Raters' Role in Environmental Trading

January 01, 2008
Climate Solutions Special Issue
A version of this article appears in the Climate Solutions Special Issue issue of Home Energy Magazine.
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Environmentalists, ordinary citizens, and some politicians are becoming increasingly alarmed by the effects of climate change, and are loudly calling for federal and state governments to adopt serious policies to combat it. It is vital that the rating community be at the forefront of these efforts, for both altruistic and financial reasons. First, raters bring invaluable skills to all efforts to reduce greenhouse gas emissions (GHG) from the building sector. And second, combating climate change offers raters many valuable business opportunities.

One opportunity that will surely benefit the building and rating industry is environmental trading. Environmental trading takes a market-based approach to removing pollutants from the environment. Rather than simply being required to reduce pollutant emissions to meet a regulated target, under a market-based approach companies and utilities are given a choice. They can meet a regulated target either by reducing their own emissions or by buying credits from companies that have reduced their emissions below the required level. This approach is also known as a cap-and-trade policy, because a cap is set on permitted emissions levels, and companies can choose either to meet that cap or to trade allowances in order to stay in regulatory compliance. Markets for trading sulfur oxides (SOx), nitrogen oxides (NOx), and mercury allowances already exist in the United States to reduce the emissions of those pollutants. A market for trading carbon dioxide (CO2) allowances also exists in the United States, although it is not as well known or as active as its counterparts in Europe and Asia.

Building Performance Meets Environmental Trading

Currently, more than ten bills have been submitted to Congress that include cap-and-trade provisions for carbon dioxide (CO2) emissions or, in the case of one bill, a carbon tax. Most bills require emissions to be stabilized by 2010 to 2012. By 2015 to 2020, depending on the bill, major reductions would have to be accomplished, although the amount of those reductions varies greatly from bill to bill. Traditionally, environmental regulation has been aimed at tailpipes and smokestacks. Today, most people still think of pollution and global warming as problems caused by emissions from automobiles and factories—and those sources certainly contribute to the problem. However, energy use in residential and commercial buildings accounts for roughly 40% of CO2 emissions, and residential energy use alone accounts for 21% of CO2 emissions. Retrofitting existing buildings so that they perform better and use less energy, as well as creating energy-efficient new buildings, can help our country to meet CO2 reduction targets.

How can raters both promote and profit from efforts to reduce CO2 emissions? Environmental trading offers a new market opportunity for raters—one that will not require them to learn a new skill or set of standards. The modeling and inspection procedures developed by the Residential Energy Services Network (RESNET), procedures that are used to document efficiency improvements and energy savings, can also be used to calculate the resulting CO2 emissions reductions. These emissions reductions can be traded as carbon credits in an environmental trading market. There is no need for additional inspections or software modeling.

In fact, credits from home performance improvements are already being sold in the United States. Conservation Services Group, a nonprofit organization that implements energy efficiency programs, has been compounding the CO2 emissions reductions that result when it makes efficiency improvements in homes, and has been trading those reductions as carbon credits for the past four years (see “Reducing Greenhouse Gases—and Reaping the Benefits,” p. 14).

What Raters Should Do

Carbon cap-and-trade systems have already been adopted by a few groups of states across the United States, and more such groups are currently being formed. It is uncertain, though, to what extent energy savings from improvements to commercial and residential buildings will be included in any of these systems. Raters should argue for the inclusion of residential and commercial buildings in all such cap-and-trade programs. Raters can begin by forming partnerships with industry, consumer, and environmental advocacy groups, and by participating in local regulatory meetings. By advocating in this way on the local, state, and regional levels, raters can do their part to ensure that buildings are included in regional cap-and-trade programs, and in any future national program.

Many regulators and legislators are unaware of RESNET’s work in creating a national standard to measure and verify the energy performance of homes. Raters need to educate all interested parties to ensure that a HERS rating becomes a necessary step in any residential carbon trading.

Steve Baden is executive director of RESNET, which is based in San Diego, California.

For more information:

RESNET has adopted a plan of action for the rating industry on environmental certificate trading. To read this plan, go to www.resnet.us/about/policy/Environmental_Trading.pdf

RESNET has also posted information on energy efficiency and environmental certificate trading at www.resnet.us/trading

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