Open Letter to Pres. Obama on reducing GHG-emissions

Streamlining Incentives is the Low Cost/No-Cost Option to Speed up Reductions in GHG-emissions by Accelerating Renewable Energy Retrofits and creating Property Appreciation

The following is an open letter to President Barack Obama about ideas to promote faster reductions of GHG-emissions by simplifying incentives for renewable energy retrofits, and basing programs on correct economic and financial principles so that the benefits accrue to the investor (property owner) in the form of property appreciation, and not to the energy companies or equipment manufacturers as is now often the case.
Note that every major statement is backed up with references to relevant articles on this blog. Additionally the search functions allows the reader to drill down deeper.

Open Letter to President Obama on Reducing GHG-emissions, by increasing renewable energy retrofits and creating property appreciation

Note: The letter was sent on the letterhead of DaBx Demand Side Consulting, Inc.

August 8, 2013

President Barack Obama
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President:

Re: Climate Change – A Proposal to Make Major Progress to Reduce GHG-Emissions from Buildings by Streamlining Processes.

Please consider this an open letter. I may send copies to such federal and New York agencies and officials as may seem relevant given the topic, and/or the press, and/or publish the information online.

There are a few very simple steps your administration could pursue that would unlock the forces of change to reduce GHG-emissions —without any need for major funding. Such action would also go a long way to shoring up real estate markets and boosting long-term economic competitiveness. These steps would entail both the radical simplification of many subsidies, incentives and programs, along with the proper use of financial solutions such as PACE bonds. These and other vehicles can be used to provide the financing to meet up-front capital requirements for renewable retrofits and to build asset values in real estate markets.

In order to achieve these real estate value-enhancing goals, we would need to abandon all subsidies and incentives for specific technologies, such as ITC for Solar PV( but not for certain other technologies which might be superior fora given building). By targeting the incentives to property owners for GHG emissions reductions for individual buildings, instead of by technologies used, tremendous creativity will be unleashed.

Any engineer experienced in this field has seen optimal solutions rejected because some accountant comes along to point out a tax credit on one technology versus another. Very often, wrong solutions are specified to qualify for incentives. Imagine how much better we could do if a 30% ITC were awarded pro-rata for 50% reduction in GHG-emissions in a building. Perhaps even award extra percentage point for every 10% above 50% reduction. Things would change quickly.

This problem gets really out of hand when finance programs target specifics such as the use of Energy Star rated equipment. Sometimes, the wrong equipment will be selected because the financing depends on it. Again, the incentives should be based on the overall goal of reducing GHG-emissions at the property level. There should be simple, agreed regional standards for such improvements and the related financial computations.

This building-focused approach has been proposed by us in our publication, the DaBx Renewable Energy Retrofit Portfolio Standard (copy enclosed) and is available with supporting references here:

Also, our proposal has been published in our report to New York City, DaBx PlaNYC2020, in the new 2013 edition, available here:

A copy will be gladly provided upon request.

The individual issues referred to above have been discussed extensively on my blog at and in the annotated version of the DaBx Renewable Energy Portfolio Standard for Multi-Family Buildings. As previewed earlier, pressing issues documented by our firm include a) the distortions created by ill-conceived incentives b) the distortions in decision making caused by prioritizing energy efficiency over renewable energy, as well as, c) the way many programs incentivize counter-productive financial decisions, whereas d) under a 30 year Capital Asset Pricing, the attractiveness of renewable energy would move to the top of the list. For your ready reference, I have highlighted key issues and proposed fixes as Enclosure I to this letter with references to the relevant DaBx commentaries and documents.

Commending the above to your attention.


Rogier F. van Vlissingen


Encls. DaBx Renewable Energy Retrofit Portfolio Standard for Multi-family Buildings.

NYS – Governor Andrew Cuomo
NYC – Mayor Michael Bloomberg
EPA – Gina McCarthy, Administrator
DOE – Dr. Ernest Moniz, Secretary of Energy
New York Times – Jill Abramson, Executive Editor
Bloomberg Business News – Matthew Winkler, Editor In Chief
The Wall Street Journal – Gerard Baker, Managing Editor
Fannie Mae – Timothy J. Mayopoulis, President and CEO
Freddie Mac – Donald H. Layton, CEO

Enclosure I – Open Letter to President Obama

Proposed Building Code and Energy Policy Revisions to Reduce GHG Emissions and Enhance Real Estate Values

Highlights from DaBx Demand Side Solutions
Commentary & Publications

  1. Programs that prioritize energy efficiency as a proxy for reducing of GHG-emissions fail, because they will marginalize renewable energy in favor of efficiency improvements of existing carbon-based infrastructure. Thereby, they effectively crowd out investment in renewables that would, in many cases, create greater enhancements to property values than available through carbon-based energy efficiency. Improving energy efficiency is not a goal in its own right, as it merely lowers the cost and increases demand for energy. Example:
  2. Incentives directed at energy efficiency without regard to the prior (make or buy) decision regarding carbon-based energy versus renewable energy, will always work out as a subsidy to carbon-based energy due to sunk costs. Example:
  3. Incentives directed towards specific technologies will tend to destroy property values given, first, the inappropriate technology choices they foster in many cases, and, second, their tendency to encourage property owners to make capital decisions on energy infrastructure based on payback of the equipment, instead of based on long term cash flow and increasing building values. Example:
  4. When securitized, the performance of energy-efficiency loan portfolios has not been an unqualified success, because the valuations are dubious. Net zero construction has been the fastest growing segment of the construction market for 20 years. Therefore, the value of reducing your energy use 20-30% over last year diminishes as this new construction upgrades the overall stock of buildings. Energy-efficiency driven finance is merely the latest form of predatory lending offered by Wall Street to Main Street, hi-jacking property appreciation from its rightful owners. Example: Solar PPAs – the current fad:
  5. The single most positive change to help bring about rapid reductions in building-level GHG-emissions—have the financial industry make mortgage lending for rehab/retrofits, including PACE bonds and similar vehicles, contingent upon 30-year cash flow projections for the property. The valuation extension would have the financial effect property by property of moving energy from liability side of the owners balance sheet to the asset side through renewable investment. Once 30-year cash flow models become the norm, the marketplace will start to appreciate that 30 years of no energy bills beats 20-30% of energy “savings.” Moreover, emphasizing property values is the proper, capitalistic approach, in lieu of the 20 year top down plans which are now the norm. These plans reek of the toothless 20 year economic plans proffered in the former Soviet Union to protect the status quo. Such plans subsidize the shareholders of energy companies at the expense of property owners and are generally designed to fail. Example:
  6. Two simplifications go hand in hand here: 1) policy and regulations should focus on reducing GHG-emissions and 2) building owners should focus on investments that enhance long term property values. Together, these complementary priorities can eliminate vast amounts of red tape and unleash the economic forces that will drive the shift to a less carbon intensive economy.
  7. The place to enforce the application of a proper 30 year cash flow model of the property is in the application process for financing and/or incentives. The model of current applications encourages financially counter-productive decision making, which benefits either energy companies (in the case or energy efficiency), or equipment manufacturers (ITC and other incentives), not the property owners, by emphasizing payback of specific equipment or efficiency measures. By shifting to a reporting of the long term improvement in property values, while qualifying for incentives based on reducing GHG-emissions, the correct habits can be enforced seamlessly as part of the process.

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Conclusion: Simplifying Incentives will Speed Up Reductions in GHG-emissions with Renewable Energy Retrofits and Speed Up Property Appreciation

Reducing GHG-emissions can be speeded up tremendously by simplifying regulations and targeting them better towards the real objective, instead of proxies for that objective, which always fail. Renewable energy retrofits in buildings directly reduce GHG-emissions at the source, and will serve to increase property values by moving energy from liabilities to assets for a property, creating property appreciation and constructive engagement of the property owner in reducing GHG-emissions with simple incentives to stimulate those investments.