3 Sure-Fire Green Solutions Obama Should Put in His Jobs Speech

3 Sure-Fire Green Solutions Obama Should Put in His Jobs Speech

The advance word has been mixed about President Obama's September 8 jobs speech. Bold or not bold? Rumors have been floated that bold will be the order of the day, but some of the President's advisors have been attempting to diminish expectations.

Were I advising President Obama on his speech, sustainable and energy-efficient building programs would be included in the mix as a high-growth and cost-effective way to get America back to work and enhance American competitiveness.

Programs that focus on building energy-efficiency create jobs not only in construction, but also in architecture; engineering; interior design; energy audit; the design, manufacture and sale of building equipment, materials and supplies; finance; law; and -- to support the tracking of building energy savings -- software development and sales.

As economists would say, building energy-efficiency programs have a high multiplier effect—they create significant economic activity per dollar spent. And, by reducing the operating costs of homes and commercial properties, such programs are cost-effective and improve American competitiveness.

Here are several building energy-efficiency programs that have tremendous promise, have won substantial bipartisan support, and produce meaningful, long and which warrant aggressive implementation:

PACE. Property Assessed Clean Energy (PACE) programs are much-needed vehicles to create American jobs while reducing building energy costs. PACE programs allow municipalities, upon state authorization, to create building energy-efficiency retrofit programs that are repaid by tax assessments on participating properties.

The programs can be used for a wide range of building energy-efficiency improvements, ranging from weatherization, to upgrading heating, ventilating and air conditioning equipment, to installing solar panels and other renewable energy systems.

PACE initiatives, the local creation of which has been authorized in 27 states, have been largely sidelined since mid-2010. The Federal Housing Finance Agency put the kibosh on residential PACE programs [PDF] by precluding Fannie Mae and Freddie Mac, which buy the lion's share of U.S. home loans in the secondary mortgage market, from purchasing PACE-encumbered mortgages. FHFA's action shut down the residential PACE market and had a chilling effect on commercial PAC E initiatives. (Full disclosure: My firm has advised several jurisdictions on PACE and serves on a team that will be creating a commercial PACE program for the District of Columbia.)

Getting PACE back in gear should be easy for the President to support. Bipartisan legislation introduced in July in the U.S. House of Representatives, the PACE Assessment Protection Act of 2011, would require Fannie Mae and Freddie Mae to participate in PACE programs that met threshold criteria for safety and soundness.

Threshold standards include the use of qualified energy audits/feasibility studies and qualified contractors; capping the PACE assessment of 10 percent of the property value; and requiring that the property owner have at least 15 percent equity in the property. The PACE bill has been co-sponsored by 22 members of Congress, including 13 Republicans and 9 Democrats.

EISA. The retrofit provisions of the Energy Independence and Security Act [PDF], signed into law by President Bush in 2007, require federal agencies to retrofit 75 percent of the U.S. government's building stock to reduce energy use by at least 30 percent by 2015. Detailed guidelines that would help federal agencies to implement the program (and which my company and I helped draft) were submitted to the Department of Energy in late 2010.

I suspect that release of the guidelines was deferred due to uncertainty about federal outlays. That's a shame, because EISA retrofits can be undertaken only if project savings exceed expenditures -- a win for the taxpayer that would create jobs, too. Congress should fully fund EISA retrofit programs and the President should direct the Department of Energy to complete and release the federal-wide guidelines for its implementation.

The Section 179D Tax Incentive. The Section 179D tax incentive, approved under the 2005 Energy Policy Act, provides a deduction of up to $1.80 per square foot for commercial building energy-efficiency upgrades. That's a good start, but the incentive could be made far more attractive to encourage additional job growth.

The President's budget plan (still being debated in Congress) recommended converting the Section 179D deduction to a credit, a solid recommendation that would spur additional investments in building energy-efficiency. Another welcome revision would be to extend Section 179D to the multi-family housing sector. Finally, the rules regulating the incentive should permit tax-exempt investors (a group that includes REITS and pension funds) to transfer the incentive to transaction partners such as third party developers, financing sources and contractors.

Official White House Photo by Pete Souza.