What One Stimulus Buck Could Do

[one...two...tree 2,762]

—By Michael Mechanic, Mother Jones

Okay, quick: Which portion of the US economy consumes the most energy?

Nope. It's not transportation. Not manufacturing either. The correct answer is the building sector, which guzzles about three-quarters of the nation's electricity and half of our overall energy—and is responsible for almost half of America's carbon emissions.

Round two: Which sector, besides banking, has been hardest hit by the recession? You can see where this is going. Construction unemployment stands at 20 percent, more than twice the national rate. For the six months that ended in April, the building industry has shed jobs at a rate of about 120,000 per month—more than 1.2 million jobs have been lost since December 2007. Private construction, which normally accounts for about 9 percent of America's GDP, is on its knees. For near-broke local governments, this means a shrinking tax base, new foreclosures, and more citizens and companies in need of handouts.

But what if there were a way to simultaneously revive this flagging industry, slash energy use, and reduce carbon emissions using federal stimulus cash? And what if the strategy generated all sorts of jobs and filled government coffers and kept people in their homes—even people who have nothing whatsoever to do with the construction?

Sounds like a fantasy, but Santa Fe-based architect Edward Mazria has done the math, and his "14x" plan, which he calculates will generate $14 in private spending for every stimulus buck spent, is creating major buzz in city halls and statehouses across the country.

Mazria was in Washington, D.C., last week pitching his plan to senators, administration officials, and perhaps more importantly, to a luncheon crowd of about 250 mayors, council members, and county commissioners at a national climate change summit hosted by the International Council for Local Environmental Initiatives (ICLEI).

Since late March, state and local officials have scrambled to secure their share of $6.3 billion in energy-efficiency grants offered by the federal stimulus package. (They have until June 25 to apply to the Department of Energy, which decides who gets what.) The politicians were riveted by Mazria's talk, says Michelle Wyman, ICLEI's executive director. They even stopped eating to pay closer attention, and when Mazria finished his spiel, they gave him standing ovation. "You could almost see in the audience light bulbs going on as he put flesh on the skeleton of his concept," says Mayor Patrick Hays of North Little Rock, Ark. "It was like a preacher giving a sermon and by the end we were singing out of the same hymn book and there were ten or twelve of us lining up to be baptized."

Mazria's sermon took root a few short weeks ago, at one in the morning, when a sleepless Wyman emailed him with a conundrum. She knew he was a creative problem solver with street cred on climate change: Thousands of architects and construction firms, schools, nonprofits, and state and local governments have already joined the 2030 Challenge—a centerpiece of Mazria's Architecture 2030 initiative—promising to ratchet up energy efficiency on their building projects with the goal of making all new buildings and major renovations carbon neutral within 21 years.

Wyman informed Mazria that just she'd received a plea from a mayor who was under political pressure to spend $683,000 of promised stimulus money on a parking lot. The mayor knew the massive federal investment in local communities was a once-in-a-lifetime kind of thing, and he didn't want to blow it on wasteful one-off projects. What kinds of uses for that money would have a truly lasting, positive effect?

Which got Mazria to thinking. Suppose a city were to use its stimulus money to, say, trick out a new public library with insulated windows, natural lighting, solar panels, and so on. It would make for a fine green showcase, maybe even a building that produced as much energy as it used, with modest savings down the road.

But what if that city instead took that money and said to local homeowners and businesses: If you refinance your home or building, we'll pay the bank percentage points up front to get you a lower interest rate. In exchange, you'll make efficiency upgrades—installing better windows, insulation, a more efficient furnace, PV panels, on-demand water heaters, whatever. The more efficient the upgrade, the more the city pays down the interest rate.

Over the next few weeks, Mazria and his staff at Architecture 2030 hammered out the details. Renovation costs could be lumped into the new loan so that the owner pays nothing up front, but still makes out with a cheaper energy bill, a more valuable property, and lower payments; a family currently paying 6 percent on a $230,000 loan, they calculated, could install a $20,000 system of solar panels and still save $425 per month—not counting a new federal tax credit that covers 30 percent of the cost.

The property owner isn't the only one who stands to benefit from this arrangement. Local builders and banks get a shot in the arm, as do engineers, architects, and producers of building materials. New markets emerge for energy-efficient products. Contractors get back to work and fewer people lose their homes and go on the dole. All told, Mazria says, that remodel will have doubled to tripled the value of the city's stimulus dollar; for new construction, the city would see a 25-fold effect. (The 14x figure assumes a ratio of 70 percent renovation to 30 percent new building.) The resulting boom in construction-related spending also means higher tax revenues at all levels of government. "It builds local pots of money that cities can reinvest in more energy efficiency," beams ICLEI's Wyman. "It's absolutely brilliant. Everybody wins."

Mazria has vetted his plan with bankers at Wells Fargo, Bankers Trust, and Bank of the West, all of whom are interested in providing loans; while in Washington, he also met with the Teamsters, who are eager to get in on the green economy. The city of Des Moines, whose mayor, Frank Cownie, helped Mazria develop and pitch his proposal to state and federal leaders, has been fully on board. Cincinnati has expressed interest, too. Ditto Atlanta, Dubuque, Santa Barbara, Albuquerque, Fort Wayne. North Little Rock, population 61,000, is "absolutely" planning to file a 14x application, according to Mayor Hays.

The Arkansas contingent, in fact, is already devising new twists on the concept. Green business pioneer Martha Jane Murray, an architect and shoe factory co-owner who set up free home energy audits and energy-efficiency loans for her employees, is now considering ways to incorporate mortgage-rate paydowns into her program. By offering cheaper home loans as an employee benefit—contingent on an energy retrofit—a company could effectively give workers a pay raise that encourages them to stay put. Mayor Hays suggests that cities might even use such incentives to, say, entice police officers to live in what he calls "challenged" areas of town. "It's a simple idea," he notes, "but it certainly seems to hold promise for some profound opportunities."

DOE officials seemed "real excited" about 14x, Mazria says, and will likely look favorably upon local variations of his plan as the stimulus money begins to flow in earnest next month. ("Yes, we're excited," confirms Claire Johnson, the department's efficiency advisor for the stimulus package, "but we're excited by a lot of things. The department is always interested in innovative ways to increase energy efficiency.")

Phase 2 of the plan would elevate the concept to the federal level. Mazria envisions dipping into the $1.2 trillion pot the Federal Reserve has set aside to buy up debt and toxic securities and bolster Fannie Mae and Freddie Mac. A mere $60 billion of that money, Mazria says, would enable the federal government to tie mortgage-rate paydowns to energy efficiency on a grand scale, leading to $572 billion in construction spending, 9 million jobs, and $40 billion in state and local tax revenue.

Best of all, the whole thing will pay for itself: Within a year, Mazria calculates, that $60 billion will have brought in a whopping $120 billion in federal taxes. "To turn the country around," says the architect, "you need to turn the building sector around. And you have an opportunity to transform it as you're bringing it back."

http://www.motherjones.com/politics/2009/0...s-buck-could-do

[mRx 16]

I'm very leary when politicians tout plans that create new markets.

Alternative energy is in it's infancy. If it were cost effective, the market would've installed solar panels, insulated windows, natural lighting, and other green features on all houses already. The fact that hasn't occured yet doesn't mean that the market has failed, nor does it mean that there exists an information barrier. It's far simplier, really. They are simply not cost-effective for consumers yet.

A perfect example of this is DVD players. Remember in the mid-90's how God-awful those things were? They were undependable, extremely noisy, and worst of all, costed upwards of $1,000! Not too mention damned complicated. The instruction manuals were the size of a university textbook.

At this time, DVD players were in their infancy. Consumers of course, demanded higher quality, less noise, and lower prices; manufacturers tailored to these needs in competition with other manufacturers, and 12 years later, it's not uncommon to pay $50 for a DVD player that is extremely dependable and silent. The increase in quality is immeasurable while the price is nearly 2000% less! That is the beauty of a market.

When the government forces consumers to see the error of their ways by incentivizing non-cost effective products, it does more harm than good, to both consumer and manufacturer. It creates a bureaucratic fog that blankets the information lines between demander and supplier. It masks something as cost-effective through incentives--when in reality, it isn't.

[one...two...tree 2,762]

I'm very leary when politicians tout plans that create new markets.

Alternative energy is in it's infancy. If it were cost effective, the market would've installed solar panels, insulated windows, natural lighting, and other green features on all houses already. The fact that hasn't occured yet doesn't mean that the market has failed, nor does it mean that there exists an information barrier. It's far simplier, really. They are simply not cost-effective for consumers yet.

A perfect example of this is DVD players. Remember in the mid-90's how God-awful those things were? They were undependable, extremely noisy, and worst of all, costed upwards of $1,000! Not too mention damned complicated. The instruction manuals were the size of a university textbook.

At this time, DVD players were in their infancy. Consumers of course, demanded higher quality, less noise, and lower prices; manufacturers tailored to these needs in competition with other manufacturers, and 12 years later, it's not uncommon to pay $50 for a DVD player that is extremely dependable and silent. The increase in quality is immeasurable while the price is nearly 2000% less! That is the beauty of a market.

When the government forces consumers to see the error of their ways by incentivizing non-cost effective products, it does more harm than good, to both consumer and manufacturer. It creates a bureaucratic fog that blankets the information lines between demander and supplier. It masks something as cost-effective through incentives--when in reality, it isn't.

Matt, do you consider the Jonas Bros. one of the best bands out there? Because, according to the market, they are. According to the market, McDonald's makes the best burgers, and Walmart sells the best clothes.

It's not very cost effective to spend 60g's or more on a car, but some people find it a worthy expenditure. However, consumer choice is somewhat elusive as it is impossible to accurately predict what products people will buy and reject. There is a growing market for energy conserving technology and like anything, it is difficult to predict as well as to draw any conclusion about it when it is still in its infancy, market wise.

Edited May 31, 2009 by Col. 'Bat' Guano

[NickD 203]

One one hand, Michael is talking about our buildings consuming way too much energy, then on the other to build even more buidings.

Thought about that before with the number of different places I could live, disregarding my kids or in-laws that would be more than happy to take me in, as long as I agree to cut the grass.

At my corporate workplace, could have lived there, own private office, coffee maker, microwave, refrigerator, a couch to sleep on, toilet and sink, but would have had to take a bath in the degreasing tanks as had no shower. That would get me clean also removing the first two layers of my skin. Even would have made my bosses happy as they would have loved if I stayed there 24 hours a day, but working. But also had a complete household to maintain that gave me another place to lay my head.

Could spend all day at the public library, least for 12 hours, but would need a cardboard box to sleep in outside. Our pastor demanded the biggest and best church in town that consumes a lot of energy, but when I was going, only spent about 0.4% of my time there, if that long. If I did feel like saying a prayer at other hours, the place was locked up due to thief reasons with all that stealable art laying around. At some churches, even I would like to steal those video projectors and organs.

Kids only spend about 17% of their time in these marble and stainless steel railing schools they have to have, even way far worse at our really fancy overpriced universities, with less than 2% of their time spent in the actual classrooms.

Kind of thought it was dumb for those two heros of 9/11 way on the top of the WTC to have to commute 80 miles a day just to sit in front of a PC, I can do that at home.

I try to visit my several banks on rare occasions, but mostly to restock on free ball point pens, really big way overpriced and understaff places, practically all of my banking is done on the net with direct deposits, so hardly every go there. Can say the same thing about all the city, state, and federal buildings we have around here, but I try to stay as far away as possible from those places, they just want my money. Police department is a joke, just guys driving around issuing traffic violations, even rare to find anybody there, another huge buidling.

And it's always comforting to know, there is a jail cell waiting for me with free food, entertainment, and health care, and all I have to do is to be naughty to get admission.

Plenty of buildings for us to stay in, even the mall that is opened 60% of the time, but deserted mostly, do we really need more? Often wonder what their energy bills are like?

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[mRx 16]

I'm very leary when politicians tout plans that create new markets.

Alternative energy is in it's infancy. If it were cost effective, the market would've installed solar panels, insulated windows, natural lighting, and other green features on all houses already. The fact that hasn't occured yet doesn't mean that the market has failed, nor does it mean that there exists an information barrier. It's far simplier, really. They are simply not cost-effective for consumers yet.

A perfect example of this is DVD players. Remember in the mid-90's how God-awful those things were? They were undependable, extremely noisy, and worst of all, costed upwards of $1,000! Not too mention damned complicated. The instruction manuals were the size of a university textbook.

At this time, DVD players were in their infancy. Consumers of course, demanded higher quality, less noise, and lower prices; manufacturers tailored to these needs in competition with other manufacturers, and 12 years later, it's not uncommon to pay $50 for a DVD player that is extremely dependable and silent. The increase in quality is immeasurable while the price is nearly 2000% less! That is the beauty of a market.

When the government forces consumers to see the error of their ways by incentivizing non-cost effective products, it does more harm than good, to both consumer and manufacturer. It creates a bureaucratic fog that blankets the information lines between demander and supplier. It masks something as cost-effective through incentives--when in reality, it isn't.

Matt, do you consider the Jonas Bros. one of the best bands out there? Because, according to the market, they are. According to the market, McDonald's makes the best burgers, and Walmart sells the best clothes.

It's not very cost effective to spend 60g's or more on a car, but some people find it a worthy expenditure. However, consumer choice is somewhat elusive as it is impossible to accurately predict what products people will buy and reject. There is a growing market for energy conserving technology and like anything, it is difficult to predict as well as to draw any conclusion about it when it is still in its infancy, market wise.

Steven, the terms cost-effective and best are not interchangable. McDonalds doesn't make the best burgers. However, , individuals have aggregately determined them to be cost-effective as evident by their profits.

It is difficult to predict what products consumers will buy or reject, that's why businesses flounder, and successful entrepenuers make profits.

But as I've already stated, artificially incentivizing a market does no good to a market, as if the market is viable, it will emerge on it's own (as with DVD).

[Ban Hammer 13,364]

great idea if one wants to employ more illegal construction workers.