Better Buildings, More Jobs

Yesterday, President Obama met with his Council on Jobs and Competitiveness in North Carolina to hear their ideas on job creation. While he was there, he also toured the Cree facility to see the American jobs that have been created making the next generation of energy efficient lighting. Among Council’s ideas for job creation was one that we have been pressing on for a long time – increasing the energy efficiency of our existing building stock. Not only will this create jobs in the ailing construction sector, but also in manufacturing, operations and throughout the economy as earnings and energy bill savings are spent in other sectors. A new study by the Political Economy Research Institute (PERI) released yesterday estimated that 114,000 jobs could be created from policies in the President's Better Buildings Initiative to make our existing commercial buildings more efficient, while saving business $1.4 billion annually on their energy bills.

The PERI analysis found that the majority of the jobs – 77,000 to be precise – would come from a reformed tax incentive for efficient commercial buildings. The current Commercial Buildings Tax Deduction, Section 179D, has seen limited uptake, in particular for existing buildings. Even the Empire State Building Retrofit, which will reduce its energy use by 38 percent, would not qualify for the existing deduction. The PERI analysis modeled proposed modifications to the tax deduction that would gear it towards existing building retrofits. The core elements of these modifications are:

• Changing the baseline to the building’s own prior energy use rather than code;
• Offering incentives on a increasing sliding scale, ranging from 20 percent to 50 percent energy savings compared to the previous baseline; and
• Incentivizing efficient operations by splitting the deduction into a 60 percent up front deduction, based on designed savings, and a 40 percent realized deduction, based on actual energy saved 2 years after measures are implemented.

These changes would need to be made legislatively and in early May a diverse set of over 80 stakeholders sent a letter to the Hill  endorsing these and other core principles for a reformed tax incentive.

In addition to jobs created by modifications to the tax deduction, the PERI analysis also found that 25,000 jobs would be created through a federal loan guarantee program which would increase access to capital for building energy efficiency improvements. This program could be implemented under existing authority.  The PERI analysis found that 11,500 additional jobs would be created through the Race to Green program and the deployment of remaining Recovery Act funds for energy efficiency.

While the news that investment in energy efficiency is a big job creator is nothing new, yesterday’s report reconfirms this fact and shows just how many jobs could be created through targeted policies to increase the efficiency of our existing commercial buildings. We need these jobs now more than ever, especially given the high levels of unemployment that persist in the construction sector. Investing in energy efficiency will also save businesses money on their energy bills, reducing harmful pollution, helping their bottom line, and freeing up capital that can be reinvested in other parts of the economy. We urge the President to move forward with the BBI and for Congress to act on the proposed modifications to the commercial buildings tax deduction.