“Real estate is the largest source of clean energy in this country, and it’s very inexpensively tapped.”
So said Tony Malkin, the president of Malkin Holdings, owner of the Empire State Building.
Malkin spoke this week at the annual Energy Efficiency Forum in Washington, D.C., and he’s got a point, albeit a controversial one.
If we — or, more to the point, the people who represent us in Washington — have $1 to spend, better that it be spent on energy efficiency than on clean energy. That’s not way things work now. Today, wind and solar power get generous tax breaks and subsidies. Energy efficiency investments do not. The government has it exactly backward.
Why? First, let’s stipulate that money spent on efficiency and on clean energy creates short-term jobs. The efficiency-related jobs are more likely to be US jobs (because most solar panels are made in China) but set that aside for a moment. What matters is what happens after the insulation goes into a building, or the solar panels go up on the roof.
The problem with clean energy is that electricity from wind turbines or solar panel, as a rule, costs more than power generated by burning coal or natural gas. If it didn’t, the wind and solar industries wouldn’t need the investment tax credits and renewable portfolio mandates that are vital to their business. But over time the higher costs of clean energy create a drag on economic growth, whether they are paid by the government or by energy users.
By contrast, money spent on efficiency reduces costs over time. So, whether we are talking about more efficient factories, commercial buildings, homes or even cars, the spending on efficiency makes the economy more productive, driving economic growth and creating jobs in the long run.
Yet the government generously subsidizes wind and solar. Efficiency, not so much.
Actually, it’s a bit worse than that. Since businesses can deduct legitimate expenses on their tax returns, they pay less than the full cost of their electricity bills.
“I get a tax deduction for wasting energy,” Dave Myers, president of the building efficiency business at Johnson Controls, said wryly during the forum.
“It is absolutely insane to me that energy can be expensed on your tax bill,” Malkin agreed.
Let me hasten to add that we need both energy efficiency and clean energy, and in my view, both deserve strong policy support. Remember, scientists say that to avoid risky climate change, the world needs to curb its greenhouse gas emissions by 80% by 2050. That will require the aggressive deployment of low-carbon energy sources, as well as dramatic gains in efficiency. But we also should be clear about how the costs and benefits work, so we can get the policy right, and especially think about why the government isn’t doing more to promote efficiency.
Next page: Many happy returns