The Sustainable Home Blog

“Green or environmental accounting describes an effort to incorporate environmental benefits and costs into economic decision making.” - Gernot Wagner

If you didn’t think economic and accounting theory were important in our lives, consider this.

Much of what enters our national model energy codes is a some point filtered through a cost benefit analysis (CBA). CBA’s are subject to the principle of “lies, damn lies, and statistics”, in that much like statistics their end product is subject to underlying assumptions like the future cost of energy and discount rates (see CBA Failings). For example, the requirements for insulation levels in our codes is decided by cost benefit analysis which mysteriously always results in requirements that correspond to the exact thickness fiberglass batt that can fit into a 2×4 or 2×6 wall cavity or a 2×10 ceiling cavity.

Green, environmental, or social accounting would add in other factors to a CBA such as:

• the cost of air pollution
• the cost of climate change due to greenhouse gas emissions
• the benefit of insuring energy supply security

This would give us a “sustainable” Green CBA methodology that would transform our code requirements.

The EU and even China has already started moving in this direction, but the politics of vested interests have blocked progress in the U.S. Back in 1993 the Bureau of Economic Analysis, the official bookkeeper of the U.S. economy, did began working on a green accounting system called Integrated Environmental and Economic Accounts. However, the initial results released in 1994 showed that GDP numbers were overstating the impact of mining companies to our nation’s economic wealth. Mining companies didn’t like those results, and it didn’t take long for Capitol Hill to react. Alan Mollohan, a Democratic House Representative from West Virginia’s coal country, sponsored an amendment to the 1995 Appropriations Bill that stopped the Bureau of Economic Analysis from working on revising the GDP and that’s where things stand today.

You can imagine Owen Corning’s response to the application of a Green CBA approach to our current insulation requirements. Consider for a moment the effect a carbon tax would have on the our national requirements for insulation. I’ll use Sweden as a model. In an effort to account for the environmental costs of fossils fuels, in 1991 Sweden enacted a carbon tax of $100 per ton (raised to $150 in 1997) CO2 emitted. If the U.S. were to enact a $100/tCO2 carbon tax it would increase the current cost of natural gas by about 75% and current cost of coal fired electricity by about 70%.

Since the basis for code requirements for insulation are primarily driven by energy costs, if the social and environmental costs of energy were included in a “green” CBA analysis, insulation requirements would increase by the order of 70%.

… more on Sustainable Economics

“To understand what sustainable economics is, and why it would be superior to conventional economics, we need to start with a brief recap of conventional economics. I’ll need to go through a number of definitions and distinctions, but this is far more than an academic exercise. The conventional economics concepts I’ll be describing provide the basis on which those in power all over the world (which to some degree includes most of us in the rich industrialized countries) justify the destruction of the Earth. It would be hard to find a more pervasive, pernicious and powerful evil than the seemingly innocent concepts that currently rule our economic lives. Let me be more precise, it is not so much the concepts on their own - they have served an historically useful role. The real evil is the continued dominant use of these concepts long after they have become seriously outdated and destructive. This is indeed the belly of the beast, and until we can replace these concepts with a more Earth-friendly approach, our prospects are grim.” - Robert Gilman

“To impact the energy use of all new homes and prevent the resultant environmental degradation due to ever-increasing home sizes and escalating urban sprawl, the US Environmental Protection Agency (EPA) began its new homes initiative in 1995.”

The Energy Star for New Homes program is a voluntary program aimed at promoting energy efficient construction in the residential sector through the strength of the Energy Star “brand”. Since it’s inception in 1995, the program has attracted more than 90 utility partners, 2,900 builders, and 360 providers and rater (verification) organizations.

There is no question the the Energy Star New Homes program has been a huge success. According to conservative estimates, the program could save 0.70 quads of electricity by 2010 and forty billion pounds of CO2 could be prevented from entering the atmosphere if only 10% of US homes were able to meet Energy Star’s guidelines for new construction.

All of this has been accomplished on the strength of Energy Star’s “brand”. A brand which is widely known in the marketplace is considered to have acquired “brand recognition”. When brand recognition builds up to a point where a brand enjoys a critical mass of positive sentiment and trust in the marketplace, it is said to have achieved the status of a “brand franchise”. Energy Star has clearly become a brand franchise with strong recognition within the American buying public. Consumer’s have come to trust the Energy Star label to mean that they are getting the best in energy efficiency.

Builders (usually large builders catering to a large suburban market) have signed on to the program because they want the marketing power of the Energy Star brand to help them sell homes. They also want to do and spend the minimum required (with notable exceptions) to win the Energy Star label. As a result, because the EPA is subject to politics, the Energy Star New Homes requirements tend to get watered down by the lobbying power of vested interests which includes the builders. The end result is undeniably positive, but it is not the “best in energy efficiency” that consumer’s think they are getting.

Green building specifications like Energy Star come with about a 2 to 3% cost premium and merely tweak the status quo by reducing energy consumption over existing U.S. code requirements by a minimum of 15%. By contrast, European green standards like PassivHaus in the UK and Germany come with a 5 to 10% premium and if applied in the U.S. would reduce energy consumption by more than 80%. (see chart for a graphic comparison)

My point is that consumers having been lulled into complacency by their trust in the Energy Star brand are blissfully unaware of what’s possible.