By Nick Loris
Energy Secretary Jennifer Granholm recently announced several federal actions to improve energy efficiency and reduce greenhouse gas emissions in residential and commercial buildings. The move echoes many of the efficiency objectives President Biden laid out in his American Jobs Plan. Energy efficiency investments will save consumers money and reduce America’s carbon footprint, but the federal government should empower the private sector rather than supplant it.
DOE’s initiatives call for more spending on advanced heating and cooling, energy efficient windows and smart building technologies. It also would spend $30 million on workforce training, with an emphasis on union work, to install more efficient materials and equipment. On the surface, these programs sound promising. After all, energy efficiency programs typically enjoy bipartisan support. They’re perceived as “win-win” because they lower energy bills and reduce pollution. If that’s the case, however, government subsidies are not necessary. Businesses and homeowners will make those investments on their own if they believe it’s the best use of their money.
In fact, producers of energy-efficient technologies already offer energy audits of homes and businesses to identify where inefficiencies and energy leakages exist. If the savings on energy bills outweigh the upfront costs, these products will sell themselves. Moreover, businesses will expand their workforces as necessary to meet the increased demand for their services.
Better information will better identify where efficiency gains in buildings can be made. Last year, VentureBeat reported that “Researchers at the University of Pittsburgh, University of Massachusetts Amherst, and Microsoft Research India have developed a system — WattScale — that leverages AI to pick out the least energy-efficient buildings from a city- or region-level population.” WattScale could be a critical tool that drives private sector investment in energy-saving technologies and better construction to reduce energy use in buildings. Further, as we highlight in our “Free Economies are Clean Economies” report, pro-growth tax and trade policies will increase the installation and deployment of more energy-efficient equipment.
On the converse, policymakers should raise questions with regard to the efficacy of taxpayer resources spent on energy efficiency and green jobs training. For instance, economists examined efficiency upgrades on 30,000 homes financed through the federal Weatherization Assistance Program. Those economists, in an article published in the Quarterly Journal of Economics, found the costs outweighed the benefits. The up-front costs of weatherizing homes cost almost twice as much as the energy savings accumulated. Even when accounting for broader social benefits of emissions reduction, the costs still outweighed the benefits.
With regard to jobs training, we’ve seen this movie before, too, and it wasn’t a great ending. Under the Obama administration, a $500 million green jobs program trained more than 81,000 potential workers. After just six months, fewer than 12,000 had jobs.
That’s not to suggest the federal government has no role in driving efficiency improvements and reducing emissions. Offering technical expertise and identifying technology-neutral fuel savings technologies to deploy in federal buildings will save taxpayers money and reduce the federal government’s co2 output. Energy Savings Performance Contracts are one tool the federal government has to accomplish that objective.
As Secretary Granholm proclaimed in her announcement of these initiatives, commercial and residential buildings represent about one-third of America’s co2 emissions. As such, it is commendable to see the Biden administration turn their attention to buildings. But the private sector needs to be the leader, not follow the government. Unlocking opportunities for private investments in efficiency will better achieve the desired results of energy savings and emissions reductions, all while protecting the taxpayer.