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How Cap and Trade Affects Green Building Through Revenue Spending

USGBC (U.S. Green Building Council)'s picture

The U.S. Green Building Council is committed to transforming the way our buildings are designed, constructed and operated through LEED — the top third-party verification system for sustainable...

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  • Aug 24, 2017

The California legislature recently passed a 10-year extension to cap and trade. With the graphics below, USGBC gives you a closer look at the proportion of emissions being regulated in various sectors of the California economy, as well as how revenues are distributed to sustainability initiatives.

Buildings and the environment

Greenhouse gas (GHG) emissions have many sources, including agriculture, transportation, industrial processes and fuel and electricity for buildings. This pie chart estimates the breakdown of emissions in California by sector:

California GHG emissions
This emissions profile was created combining CARB emissions data and U.S. electricity consumption data. According to the data, residential and commercial buildings are responsible for 25 precent of California’s GHG emissions. The estimate is conservative, since there are most certainly GHG-emitting buildings in the “industry” and “agriculture” categories.

So, with buildings being responsible for about a quarter of GHG emissions, how has cap and trade addressed this important sector?

Financing through the GGRF

Cap and trade is most clearly connected to buildings through Greenhouse Gas Reduction Fund (GGRF) spending. The revenues from selling allowances in the trading scheme are collected in the GGRF and distributed to several agencies, such as Caltrans and the Air Resources Board (ARB), to invest in GHG emissions reductions in their respective sectors.

To date, a total of $3.4 billion has been allocated through GGRF to 23 different programs or initiatives since the cap-and-trade program began. The programs that have funded projects that reduce GHG emissions from buildings are summarized in the table below.

Building-Related GGRF-Funded Programs
Program Total Funding Description
Low-Income Weatherization Program $174M Finances rooftop PV, solar thermal, and weatherization measures in disadvantaged communities
Waste Diversion $71M Funding for expanding compost and recycling facilities
Water Energy Grant Program $50M Finances water conservation and efficiency measures that also have energy savings
Energy Efficiency in Public Buildings $20M Finances lighting, controls, HVAC, etc., improvements in state universities and courts
State Water Project Turbines Program $20M Invests in hydro energy turbine efficiency, which will produce electricity for building consumption
Technical Assistance $2M Funding for training in low-income communities on energy and water efficiency improvements
Transformative Climate Communities (TCC) TBD Specific projects TBD, expected to benefit buildings, transportation, green infrastructure, and land conservation
Total Building Funding $337M ($3.4B total GGRF spending)

If these building-related programs are compared to the remaining GGRF programs (leaving out TCC and administrative fees), as in the pie chart below, buildings would account for 12 percent of current GGRF funding to date. Transportation has the largest cut of the pie, with the majority of its funding being distributed to rail expansion, low-carbon transit (electric and fuel-efficient vehicles), and transit-oriented development for affordable housing.

GGRF program spending categorized by the impacted sector.
The funding portfolio comes out disproportionately to the emissions profile of the sectors in the first graph. Transportation emissions are about 1.5 times greater than building emissions, yet transportation receives almost seven times as much funding.

There are a variety of complicating factors that the state must consider when allocating the funding, such as the existing programs and funding, politics, tractability and how likely it is that an investment will have an impact.

Making the money go further

Of the GGRF funds that do target buildings, it helps that they are being invested where most needed: in existing buildings. All the programs in the table above fund energy efficiency in existing buildings or renewable energy that they can use. However, the GGRF could be prioritizing energy efficiency interventions, which tend to be less expensive than renewable energy generation and also support grid reliability.

In short, GGRF proceeds alone do not equitably target building emissions; however, the programs that are funded do have a valuable impact on greening the existing building stock. Furthermore, it is difficult to determine exactly what percentage funding buildings should rightfully receive due to complicating factors.

Learn more about cap and trade in California.

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