Invisible Energy: How Can We Get Political and Opinion Leaders to Recognize the Key Role of Energy Efficiency

All of the debate this week in Congress regarding the stimulus bill seems to be over its size and whether it focuses on government spending or private investment. Completely absent is discussion about the root causes of the crisis and how the stimulus would address those fundamental problems.

Particularly astonishing was the recent vote to establish a tax credit for buyers of new homes.

While a tax credit could superficially be seen to help stimulate more housing production and sales, more careful analysis shows that this is just adding to the nation's problems rather than solving them.

The most direct cause of the recession is that prospective homeowners borrowed money that they couldn't repay, perhaps ensnared by lending policies that offered the ability to buy a house to people who otherwise couldn't afford it.

But this is exactly what a tax credit does. Especially since the main costs of owning and operating a house-the cost of driving to and from it and of paying the utilities-still are not considered when originating loans.  (As I previously noted, for a typical house lost in suburban sprawl, the median loan is below $175,000 but the average 30-year commitment to utility costs to run the home is $75,000 and the cost to drive to and from is $300,000.)

So the tax credit will perhaps help solve one problem-reducing the inventory of unsold homes-while actually worsening a bigger one: the toxic debt of mortgages that may default.

If we want to stimulate new housing, we should condition it on good energy efficiency and location efficiency. Senator Snowe recognized this in her amendment to the Economic Recovery bill that would offer a $5000 tax credit for building a new home but condition it on achieving a 50 percent reduction in utility bills. The reduction is measured by a home energy rating performed after the house is constructed.

Working with a broad group of nonprofits and business organizations, NRDC has developed a set of programs aimed directly at addressing all of the root causes of the recession through improving energy efficiency in a way that creates lots of jobs quickly but also develops a sustainable program of stimulating spending and provides a way to pay back all the costs through energy savings.

Unlike the tax credit for purchasing a new home, which may alleviate one cause of the recession but only at the expense of exacerbating another, energy efficiency policy helps relieve ALL the causes of the recession.

These issues will be discussed in detail in my forthcoming book from Bay Tree Publishing called Invisible Energy.