There has been a lot of press about the American Clean Energy and Security Act of 2009—also known as the “cap-and-trade” bill—which passed the House of Representatives on June 26. The bill contains some “pain” for everyone.
In addition to provisions placing a “value” on carbon emissions and clean transportation, the bill requires that new homes be built 30 percent more energy efficient than mandated in the 2006 International Energy Conservation Code upon enactment. Improvement by an additional 20 percent must occur by Jan. 1, 2014, and a further 5 percent improvement is required for each three-year period from Jan. 1, 2017, through Jan. 1, 2029.
The bill has proponents and opponents—the latter which includes the NAHB and other trade organizations in the construction and real estate industries. Proponents say the bill would help conserve energy, drive innovation and development of “clean” technologies, make energy more affordable, and generate thousands of “green” jobs. Opponents have attacked the legislation as the largest tax bill in the country's history.
There is no doubt that the United States needs a comprehensive energy policy that will encourage reduced consumption and, as a result, reduced greenhouse gas emissions. Cost estimates for the legislation vary. The Congressional Budget Office and Joint Committee on Taxation estimate it will cost $175 a year in higher electric and heating bills, while the Heritage Foundation—an opponent of the bill—forecasts a hit of $1,750 per household. With legislation of this size, any cost estimate is a shot in the dark.
The construction industry—home building included—must bear some of the brunt.
The American Institute of Architects estimates that buildings contribute up to 48 percent of U.S. global warming pollution. According to the Environmental Protection Agency, in 2007, residential structures accounted for 17 percent of all U.S. global warming emissions. It's easy to see why the construction industry has become a target for near-term strides in energy consumption and global warming pollution.
Most commentators in the home building industry note that there are ways to improve on energy use in new and existing residential structures. Structural insulated panels (SIPs), improved HVAC systems, energy-efficient windows and doors, and better insulation can improve energy consumption a lot. The use of polyurethane can cut energy consumption by more than 40 percent, according to several manufacturers' client testimonials. The Department of Energy indicates using SIPs alone can reduce energy consumption 12 percent to 14 percent. Contrary to the opinion of some, SIPs are not difficult to install and require no pre-installation training.
The cost of adopting these new technologies will increase the price of a home, but by how much? What's the real cost of the home after a total “system” analysis of costs to build, available energy credits to the home buyer, and the reduced expenses over the average ownership period? These questions need to be addressed by the home building industry soon if we are to effectively lobby for changes to improve the bill as it wends its way through the Senate. Addressing these issues, together with the need to have a reasonable phase-in timeline, should be the focus of the NAHB and other industry trade advocates—not opposing a bill that is good for America in the long term.
Phil Whitcomb is president of AH&P Investments, a partner of AgoraRetail Advisors LLC, and acts as president of Promethean Structures. He may be reached via e-mail at [email protected].
