost for the installation of solar roofs on medium and large-scale commercial buildings that can obtain an energy savings of at least 25% based on the average consumption during the previous three years. The commercial firms would rebate to the government not only the interest, but 25% of the energy savings during the life of the loan.
• Issue on a one-time basis 14 million car purchase certificates (the average number projected for future demand for cars) for $10,000 and good for 7 years for the purchase of American-produced automobiles, including foreign brands, getting an average of 55 miles per gallon (based on highway and city driving). The creation of these permits would spark entrepreneurial innovation and create jobs.
• Accelerate spending on mass transit and rail in the transportation sector, modeled on a recent Federal Transit Report demonstrating that that low-income households in urban, walkable neighborhoods spend just 9% of their incomes on transportation, while those in car-oriented neighborhoods spend a whopping 25%.
• Enact a program to pay the “black book” value for any car ten years or older that can then be junked and the scrap recycled with payments to the Government.