Dispatch From Davos: The Green Economic Solution Is Here At Work And Home

Here is the conversation starter I'm putting on the table when I speak today at the World Economic Forum at Davos: Why are we letting supply side obstacles -- lack of capital, shortage of training, need for access to materials and technologies -- derail what stands to be the single best immediate-term route to a global economic recovery?

There are about 120 million existing homes in the U.S., and about 5 million commercial buildings comprising more than 71 billion square feet of space.

And virtually every one of them is an energy hog.

Virtually every one of them has a plumbing system that literally flushes our potable water down the drain. Energy expenses alone in U.S. commercial buildings total more than $100 billion a year.

This is the norm in every country across the world, and it's not sustainable.

Bold action to bring green building to scale is the fastest way to meet current economic and environmental challenges, put millions to work in green jobs and save families and businesses billions of needed dollars.

Using something as mundane as buildings as the lever that moves the global economy forward seems almost counter-intuitive. But for those of us who see the world in the simple terms of paychecks and savings accounts, it sounds straightforward enough to actually work.

The LEED rating system, Green Star, BREEAM and others provide a road map for improving the energy performance of existing buildings and creating millions of jobs financed through energy savings.

Last summer, the U.S. Green Building Council sponsored a McKinsey study that showed that investing in the energy efficiency of buildings represents a powerful and strategic energy and climate solution that, combined with other non-transportation initiatives, could:
  • Reduce U.S. energy consumption by 23 percent by 2020
  • Save the U.S. economy1.2 trillion
  • Reduce greenhouse gas emissions by 1.1 gigatons annually

One of the most significant paths to financing these retrofits, and reaping the tremendous benefits, is a paid-from-savings approach that leverages the savings generated from building system upgrades.

Typically these upgrades are straightforward - replacing boilers, chillers and water fixtures; upgrading lighting systems; and installing building automation systems.

A recent Adobe project is an example of using a paid-from-savings approach to finance and implement green performance measures. With a $2.1 million investment in energy and environmental retrofits, Adobe is saving $1.5 million in energy and water costs annually, making for a 91 percent return on investment with a payback in just 1.1 years.

The iconic Empire State Building is undertaking green retrofits that represent $20 million of a $500 million makeover. These retrofits will reduce energy use by 19 percent in the initial stages of the upgrade, increasing over full implementation to a 38 percent reduction in total energy use. This will save $4.4 million in energy costs annually and will prevent 105,000 metric tons of greenhouse gas emissions over the next 15 years.

The building's owners, Wein & Malkin, used energy performance contracting (EPC), an approach that pays for the building upgrades from energy cost savings generated down the line. This is aside from the retrofit's enhancement to the building's marketability and asset value.

Similar retrofits can occur right now, across America -- and across the globe.

On the residential side, the government has an important role to play, and the U.S. stimulus legislation offers many advantages. As an example, the City of Houston began piloting a program to improve energy efficiency in lower income communities in 2006 through a partnership with the local utility. Efficiencies of upwards of 20 percent were achieved through simple weatherization measures with payback periods of approximately two years. The average annual savings of more than $800 per household was significant to families, not to mention the CO2 reduction and other environmental benefits.

The program has continued to grow, and The Mayor's Office of Environmental Programming is currently writing grants utilizing recovery dollars. Major programs include the Department of Energy's Weatherization Assistance Program and Efficiency Conservation Block Grant, and the Housing and Urban Development Department's Assisted Housing Stability and Energy and Green Retrofit Investments program.

The common thread among these projects is the jobs that were created to get the work done. In fact, we're confident that green building will support 7.9 million U.S. jobs and pump $554 billion into the American economy -- including $396 billion in wages -- over the next four years (2009-2013).

Green construction spending currently supports more than 2 million American jobs and generates more than $100 billion in gross domestic product and wages. The economic impact of the total green construction market from 2000 to 2008, the study found, contributed $178 billion to U.S. gross domestic product; created or saved 2.4 million direct, indirect and induced jobs; and generated $123 billion in wages.

In many cases these jobs are skilled and semi-skilled trades jobs that can begin to replace lost manufacturing jobs. There, we must address the supply side obstacle of to training. We must expand current programs and create tax incentives to encourage individuals and companies to take advantage of them; create new programs in our vocational schools; and engage our union craftspeople -- anything it takes to field this green workforce as fast as possible.

We can, and must, do much more to leverage the opportunity for a better economy and better environment that's all around us, right here at home.

And so I'm going to spend my week in Switzerland trying to push the conversation back to the United States.