Making Buildings Part of the Climate Solution with Flexible Innovative Financing

Lack of attractive financing remains one of the most significant barriers to energy-efficiency improvements in commercial buildings. This paper examines a flexible financing policy that would support state and local initiatives via loan loss reserves, tax lien financing, revolving loans, performance contracts, and on-bill programs. We examine the impact of different levels of subsidy covering different numbers of technologies, ultimately selecting a 10% subsidy for 64 qualifying technologies. This policy would save almost half a quad of energy in 2020 and 1.04 quads in 2035, producing net social benefits of $105 billion and a benefit/cost ratio of 1.9. Technologies with significant growth in market share include advanced fluorescents and variable-air-volume ventilation systems. Case studies of other technologies illustrate the advantage of optimizing financial assistance to reflect product maturity and cost-competiveness. A 10% subsidy would produce an estimated ten-fold increase in the amount spent on highefficiency equipment in 2035, and the $3.9 billion subsidy in that year would have only an 11% rate of free ridership.

• Marilyn A. Brown

Making Buildings Part of the Climate Solution with Flexible Innovative Financing

• Economic Development and Smart Cities

• School of Public Policy