The Breakthrough Institute

By Daniel M. Kammen

The scientifically established need to adopt and accelerate a low-carbon, more sustainable future has finally been put squarely in the center of U. S. policy. President Elect Obama has taken the courageous and necessary step to announce that not only will this become a federal priority, but the U. S. will also take an active international leadership role in developing a workable and global approach to this issue. At Schwarzenegger's climate conference last month, these words brought a bi-partisan crowd of lawmakers to their feet for a standing ovation.

To accomplish these goals, the New Administration will need a diverse set of tools to address global warming. Despite years of under-investment [1], thankfully a diverse and growing set of science and engineering tools do already exist, as do a number of public policy and pollution market mechanisms that can be brought to bear to reward efficient and clean energy development, and to monetize pollution.

Beyond these efforts, however, additional tools are needed, namely those that mobilize novel financing opportunities to bring capital into the clean energy arena. There are many barriers to reducing energy consumption and increasing the use of renewable energy. One major barrier is high first cost ("upfront cost"), which is both a psychological and financial barrier for many people, institutions, and industries. How many of us would have cell phones, if we had to pay for 20 years of minutes up front?

This program, which we term Clean Energy Municipal Financing (CEMF) allows property owners (residential and commercial) to install electric and thermal solar systems and make energy efficiency improvements to their buildings. These improvements are financed through a special fee on their property tax bills that transfers to the next owner upon property resale

This program, which has been pioneered by cities including Berkeley and Palm Desert, California, and is under review in Boulder, Colorado, Burlington, Vermont, Austin Texas, and other locations, can be applied to energy efficiency measures alone, to renewable energy alone, or to a combination of efficiency and renewable generation. Repayment over 20 or 25 years is a natural timetable, and the payments go with the property, not the individual, so that clean energy and energy efficiency become investment opportunities.

While local property tax issues demand that local implementation be carefully reviewed, the results can be striking. At the current national rate of increase in electricity and costs (almost 5% per year growth since 2002), property owners would, on average, reduce their utility bills by $100 per year over a 25-year term while building clean energy equity in their homes. In addition to receiving cost effective energy services from the improvements, this initiative would eliminate over a gigaton of CO2 emissions with no additional cost to local, state, or federal governments beyond existing incentives.

If this program were utilized by 15% of residential property owners nationwide, this would conservatively contribute 4% of the savings needed for the US to reach 1990 emission levels by 2020, with very significant additional savings if the program expands to commercial buildings. My laboratory developed an interactive website for evaluating the energy and carbon benefits of the program: http://rael.berkeley.edu/berkeleyfirst.

Federal and state involvement could greatly expand the model that cities are now pioneering, and would facilitate the spread of such financing and could eliminate some of the challenges and barriers that cities face from implementing such programs on their own. Federal and state governments could become involved in this effort either by providing support for city programs or by creating direct programs to finance residential and commercial clean energy upgrades.

The economic and environmental need to transition to a low-carbon economy is now at the forefront of energy science, engineering, and policy discussions in the U.S. and internationally. Former Vice President Gore has called for a 100% decarbonization of our electricity system over 10 years [2] and California, Japan, and the UK are notable for a growing list of municipalities legislating 70% or more emissions reduction goals over the next four to five decades. Thus far much of the effort has been focused on technology and policy solutions, with very little attention given to how this change can be enabled through financing. This program not only opens the door to an entirely new source of funds, but rewards the investment in clean energy and energy efficiency.

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Daniel Kammen is the Class of 1935 Distinguished Professor of Energy in the Energy and Resources Group, the Goldman School of Public Policy, and the Department of Nuclear Engineering. Director, Transportation Sustainability Research Center and Founding Director, Renewable and Appropriate Energy Laboratory. Kammen is a member of the Intergovernmental Panel on Climate Change that shared the 2007 Nobel Peace Prize. He is attending the COP-14 meeting in Poznan Poland as a member of the delegation of the United Nations Environment Program.

References:

[1] Nemet, G. F. and D. M. Kammen (2007). "U.S. energy research and development: Declining investment, increasing need, and the feasibility of expansion." Energy Policy 35(1): 746-755.

[2] Speech available at: http://www.wecansolveit.org/content/pages/304 (accessed 11/24/08).