Wednesday, July 4, 2007

The Importance Of Government Leadership

Happy 4th Of July! In honor of the founding of our nation's government, I would like to discuss the importance of government leadership in promoting green building. There are basically three ways in which the government can do it: 1) new laws; 2) new incentives and 3) investment of state/federal/local money in green building projects.

Passing new laws related to green building is the most obvious way that the government can promote green building. For example, earlier this spring Boston passed amendments to its zoning code to require all projects over 50,000 SF to be designed and planned to meet the “certified” level using the US Green Building Council’s Leadership in Energy and Environmental Design building rating system. New laws have both benefits for green building and some drawbacks. The major benefit is that the laws make adoptinng green building practices mandatory. In turn, this will lead to an increase in the use of green building practices and products, which will make them more accepted, available and reduce the cost. On the other hand, new laws comes with new challenges. If the laws are not well thought out, they can lead to dramatically adverse consequences. For example, Nevada passed a new tax incentive (more on these below), but later had to repeal it because it was so poorly drafted that it threatened the state budget. (I will write more on the Nevada debacle in a subsequent post, but for more information see Further, new laws are open to new interpretation and challenges at the administrative level and in the courts. The uncertainty this creates adds transaction costs to the green building endeavor. Despite these drawbacks, however, I believe that new green building regulations are necessary to create a tipping point where all construction incorporates green building practices, at least to some degree.

Incentives are another means for governments to incentivize specific behavior. This has been very popular--many states have created tax incentives for green building, and the federal government offers a variety of energy efficiency and renewable energy incentives as well. (For a good listing of state and federal programs, see Tax incentives use market forces to make green building practices more financially desireable. I think that there is certainly a benefit to these incentives, but, in speaking to several developers, if the deal is a good one, the tax incentives are not likely to factor into the analysis that significantly.

Finally, I want to discuss my personal favorite, government spending. Facilities now owned by the Federal Government are valued at over $300 billion. The Federal Government also spends over $25 billion per year for acquisition, renovation, and upkeep. If you add the state and municipal investment in facilities, its an enormous amount of resources, which can substantially influence the proliferation of green building practices and products.

Together, these three tools make government action vital to promoting green building practices, and I believe that the government will only become more influential in green building as the need and demand for environmental stewardship grows.

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