WEBVTT 00:00:00.000 --> 00:00:01.992 align:middle line:90% [SQUEAKING] 00:00:01.992 --> 00:00:02.988 align:middle line:90% [RUSTLING] 00:00:02.988 --> 00:00:03.984 align:middle line:90% [CLICKING] 00:00:03.984 --> 00:00:10.470 align:middle line:90% 00:00:10.470 --> 00:00:12.720 align:middle line:84% DAVID HSU: Welcome to another lecture in my series 00:00:12.720 --> 00:00:15.790 align:middle line:84% on urban energy systems and policy. 00:00:15.790 --> 00:00:16.570 align:middle line:90% Welcome back. 00:00:16.570 --> 00:00:22.160 align:middle line:84% Today I'd like to talk about cities and building energy 00:00:22.160 --> 00:00:23.610 align:middle line:90% policies. 00:00:23.610 --> 00:00:26.700 align:middle line:84% This is an area that I think is really interesting for cities, 00:00:26.700 --> 00:00:29.600 align:middle line:84% but also representative of energy efficiency 00:00:29.600 --> 00:00:30.945 align:middle line:90% efforts in general. 00:00:30.945 --> 00:00:32.570 align:middle line:84% And so what I'll take you through today 00:00:32.570 --> 00:00:37.430 align:middle line:84% is how me and many other people in New York City 00:00:37.430 --> 00:00:40.340 align:middle line:84% help develop building energy policies that we see continue 00:00:40.340 --> 00:00:42.870 align:middle line:90% to be aggressive today. 00:00:42.870 --> 00:00:46.820 align:middle line:84% And just to give you a sense of how this fits in a larger 00:00:46.820 --> 00:00:49.580 align:middle line:84% landscape around environmental policy instruments and energy 00:00:49.580 --> 00:00:54.860 align:middle line:84% efficiency, this is from a chapter by Peter May in 2003. 00:00:54.860 --> 00:00:57.590 align:middle line:84% This is the sort of thing I'd read in graduate school quite 00:00:57.590 --> 00:00:59.540 align:middle line:90% a bit, maybe, at the time. 00:00:59.540 --> 00:01:01.580 align:middle line:84% And a lot of the debate at the time 00:01:01.580 --> 00:01:03.800 align:middle line:84% was about command and control regulation. 00:01:03.800 --> 00:01:06.560 align:middle line:84% What could government simply command 00:01:06.560 --> 00:01:08.952 align:middle line:84% the industry or private actors to do? 00:01:08.952 --> 00:01:10.910 align:middle line:84% And of course, a lot of debate at the time when 00:01:10.910 --> 00:01:13.010 align:middle line:84% I was in graduate school was around charges 00:01:13.010 --> 00:01:16.280 align:middle line:84% and special taxes, most notably carbon taxes. 00:01:16.280 --> 00:01:19.400 align:middle line:84% There had been a lot of success in the 1980s and '90s 00:01:19.400 --> 00:01:22.220 align:middle line:84% with sulfur dioxide abatement taxes. 00:01:22.220 --> 00:01:25.400 align:middle line:84% It started during the first Bush administration. 00:01:25.400 --> 00:01:27.050 align:middle line:84% And a lot of economists looked at this 00:01:27.050 --> 00:01:29.030 align:middle line:84% as an incredibly economically efficient way 00:01:29.030 --> 00:01:31.670 align:middle line:84% to achieve environmental policy outcomes. 00:01:31.670 --> 00:01:34.790 align:middle line:84% Of course, command and control regulation 00:01:34.790 --> 00:01:36.500 align:middle line:84% and charges and special taxes are not 00:01:36.500 --> 00:01:40.550 align:middle line:84% the only ways to achieve our environmental policy goals. 00:01:40.550 --> 00:01:43.670 align:middle line:84% Other ways are economic regulation. 00:01:43.670 --> 00:01:47.070 align:middle line:84% Instead of incentivizing industry to do certain things, 00:01:47.070 --> 00:01:50.270 align:middle line:84% we could also simply pass standards, standards 00:01:50.270 --> 00:01:52.130 align:middle line:84% over what kinds of goods can be sold 00:01:52.130 --> 00:01:55.872 align:middle line:84% or how certain services can be delivered. 00:01:55.872 --> 00:01:57.830 align:middle line:84% We could give incentives or subsidies directly, 00:01:57.830 --> 00:02:00.260 align:middle line:84% including tax credits, a notable feature 00:02:00.260 --> 00:02:02.012 align:middle line:90% of the Inflation Reduction Act. 00:02:02.012 --> 00:02:03.470 align:middle line:84% And of course, government insurance 00:02:03.470 --> 00:02:05.780 align:middle line:84% is a way to subsidize high-risk industries. 00:02:05.780 --> 00:02:07.580 align:middle line:84% For example, the nuclear industry 00:02:07.580 --> 00:02:10.080 align:middle line:84% is heavily insured by the government. 00:02:10.080 --> 00:02:13.460 align:middle line:84% Even then, it has not proven to be cost effective. 00:02:13.460 --> 00:02:15.560 align:middle line:84% Of course, other ways that we provide services 00:02:15.560 --> 00:02:17.450 align:middle line:84% or vital services through government, 00:02:17.450 --> 00:02:20.070 align:middle line:84% the government can directly provide those services. 00:02:20.070 --> 00:02:23.780 align:middle line:84% We can also have government corporations and enterprises. 00:02:23.780 --> 00:02:28.010 align:middle line:84% Both examples exist, where the government owns utilities, 00:02:28.010 --> 00:02:30.200 align:middle line:84% something we'll talk about later. 00:02:30.200 --> 00:02:34.100 align:middle line:84% About 30% of electric utilities are owned by governments. 00:02:34.100 --> 00:02:36.980 align:middle line:84% And about 60% or 70% of water utilities 00:02:36.980 --> 00:02:38.150 align:middle line:90% are owned by governments. 00:02:38.150 --> 00:02:40.910 align:middle line:84% That's essentially direct government provision. 00:02:40.910 --> 00:02:43.140 align:middle line:84% We can set up government corporations-- 00:02:43.140 --> 00:02:45.590 align:middle line:84% Amtrak is a government corporation-- 00:02:45.590 --> 00:02:46.910 align:middle line:90% or special enterprises. 00:02:46.910 --> 00:02:50.750 align:middle line:84% For example, if your city owns an airport or a utility, 00:02:50.750 --> 00:02:53.150 align:middle line:84% it may often be on its own balance 00:02:53.150 --> 00:02:55.670 align:middle line:84% sheet, which is to say that it runs its own agency. 00:02:55.670 --> 00:02:57.170 align:middle line:90% It can issue its own bonds. 00:02:57.170 --> 00:03:00.380 align:middle line:84% It's run for hopefully a profit for the city. 00:03:00.380 --> 00:03:02.660 align:middle line:84% But it essentially is an enterprise 00:03:02.660 --> 00:03:04.500 align:middle line:90% set up to serve the city. 00:03:04.500 --> 00:03:06.230 align:middle line:84% Of course, we know that cities, because 00:03:06.230 --> 00:03:09.440 align:middle line:84% of their economic activity, and wealth, and population, 00:03:09.440 --> 00:03:11.240 align:middle line:84% have tremendous power to influence 00:03:11.240 --> 00:03:13.640 align:middle line:84% the market through contracting and purchasing. 00:03:13.640 --> 00:03:16.380 align:middle line:90% 00:03:16.380 --> 00:03:17.970 align:middle line:84% Finally, there's other ways that we 00:03:17.970 --> 00:03:20.010 align:middle line:84% can try to achieve our market policy goals. 00:03:20.010 --> 00:03:22.920 align:middle line:84% We can implement social regulations. 00:03:22.920 --> 00:03:24.940 align:middle line:84% Vouchers are something that's used quite a bit, 00:03:24.940 --> 00:03:28.020 align:middle line:84% let's say, in school choice, but something that could be used, 00:03:28.020 --> 00:03:31.200 align:middle line:84% let's say, in other areas of our policy. 00:03:31.200 --> 00:03:33.330 align:middle line:84% And tort liability is another aspect 00:03:33.330 --> 00:03:36.120 align:middle line:84% where, again, we can try to limit the liability 00:03:36.120 --> 00:03:37.260 align:middle line:90% of certain industries. 00:03:37.260 --> 00:03:39.210 align:middle line:84% That's essentially another way to provide 00:03:39.210 --> 00:03:42.660 align:middle line:84% insurance or limited liability for certain industries 00:03:42.660 --> 00:03:45.915 align:middle line:84% that we think might be high risk or we want to encourage. 00:03:45.915 --> 00:03:47.790 align:middle line:84% And the thing I plan to spend most of my time 00:03:47.790 --> 00:03:50.250 align:middle line:84% talking about today is public information. 00:03:50.250 --> 00:03:52.800 align:middle line:84% We know the government has a tremendous role in providing 00:03:52.800 --> 00:03:54.450 align:middle line:90% information to the market. 00:03:54.450 --> 00:03:56.670 align:middle line:84% We know sometimes if the market doesn't have-- 00:03:56.670 --> 00:03:59.760 align:middle line:84% or the market lacks information, it will not actually grow. 00:03:59.760 --> 00:04:02.040 align:middle line:84% Or it's very difficult for private actors 00:04:02.040 --> 00:04:05.160 align:middle line:84% to accumulate the information they need to make decisions. 00:04:05.160 --> 00:04:06.990 align:middle line:84% A good example, of course, is the census, 00:04:06.990 --> 00:04:09.120 align:middle line:84% which is embedded in the US Constitution. 00:04:09.120 --> 00:04:13.980 align:middle line:84% We know the census is basically an essential instrument 00:04:13.980 --> 00:04:16.860 align:middle line:84% or essential data set for many businesses 00:04:16.860 --> 00:04:18.250 align:middle line:90% to make their decisions. 00:04:18.250 --> 00:04:21.565 align:middle line:84% This is why the census is so important. 00:04:21.565 --> 00:04:23.190 align:middle line:84% And so this is something that also I've 00:04:23.190 --> 00:04:25.560 align:middle line:84% argued in many papers, but just to highlight 00:04:25.560 --> 00:04:27.630 align:middle line:90% one paper I wrote in 2017. 00:04:27.630 --> 00:04:30.060 align:middle line:84% I hope the title is direct and to the point. 00:04:30.060 --> 00:04:31.710 align:middle line:84% It's called Further Opportunities 00:04:31.710 --> 00:04:33.840 align:middle line:84% to Reduce the Energy Use and Greenhouse Gas 00:04:33.840 --> 00:04:35.310 align:middle line:90% Emissions of Buildings. 00:04:35.310 --> 00:04:37.680 align:middle line:84% It's in the Journal of Planning Education and Research. 00:04:37.680 --> 00:04:40.260 align:middle line:84% My co-authors and I argued, essentially, 00:04:40.260 --> 00:04:43.290 align:middle line:84% that cities actually have many more opportunities to reduce 00:04:43.290 --> 00:04:45.810 align:middle line:84% the energy use and greenhouse gas emissions of buildings, 00:04:45.810 --> 00:04:48.480 align:middle line:84% an area that I've argued to actually result 00:04:48.480 --> 00:04:52.163 align:middle line:84% in a lot of greenhouse gas emissions for countries. 00:04:52.163 --> 00:04:53.580 align:middle line:84% So to give you an example of where 00:04:53.580 --> 00:04:55.705 align:middle line:84% they might have additional powers that we might not 00:04:55.705 --> 00:05:00.600 align:middle line:84% be using, cities collect about 70% of local tax revenue 00:05:00.600 --> 00:05:03.810 align:middle line:84% and about 30% of all state and local taxes in the US. 00:05:03.810 --> 00:05:07.230 align:middle line:84% So through their tax power, they have quite a bit of leverage 00:05:07.230 --> 00:05:10.530 align:middle line:90% over the private sector. 00:05:10.530 --> 00:05:13.350 align:middle line:84% In terms of infrastructure, cities and state and local 00:05:13.350 --> 00:05:16.140 align:middle line:84% governments own about 50% or more than 50% 00:05:16.140 --> 00:05:17.490 align:middle line:90% of all infrastructure. 00:05:17.490 --> 00:05:21.350 align:middle line:84% They do about 75% of the spending on infrastructure. 00:05:21.350 --> 00:05:24.200 align:middle line:84% And as I mentioned before, we often through cities 00:05:24.200 --> 00:05:27.170 align:middle line:84% own about a third of electric utilities and 2/3 00:05:27.170 --> 00:05:28.853 align:middle line:90% of water utilities. 00:05:28.853 --> 00:05:30.770 align:middle line:84% And just to give you an example of departments 00:05:30.770 --> 00:05:33.590 align:middle line:84% that you could work in in the future that might have leverage 00:05:33.590 --> 00:05:37.910 align:middle line:84% over potential decarbonization opportunities, the Department 00:05:37.910 --> 00:05:38.900 align:middle line:90% of Finance. 00:05:38.900 --> 00:05:40.910 align:middle line:84% The Department of Finance, again, this 00:05:40.910 --> 00:05:45.110 align:middle line:84% is where all those tax revenues are gathered and then disbursed 00:05:45.110 --> 00:05:46.490 align:middle line:90% into the city government. 00:05:46.490 --> 00:05:48.320 align:middle line:84% That gives you a tremendous amount of power 00:05:48.320 --> 00:05:50.463 align:middle line:84% if you control where the money is raised 00:05:50.463 --> 00:05:51.380 align:middle line:90% and where it flows to. 00:05:51.380 --> 00:05:54.440 align:middle line:84% Also has tremendous implications for equity. 00:05:54.440 --> 00:05:58.310 align:middle line:84% The law department is essential to find out-- 00:05:58.310 --> 00:06:03.300 align:middle line:84% or to craft laws or policies that are lawful and effective. 00:06:03.300 --> 00:06:04.700 align:middle line:84% The fire department obviously has 00:06:04.700 --> 00:06:08.240 align:middle line:84% codes over how buildings are built. Power, water, 00:06:08.240 --> 00:06:09.710 align:middle line:90% housing authorities. 00:06:09.710 --> 00:06:12.590 align:middle line:84% New York City in particular owns a tremendous amount 00:06:12.590 --> 00:06:13.490 align:middle line:90% of housing stock. 00:06:13.490 --> 00:06:16.220 align:middle line:84% Other large cities own a lot of housing stock. 00:06:16.220 --> 00:06:17.900 align:middle line:84% And schools-- school buildings are 00:06:17.900 --> 00:06:21.650 align:middle line:90% where kids spend a lot of time. 00:06:21.650 --> 00:06:24.440 align:middle line:84% We have tremendous opportunities to improve the environment 00:06:24.440 --> 00:06:25.620 align:middle line:90% of school buildings. 00:06:25.620 --> 00:06:27.800 align:middle line:84% So to give you an example of some of the departments 00:06:27.800 --> 00:06:31.310 align:middle line:84% involved just in New York City with the building sector, 00:06:31.310 --> 00:06:33.680 align:middle line:84% there's the Department of Citywide Administrative 00:06:33.680 --> 00:06:37.250 align:middle line:84% Services, DCAS; the Department of Design and Construction, 00:06:37.250 --> 00:06:40.820 align:middle line:84% DDC; the Department of Buildings, DOB; 00:06:40.820 --> 00:06:44.330 align:middle line:84% the Department of Finance, DOF; the Office of Long-Term 00:06:44.330 --> 00:06:47.870 align:middle line:84% Planning and Sustainability-- at the time, it was OLTPS-- 00:06:47.870 --> 00:06:50.330 align:middle line:84% and the New York City Housing Authority, NYCHA. 00:06:50.330 --> 00:06:54.440 align:middle line:84% All have a role to play in governing the building 00:06:54.440 --> 00:06:57.400 align:middle line:90% stock of New York City. 00:06:57.400 --> 00:07:00.250 align:middle line:84% So just to take a trip down memory lane, 00:07:00.250 --> 00:07:02.950 align:middle line:84% there have been a variety of New York City sustainability plans. 00:07:02.950 --> 00:07:05.500 align:middle line:84% I actually wrote that one on the left, Sustainable New York 00:07:05.500 --> 00:07:06.100 align:middle line:90% City. 00:07:06.100 --> 00:07:10.270 align:middle line:84% I wrote it as a fellow for the design trust of New York City. 00:07:10.270 --> 00:07:13.720 align:middle line:84% It was one of the first sustainability plans written 00:07:13.720 --> 00:07:15.490 align:middle line:90% for New York City. 00:07:15.490 --> 00:07:17.290 align:middle line:84% I also worked as a fellow on one of 00:07:17.290 --> 00:07:19.420 align:middle line:84% the first internal government sustainability plans, 00:07:19.420 --> 00:07:21.460 align:middle line:90% started in 2003. 00:07:21.460 --> 00:07:24.070 align:middle line:84% And in 2005, the city of New York 00:07:24.070 --> 00:07:28.210 align:middle line:84% issued their first what they called PlaNYC 2030. 00:07:28.210 --> 00:07:30.790 align:middle line:90% It reads as Plan NYC. 00:07:30.790 --> 00:07:33.670 align:middle line:84% It was issued in 2005 or developed in 2005 00:07:33.670 --> 00:07:35.500 align:middle line:90% and I think issued 2006. 00:07:35.500 --> 00:07:38.590 align:middle line:84% But it was a comprehensive suite of plans from the Bloomberg 00:07:38.590 --> 00:07:41.740 align:middle line:84% administration to try to improve the environment in New York 00:07:41.740 --> 00:07:44.050 align:middle line:84% City and frankly to establish New York City 00:07:44.050 --> 00:07:46.030 align:middle line:90% as an environmental leader. 00:07:46.030 --> 00:07:48.400 align:middle line:84% The plan was updated in 2011, which 00:07:48.400 --> 00:07:51.410 align:middle line:90% is the cover on the right. 00:07:51.410 --> 00:07:54.220 align:middle line:84% And so to take us back for a second where 00:07:54.220 --> 00:07:56.650 align:middle line:84% the environmental discussion was at the time, this, 00:07:56.650 --> 00:07:59.830 align:middle line:84% again, is the McKinsey 2007 greenhouse gas reduction 00:07:59.830 --> 00:08:01.060 align:middle line:90% report that I showed you. 00:08:01.060 --> 00:08:02.980 align:middle line:84% This the marginal abatement curve. 00:08:02.980 --> 00:08:05.380 align:middle line:84% The argument I made to you last time in class 00:08:05.380 --> 00:08:07.810 align:middle line:84% was that you should be on the left-hand side of the curve 00:08:07.810 --> 00:08:09.520 align:middle line:84% because these are all negative costs. 00:08:09.520 --> 00:08:12.670 align:middle line:84% These should be easy things for you to sell in your career. 00:08:12.670 --> 00:08:15.220 align:middle line:84% These right-hand side things may be necessary 00:08:15.220 --> 00:08:17.650 align:middle line:84% but are harder to sell simply because it costs money 00:08:17.650 --> 00:08:19.150 align:middle line:84% to reduce greenhouse gas emissions. 00:08:19.150 --> 00:08:22.570 align:middle line:84% Again, on the left-hand side, we can save money and reduce 00:08:22.570 --> 00:08:23.788 align:middle line:90% greenhouse gas emissions. 00:08:23.788 --> 00:08:25.330 align:middle line:84% But if you look closely at everything 00:08:25.330 --> 00:08:28.300 align:middle line:84% on the left-hand side, you'll notice that everything here is 00:08:28.300 --> 00:08:29.740 align:middle line:90% essentially buildings related. 00:08:29.740 --> 00:08:32.330 align:middle line:84% We have residential electronics, residential buildings, 00:08:32.330 --> 00:08:34.960 align:middle line:84% commercial buildings, residential water heaters, 00:08:34.960 --> 00:08:36.940 align:middle line:84% commercial buildings control systems, 00:08:36.940 --> 00:08:40.250 align:middle line:84% and more commercial electronics, virtual lighting, and so on. 00:08:40.250 --> 00:08:42.159 align:middle line:84% So many things on the left-hand side 00:08:42.159 --> 00:08:44.440 align:middle line:84% save money, reduce greenhouse gas emissions, 00:08:44.440 --> 00:08:46.950 align:middle line:90% and are related to buildings. 00:08:46.950 --> 00:08:49.470 align:middle line:84% And so just to again maybe emphasize 00:08:49.470 --> 00:08:51.677 align:middle line:84% the importance of the New York City building sector, 00:08:51.677 --> 00:08:53.760 align:middle line:84% we know it's some of the most valuable real estate 00:08:53.760 --> 00:08:54.610 align:middle line:90% in the world. 00:08:54.610 --> 00:08:58.590 align:middle line:84% And just to break it down for a moment, at the time, 00:08:58.590 --> 00:09:01.290 align:middle line:84% the New York City government thought about 75% 00:09:01.290 --> 00:09:04.290 align:middle line:84% of all greenhouse gas emissions come from buildings. 00:09:04.290 --> 00:09:07.380 align:middle line:84% The sector size is roughly about 1 million total buildings 00:09:07.380 --> 00:09:08.640 align:middle line:90% in New York City. 00:09:08.640 --> 00:09:12.210 align:middle line:84% And a key point that influenced the policymaking 00:09:12.210 --> 00:09:15.000 align:middle line:84% around how to affect existing buildings 00:09:15.000 --> 00:09:18.600 align:middle line:84% was that one estimate was that 85% of all buildings in New 00:09:18.600 --> 00:09:21.990 align:middle line:84% York City that would be there in 2030 already exist. 00:09:21.990 --> 00:09:24.540 align:middle line:84% And I think roughly 70% of all the buildings 00:09:24.540 --> 00:09:27.180 align:middle line:84% that will be there in 2050 are already existing. 00:09:27.180 --> 00:09:30.570 align:middle line:84% So if you want to influence the energy use or greenhouse gas 00:09:30.570 --> 00:09:33.450 align:middle line:84% emissions of buildings, you have to influence the buildings that 00:09:33.450 --> 00:09:34.260 align:middle line:90% are already there. 00:09:34.260 --> 00:09:36.385 align:middle line:84% We know New York City's already tremendously dense. 00:09:36.385 --> 00:09:37.990 align:middle line:84% It's already tremendously valuable. 00:09:37.990 --> 00:09:41.910 align:middle line:84% How do we get these owners and these privately owned buildings 00:09:41.910 --> 00:09:44.610 align:middle line:90% to change their energy use? 00:09:44.610 --> 00:09:46.980 align:middle line:84% And again there's one point that came out 00:09:46.980 --> 00:09:50.400 align:middle line:84% of some of the analyses of the property tax data. 00:09:50.400 --> 00:09:52.380 align:middle line:84% It was large versus small buildings. 00:09:52.380 --> 00:09:55.560 align:middle line:84% Only 2% of all buildings New York City are above 50,000 00:09:55.560 --> 00:09:58.920 align:middle line:84% square feet, but they represented about 50-- a half-- 00:09:58.920 --> 00:10:01.890 align:middle line:84% 50% of all New York City square footage. 00:10:01.890 --> 00:10:04.440 align:middle line:84% And one estimate was they roughly 00:10:04.440 --> 00:10:06.900 align:middle line:84% were responsible for about 48% of all the energy 00:10:06.900 --> 00:10:07.800 align:middle line:90% use in the city. 00:10:07.800 --> 00:10:09.690 align:middle line:84% I can't actually find a source for that. 00:10:09.690 --> 00:10:12.760 align:middle line:84% And honestly, some of these numbers at the time, 00:10:12.760 --> 00:10:15.840 align:middle line:84% looking back at it, I'm not sure how strong the sourcing was. 00:10:15.840 --> 00:10:18.510 align:middle line:84% But this definitely influenced how environmental policies 00:10:18.510 --> 00:10:19.745 align:middle line:90% were made in New York City. 00:10:19.745 --> 00:10:21.870 align:middle line:84% And of course, we know there's tremendous diversity 00:10:21.870 --> 00:10:23.225 align:middle line:90% in buildings in New York City. 00:10:23.225 --> 00:10:25.350 align:middle line:84% We have commercial buildings, industrial buildings, 00:10:25.350 --> 00:10:28.320 align:middle line:84% institutional buildings, like hospitals and schools. 00:10:28.320 --> 00:10:29.820 align:middle line:90% We have multifamily residential. 00:10:29.820 --> 00:10:31.020 align:middle line:90% We have mixed-use buildings. 00:10:31.020 --> 00:10:32.800 align:middle line:84% And those are the large buildings alone. 00:10:32.800 --> 00:10:34.440 align:middle line:84% We know that of the million buildings, 00:10:34.440 --> 00:10:35.940 align:middle line:84% a lot of those million buildings may 00:10:35.940 --> 00:10:37.620 align:middle line:84% be single-family homes or relatively 00:10:37.620 --> 00:10:40.710 align:middle line:84% small multifamily buildings in the outer boroughs. 00:10:40.710 --> 00:10:43.920 align:middle line:84% But we know that the large buildings are also themselves 00:10:43.920 --> 00:10:45.090 align:middle line:90% tremendously diverse. 00:10:45.090 --> 00:10:48.900 align:middle line:84% Just take, for example, a campus like Columbia or NYU. 00:10:48.900 --> 00:10:51.150 align:middle line:84% Those campuses have large numbers of buildings, 00:10:51.150 --> 00:10:52.070 align:middle line:90% a lot of real estate. 00:10:52.070 --> 00:10:54.570 align:middle line:84% And even their buildings are used for many different things, 00:10:54.570 --> 00:10:56.580 align:middle line:84% both for University purposes and also, 00:10:56.580 --> 00:10:59.070 align:middle line:90% let's say, for rental or lease. 00:10:59.070 --> 00:11:00.930 align:middle line:84% And so the question I want to get to 00:11:00.930 --> 00:11:03.420 align:middle line:84% is, how do you know which buildings to implement 00:11:03.420 --> 00:11:05.230 align:middle line:90% energy efficiency in? 00:11:05.230 --> 00:11:06.720 align:middle line:84% I've talked about policy analysis 00:11:06.720 --> 00:11:08.940 align:middle line:84% in terms of efficiency and equity. 00:11:08.940 --> 00:11:11.580 align:middle line:84% But ultimately, you have to think back to maybe 00:11:11.580 --> 00:11:13.470 align:middle line:84% about 15 years ago, when we first 00:11:13.470 --> 00:11:15.270 align:middle line:84% started looking at the sector, people 00:11:15.270 --> 00:11:17.460 align:middle line:84% didn't actually have any data about the energy 00:11:17.460 --> 00:11:18.540 align:middle line:90% use in buildings. 00:11:18.540 --> 00:11:23.010 align:middle line:84% The utility only had energy tracked to the meter. 00:11:23.010 --> 00:11:25.260 align:middle line:84% But in general, because of the tenant-landlord problem 00:11:25.260 --> 00:11:28.260 align:middle line:84% that we've talked about before, only tenants often 00:11:28.260 --> 00:11:29.850 align:middle line:90% get their electricity bills. 00:11:29.850 --> 00:11:32.340 align:middle line:84% Or in some cases, only landlords get electricity bills. 00:11:32.340 --> 00:11:36.030 align:middle line:84% So tenants don't always know what energy the landlords are 00:11:36.030 --> 00:11:39.240 align:middle line:84% paying for, let's say, in a small multifamily building. 00:11:39.240 --> 00:11:41.130 align:middle line:84% Or if you're in a large commercial building, 00:11:41.130 --> 00:11:42.880 align:middle line:84% and you're a landlord, you didn't actually 00:11:42.880 --> 00:11:44.640 align:middle line:84% know what the tenants were paying for. 00:11:44.640 --> 00:11:47.100 align:middle line:84% Even if they're, let's say, a large bank or law firm, 00:11:47.100 --> 00:11:50.160 align:middle line:84% you had no sense of how much energy they were paying for. 00:11:50.160 --> 00:11:52.470 align:middle line:84% So you had this kind of fragmented information 00:11:52.470 --> 00:11:55.080 align:middle line:90% landscape. 00:11:55.080 --> 00:11:58.980 align:middle line:84% And so a lot of the data we started to gather-- 00:11:58.980 --> 00:12:01.810 align:middle line:84% I'll go through the policies that created the data first. 00:12:01.810 --> 00:12:03.810 align:middle line:84% But there was a lot of excitement about New York 00:12:03.810 --> 00:12:06.030 align:middle line:84% City in the early days about gathering 00:12:06.030 --> 00:12:08.460 align:middle line:84% the data because the New York City laws that were 00:12:08.460 --> 00:12:11.550 align:middle line:90% passed mandated gathering data. 00:12:11.550 --> 00:12:14.790 align:middle line:84% So just to give credit where it's due, 00:12:14.790 --> 00:12:18.150 align:middle line:84% first, the Institute for Market Transformation on the left 00:12:18.150 --> 00:12:21.420 align:middle line:84% started publishing reports on the opportunities 00:12:21.420 --> 00:12:23.343 align:middle line:84% for building energy transparency. 00:12:23.343 --> 00:12:25.260 align:middle line:84% And they really started to develop a framework 00:12:25.260 --> 00:12:28.260 align:middle line:84% for implementing US commercial energy rating and disclosure 00:12:28.260 --> 00:12:29.560 align:middle line:90% policies. 00:12:29.560 --> 00:12:31.770 align:middle line:84% They also I think deserve a tremendous amount 00:12:31.770 --> 00:12:36.510 align:middle line:84% of credit for going to lots of cities and states, 00:12:36.510 --> 00:12:38.670 align:middle line:84% showing them how it could work, and helping 00:12:38.670 --> 00:12:40.622 align:middle line:84% to write legislation for how it could work. 00:12:40.622 --> 00:12:42.330 align:middle line:84% So essentially, I think they are lobbying 00:12:42.330 --> 00:12:44.160 align:middle line:84% for a great environmental policy. 00:12:44.160 --> 00:12:47.010 align:middle line:84% And Cliff Majersik, Andrew Burr, Caroline Keicher, 00:12:47.010 --> 00:12:51.180 align:middle line:84% and David Leipziger all deserve a tremendous amount of credit. 00:12:51.180 --> 00:12:54.540 align:middle line:84% New York City, the law I'll focus on mostly is local Law 00:12:54.540 --> 00:12:57.090 align:middle line:90% 84, a benchmarking report. 00:12:57.090 --> 00:13:01.230 align:middle line:84% A lot of work was done by Laurie Kerr, John Lee, Hilary Bieber, 00:13:01.230 --> 00:13:04.980 align:middle line:84% Donna Hope, Stacy Lee, and Jenny Cooper at the City of New York. 00:13:04.980 --> 00:13:08.010 align:middle line:84% And then a variety of people worked on it 00:13:08.010 --> 00:13:11.970 align:middle line:84% from various sectors, including me, Constantine Kontokosta 00:13:11.970 --> 00:13:14.580 align:middle line:84% from NYU, Adam Hinge from Sustainable Building 00:13:14.580 --> 00:13:17.460 align:middle line:84% Partnerships, and Alexandra Sullivan from the EPA. 00:13:17.460 --> 00:13:19.950 align:middle line:84% And then just most recently, a lot of work on this area 00:13:19.950 --> 00:13:22.230 align:middle line:84% has been done by Urban Green Council, including 00:13:22.230 --> 00:13:26.700 align:middle line:84% Sean Brennan, Adam Schiabor, Sheena Thiruselvan, Chris 00:13:26.700 --> 00:13:30.480 align:middle line:84% Anjesky, and John Mandyck from the Urban Green Council. 00:13:30.480 --> 00:13:35.550 align:middle line:90% So how do we get to this data? 00:13:35.550 --> 00:13:38.190 align:middle line:84% The key point was New York City passed 00:13:38.190 --> 00:13:39.960 align:middle line:90% a series of building policies. 00:13:39.960 --> 00:13:42.510 align:middle line:84% And the key point I want to make is that many buildings 00:13:42.510 --> 00:13:44.530 align:middle line:90% were already-- 00:13:44.530 --> 00:13:46.140 align:middle line:84% many building owners were already 00:13:46.140 --> 00:13:48.270 align:middle line:84% doing a lot of things for energy efficiency. 00:13:48.270 --> 00:13:51.090 align:middle line:84% As I said before, New York City has jurisdiction 00:13:51.090 --> 00:13:52.920 align:middle line:84% over buildings-- the Department of Finance, 00:13:52.920 --> 00:13:54.550 align:middle line:90% the Department of Buildings. 00:13:54.550 --> 00:13:59.040 align:middle line:84% But what happened after PlaNYC 2030 came out in 2006 00:13:59.040 --> 00:14:02.820 align:middle line:84% was developed what's called the Greater Greener Buildings Plan. 00:14:02.820 --> 00:14:05.670 align:middle line:84% And that passed a series of laws. 00:14:05.670 --> 00:14:08.400 align:middle line:84% The New York City Energy Efficiency Corporation, NYCEEC, 00:14:08.400 --> 00:14:10.290 align:middle line:90% was set up. 00:14:10.290 --> 00:14:14.730 align:middle line:84% Local Law 85 in 2009 was set up to pass a New York City energy 00:14:14.730 --> 00:14:19.530 align:middle line:90% conservation code, NYCECC. 00:14:19.530 --> 00:14:22.350 align:middle line:84% Local Law 88 was also passed in 2009 00:14:22.350 --> 00:14:26.310 align:middle line:84% to encourage a more efficient lighting and sub metering. 00:14:26.310 --> 00:14:28.980 align:middle line:84% To think back to the energy efficiency lecture 00:14:28.980 --> 00:14:31.560 align:middle line:84% from last time, conservation codes 00:14:31.560 --> 00:14:34.260 align:middle line:84% have been around a long time, since 1970s. 00:14:34.260 --> 00:14:36.865 align:middle line:84% As I said to you, around 2008, 2009, 00:14:36.865 --> 00:14:38.490 align:middle line:84% there's a tremendous amount of interest 00:14:38.490 --> 00:14:41.910 align:middle line:84% in making building codes much more aggressive to deliver 00:14:41.910 --> 00:14:43.740 align:middle line:90% faster energy savings. 00:14:43.740 --> 00:14:46.350 align:middle line:84% For example, City of Seattle, where I used to work, 00:14:46.350 --> 00:14:50.730 align:middle line:84% has had since the 1970s or '80s a person in charge of energy 00:14:50.730 --> 00:14:53.160 align:middle line:90% code who did tremendous work. 00:14:53.160 --> 00:14:54.660 align:middle line:84% But the energy code is only designed 00:14:54.660 --> 00:14:57.510 align:middle line:84% to deliver about 1% or 2% improvement per year. 00:14:57.510 --> 00:15:00.240 align:middle line:84% In 2008, 2009, the Obama administration 00:15:00.240 --> 00:15:04.020 align:middle line:84% and many cities starting looking to building codes to develop-- 00:15:04.020 --> 00:15:07.350 align:middle line:84% deliver much more aggressive savings, more than 3% 00:15:07.350 --> 00:15:09.660 align:middle line:90% a year at times. 00:15:09.660 --> 00:15:12.900 align:middle line:84% Lighting and submetering, again, is essentially a no-brainer. 00:15:12.900 --> 00:15:16.470 align:middle line:84% Because of the rise of light emitting diodes, or LEDs, 00:15:16.470 --> 00:15:19.300 align:middle line:84% we have much more efficient lighting than we did before. 00:15:19.300 --> 00:15:22.620 align:middle line:84% And submetering was designed to give buildings control 00:15:22.620 --> 00:15:24.943 align:middle line:90% over subareas of the building. 00:15:24.943 --> 00:15:26.610 align:middle line:84% Of course, this is essentially something 00:15:26.610 --> 00:15:28.900 align:middle line:84% that's built into most modern buildings. 00:15:28.900 --> 00:15:33.180 align:middle line:84% So this is something that some high-value buildings 00:15:33.180 --> 00:15:34.150 align:middle line:90% were already doing. 00:15:34.150 --> 00:15:37.910 align:middle line:84% And so you want to reward owners for doing those things. 00:15:37.910 --> 00:15:42.110 align:middle line:84% The policy I'll talk about today is Local Law 84 in 2009. 00:15:42.110 --> 00:15:44.810 align:middle line:84% It's the benchmarking and disclosure policy. 00:15:44.810 --> 00:15:47.600 align:middle line:84% It essentially sought to solve the landlord-tenant problem 00:15:47.600 --> 00:15:48.947 align:middle line:90% that I talked about before. 00:15:48.947 --> 00:15:51.530 align:middle line:84% It essentially simply said, if you're the owner of a building, 00:15:51.530 --> 00:15:53.750 align:middle line:84% you have to go gather the bills for your tenants. 00:15:53.750 --> 00:15:55.220 align:middle line:90% It's not actually that hard. 00:15:55.220 --> 00:15:58.220 align:middle line:84% You simply have to send a message to your tenants, 00:15:58.220 --> 00:16:00.980 align:middle line:84% gather the data, maybe hire a consultant to put it 00:16:00.980 --> 00:16:03.208 align:middle line:90% into the EPA database together. 00:16:03.208 --> 00:16:05.000 align:middle line:84% But a lot of the infrastructure was already 00:16:05.000 --> 00:16:09.232 align:middle line:84% built by the EPA for the Energy Star rating system. 00:16:09.232 --> 00:16:11.440 align:middle line:84% But I'll talk more about what the effects of this law 00:16:11.440 --> 00:16:13.440 align:middle line:90% were later on. 00:16:13.440 --> 00:16:16.470 align:middle line:84% And of course, Local Law 87 passed in 2009. 00:16:16.470 --> 00:16:19.020 align:middle line:84% It required energy audits and retro-commissioning. 00:16:19.020 --> 00:16:22.590 align:middle line:84% An energy audit is a much more detailed, in-depth view 00:16:22.590 --> 00:16:23.340 align:middle line:90% of a building. 00:16:23.340 --> 00:16:25.650 align:middle line:84% Think of it as getting a car tune-up. 00:16:25.650 --> 00:16:28.440 align:middle line:84% You take it to the shop, and the mechanic 00:16:28.440 --> 00:16:30.510 align:middle line:84% tells you all the things that work 00:16:30.510 --> 00:16:32.460 align:middle line:84% and don't work with your building. 00:16:32.460 --> 00:16:34.410 align:middle line:84% Retro-commissioning is the next step. 00:16:34.410 --> 00:16:36.150 align:middle line:84% That's essentially a process where 00:16:36.150 --> 00:16:39.188 align:middle line:84% you turn all the dials in a building to tune it up again. 00:16:39.188 --> 00:16:41.730 align:middle line:84% In other words, once you know what's wrong with the building, 00:16:41.730 --> 00:16:42.840 align:middle line:90% you read the manual. 00:16:42.840 --> 00:16:46.650 align:middle line:84% You make sure it's performing as the designers intended it to. 00:16:46.650 --> 00:16:50.340 align:middle line:84% Local Law 87 requires I think 10% of buildings 00:16:50.340 --> 00:16:52.770 align:middle line:84% in a given year to undergo an energy audit 00:16:52.770 --> 00:16:53.730 align:middle line:90% retro-commissioning. 00:16:53.730 --> 00:16:55.843 align:middle line:84% This is a much more in-depth procedure. 00:16:55.843 --> 00:16:57.510 align:middle line:84% But we have plenty of empirical evidence 00:16:57.510 --> 00:17:00.720 align:middle line:84% that energy audits and retro-commissioning is also 00:17:00.720 --> 00:17:01.530 align:middle line:90% beneficial. 00:17:01.530 --> 00:17:05.280 align:middle line:84% I think Evan Mills from Lawrence Berkeley National Labs in 2011 00:17:05.280 --> 00:17:10.170 align:middle line:84% wrote a paper arguing that, based on 600 buildings or so, 00:17:10.170 --> 00:17:13.069 align:middle line:84% retro-commissioning on average would deliver about 20%, 00:17:13.069 --> 00:17:15.060 align:middle line:90% 25% savings in energy. 00:17:15.060 --> 00:17:17.550 align:middle line:90% That is a non-trivial amount. 00:17:17.550 --> 00:17:20.790 align:middle line:90% Local Law 33 passed in 2017. 00:17:20.790 --> 00:17:22.890 align:middle line:84% Gave letter grades for building performance. 00:17:22.890 --> 00:17:25.319 align:middle line:84% Just like you see on New York City restaurants 00:17:25.319 --> 00:17:30.060 align:middle line:84% an A, B, or, god forbid, a C grade, 00:17:30.060 --> 00:17:32.310 align:middle line:84% buildings themselves would get grades for their energy 00:17:32.310 --> 00:17:33.132 align:middle line:90% performance. 00:17:33.132 --> 00:17:35.340 align:middle line:84% And you could think about how benchmarking and letter 00:17:35.340 --> 00:17:36.445 align:middle line:90% grades are meant to work. 00:17:36.445 --> 00:17:38.070 align:middle line:84% Think about what you'd do if you didn't 00:17:38.070 --> 00:17:39.780 align:middle line:90% have this kind of information. 00:17:39.780 --> 00:17:42.270 align:middle line:84% If you're a tenant seeking to, let's say, 00:17:42.270 --> 00:17:45.450 align:middle line:84% rent a space in New York City, and you don't actually 00:17:45.450 --> 00:17:47.790 align:middle line:84% know how energy efficient any of the spaces are, 00:17:47.790 --> 00:17:50.190 align:middle line:84% why would you pay more for any space 00:17:50.190 --> 00:17:51.670 align:middle line:90% if it's more energy efficient? 00:17:51.670 --> 00:17:53.310 align:middle line:84% So actually, there's no incentive 00:17:53.310 --> 00:17:55.360 align:middle line:84% for the landlord to invest energy efficiency 00:17:55.360 --> 00:17:56.710 align:middle line:90% in the first place. 00:17:56.710 --> 00:17:58.800 align:middle line:90% We'll talk more about that also. 00:17:58.800 --> 00:18:01.980 align:middle line:90% Local Law 97 passed in 2019. 00:18:01.980 --> 00:18:05.130 align:middle line:84% Was part of a, quote, unquote, "Green New Deal" 00:18:05.130 --> 00:18:08.308 align:middle line:84% package meant to establish very aggressive carbon 00:18:08.308 --> 00:18:09.225 align:middle line:90% budgets for buildings. 00:18:09.225 --> 00:18:11.520 align:middle line:84% It is something the New York City government is working 00:18:11.520 --> 00:18:14.220 align:middle line:90% on right now to implement. 00:18:14.220 --> 00:18:17.060 align:middle line:84% So just to give you a sense also where the energy efficiency 00:18:17.060 --> 00:18:20.570 align:middle line:84% landscape was in about 2009, 2010, 00:18:20.570 --> 00:18:24.290 align:middle line:84% on the left-hand side, the codes that were being upgraded. 00:18:24.290 --> 00:18:26.330 align:middle line:84% You can see this kind of green landscape. 00:18:26.330 --> 00:18:29.960 align:middle line:84% The darker green indicates the more aggressive codes 00:18:29.960 --> 00:18:31.760 align:middle line:90% in Florida and Massachusetts. 00:18:31.760 --> 00:18:34.730 align:middle line:84% But you can see across the country in 2009 00:18:34.730 --> 00:18:38.060 align:middle line:84% that there is a Building Codes Assistance Project funded 00:18:38.060 --> 00:18:39.320 align:middle line:90% by the Department of Energy. 00:18:39.320 --> 00:18:42.140 align:middle line:84% And they're assisting all these jurisdictions, 00:18:42.140 --> 00:18:45.590 align:middle line:84% all these states, in developing more aggressive codes. 00:18:45.590 --> 00:18:47.270 align:middle line:84% And the spectrum at the lower left 00:18:47.270 --> 00:18:49.430 align:middle line:84% shows you how those codes are getting 00:18:49.430 --> 00:18:51.410 align:middle line:90% more aggressive over time. 00:18:51.410 --> 00:18:54.420 align:middle line:84% In 2013, this map on the right, you 00:18:54.420 --> 00:18:56.420 align:middle line:84% can see that there are some disclosure laws that 00:18:56.420 --> 00:18:57.890 align:middle line:90% are nascent across the country. 00:18:57.890 --> 00:19:01.520 align:middle line:84% It looks like about 15 or 20 cities and states have 00:19:01.520 --> 00:19:03.530 align:middle line:90% passed these disclosure laws. 00:19:03.530 --> 00:19:05.870 align:middle line:84% But in 2013, none of the states-- 00:19:05.870 --> 00:19:09.063 align:middle line:84% none of the cities had really developed a lot of data yet. 00:19:09.063 --> 00:19:11.480 align:middle line:84% This is part of the reason why we focused on New York City 00:19:11.480 --> 00:19:12.140 align:middle line:90% so much. 00:19:12.140 --> 00:19:14.090 align:middle line:84% New York City, as the biggest city, 00:19:14.090 --> 00:19:16.010 align:middle line:84% developed the largest data sets that we 00:19:16.010 --> 00:19:18.587 align:middle line:90% can do the most analysis on. 00:19:18.587 --> 00:19:20.420 align:middle line:84% So just to give you a sense of how these two 00:19:20.420 --> 00:19:23.360 align:middle line:84% different policies work, on the left-hand side, 00:19:23.360 --> 00:19:25.500 align:middle line:84% this is a famous graph you might have seen. 00:19:25.500 --> 00:19:28.610 align:middle line:84% It's called the diffusion of innovation curve. 00:19:28.610 --> 00:19:31.070 align:middle line:84% You might have heard the phrase early adopters. 00:19:31.070 --> 00:19:33.060 align:middle line:84% And it's essentially a bell curve, 00:19:33.060 --> 00:19:36.290 align:middle line:84% where the bell curve is divided into one standard deviation, 00:19:36.290 --> 00:19:38.270 align:middle line:84% two standard deviation differences. 00:19:38.270 --> 00:19:42.990 align:middle line:84% On the far left-hand side, innovators are the 2.5% 00:19:42.990 --> 00:19:45.680 align:middle line:84% of the population that are two standard deviations ahead 00:19:45.680 --> 00:19:46.400 align:middle line:90% of the curve. 00:19:46.400 --> 00:19:48.860 align:middle line:84% They're innovating, trying new things. 00:19:48.860 --> 00:19:51.500 align:middle line:84% The early adopters, the one to two 00:19:51.500 --> 00:19:53.570 align:middle line:84% standard deviation part of the population, 00:19:53.570 --> 00:19:55.700 align:middle line:84% are people who are adopting new technology. 00:19:55.700 --> 00:19:57.860 align:middle line:84% And of course, the rest are the early majority, 00:19:57.860 --> 00:20:00.090 align:middle line:84% and the late majority, and the laggards. 00:20:00.090 --> 00:20:01.550 align:middle line:84% But this is where benchmarking is 00:20:01.550 --> 00:20:04.200 align:middle line:84% meant to reward some groups over others. 00:20:04.200 --> 00:20:07.100 align:middle line:84% For example, if you're an innovator or early adopter, 00:20:07.100 --> 00:20:08.400 align:middle line:90% it may cost money. 00:20:08.400 --> 00:20:10.367 align:middle line:84% It may cost time for you to do those things. 00:20:10.367 --> 00:20:12.200 align:middle line:84% And if there's no information in the market, 00:20:12.200 --> 00:20:14.130 align:middle line:90% you won't be rewarded for it. 00:20:14.130 --> 00:20:17.330 align:middle line:84% But if we release the data to the public about which 00:20:17.330 --> 00:20:20.300 align:middle line:84% buildings are more energy efficient or less energy using 00:20:20.300 --> 00:20:22.250 align:middle line:84% than others, then you have an incentive 00:20:22.250 --> 00:20:24.320 align:middle line:84% to be an innovator or early adopter. 00:20:24.320 --> 00:20:26.780 align:middle line:84% At the same time, on the right-hand side of the curve, 00:20:26.780 --> 00:20:30.830 align:middle line:84% the laggards are the people who are, let's say, 00:20:30.830 --> 00:20:33.440 align:middle line:84% doing less or doing the bare minimum. 00:20:33.440 --> 00:20:36.350 align:middle line:84% That's where building codes are meant to bring up the floor. 00:20:36.350 --> 00:20:38.420 align:middle line:84% They're meant to get the laggards to perform 00:20:38.420 --> 00:20:39.710 align:middle line:90% to a minimum standard. 00:20:39.710 --> 00:20:41.660 align:middle line:84% So benchmarking and codes essentially 00:20:41.660 --> 00:20:44.800 align:middle line:84% work on different sides of this curve. 00:20:44.800 --> 00:20:48.030 align:middle line:84% And so what we found in our first look at the data-- 00:20:48.030 --> 00:20:52.170 align:middle line:84% I guess I've quoted the New York City 2013 year two Local Law 84 00:20:52.170 --> 00:20:52.980 align:middle line:90% report-- 00:20:52.980 --> 00:20:55.950 align:middle line:84% is you see tremendous variation in all these sectors. 00:20:55.950 --> 00:20:58.200 align:middle line:84% In other words, depending on the sector-- 00:20:58.200 --> 00:21:01.050 align:middle line:84% multifamily buildings, office buildings, retail, hotel, 00:21:01.050 --> 00:21:02.910 align:middle line:84% education-- you can see that there's 00:21:02.910 --> 00:21:05.250 align:middle line:84% huge variation between the best performers and the worst 00:21:05.250 --> 00:21:05.940 align:middle line:90% performers. 00:21:05.940 --> 00:21:10.530 align:middle line:84% In the retail sector, let's say, there's a 5.6 times 00:21:10.530 --> 00:21:13.830 align:middle line:84% difference between typically good performers 00:21:13.830 --> 00:21:15.510 align:middle line:90% and bad performers. 00:21:15.510 --> 00:21:18.910 align:middle line:84% An office building is a 5.8 times difference. 00:21:18.910 --> 00:21:21.577 align:middle line:84% And you can see that there's basically 00:21:21.577 --> 00:21:24.160 align:middle line:84% tremendous variation between the best performers and the worst 00:21:24.160 --> 00:21:24.940 align:middle line:90% performers. 00:21:24.940 --> 00:21:29.020 align:middle line:84% And what you want to do is give incentives or reward the best 00:21:29.020 --> 00:21:34.460 align:middle line:84% performers and tell the poor performers how to improve. 00:21:34.460 --> 00:21:38.440 align:middle line:84% And so this kind of ties into a larger empirical literature 00:21:38.440 --> 00:21:41.590 align:middle line:84% about what the market for energy efficiency is. 00:21:41.590 --> 00:21:44.167 align:middle line:84% For the past 40 years, since the 1970s, 00:21:44.167 --> 00:21:46.000 align:middle line:84% there's been a tremendous amount of interest 00:21:46.000 --> 00:21:47.290 align:middle line:90% in energy efficiency. 00:21:47.290 --> 00:21:50.120 align:middle line:84% But there's also been a gap in investments. 00:21:50.120 --> 00:21:51.700 align:middle line:84% And so the argument is that there's 00:21:51.700 --> 00:21:55.300 align:middle line:84% been underinvestment in these energy efficiency technologies 00:21:55.300 --> 00:21:58.120 align:middle line:84% compared to the significant potential returns. 00:21:58.120 --> 00:22:00.460 align:middle line:84% And frankly, neither engineers or economists 00:22:00.460 --> 00:22:02.680 align:middle line:84% explain this gap particularly well. 00:22:02.680 --> 00:22:05.830 align:middle line:84% Is this a rational or irrational process? 00:22:05.830 --> 00:22:08.020 align:middle line:90% Economists would argue that-- 00:22:08.020 --> 00:22:11.020 align:middle line:84% have argued in many papers that this is actually 00:22:11.020 --> 00:22:13.930 align:middle line:84% a rational gap, that the savings of energy efficiency 00:22:13.930 --> 00:22:16.262 align:middle line:84% are not necessarily there because people 00:22:16.262 --> 00:22:17.470 align:middle line:90% choose not to invest in them. 00:22:17.470 --> 00:22:19.600 align:middle line:84% So therefore, there must be a reason 00:22:19.600 --> 00:22:22.630 align:middle line:84% why people have chosen not to invest in energy efficiency. 00:22:22.630 --> 00:22:24.690 align:middle line:84% And engineers have focused on the fact 00:22:24.690 --> 00:22:25.690 align:middle line:90% that this is irrational. 00:22:25.690 --> 00:22:28.000 align:middle line:84% They say, well, the savings are clearly there 00:22:28.000 --> 00:22:30.170 align:middle line:84% from well-understood technologies. 00:22:30.170 --> 00:22:32.800 align:middle line:84% So this is irrational for people to be using more energy 00:22:32.800 --> 00:22:34.030 align:middle line:90% than they have to. 00:22:34.030 --> 00:22:36.910 align:middle line:84% But the paper we read for class today, the Bernstein et al. 00:22:36.910 --> 00:22:40.520 align:middle line:84% 1980 paper, is called "Overcoming Social 00:22:40.520 --> 00:22:43.450 align:middle line:84% and Institutional Barriers to Energy Conservation." 00:22:43.450 --> 00:22:47.770 align:middle line:84% It focuses on six different barriers, including misplaced 00:22:47.770 --> 00:22:50.680 align:middle line:84% or split incentives, like the tenant-landlord problem 00:22:50.680 --> 00:22:54.700 align:middle line:84% I mentioned to you earlier, the lack of or misinformation 00:22:54.700 --> 00:22:56.920 align:middle line:90% among decision makers. 00:22:56.920 --> 00:22:58.930 align:middle line:84% If you don't understand how much better 00:22:58.930 --> 00:23:02.350 align:middle line:84% a green building or an efficient appliance can perform, 00:23:02.350 --> 00:23:04.150 align:middle line:90% you won't take that action. 00:23:04.150 --> 00:23:06.820 align:middle line:84% There may be existing customs and regulation. 00:23:06.820 --> 00:23:09.595 align:middle line:84% I talked too last time about how some buildings 00:23:09.595 --> 00:23:11.980 align:middle line:90% exist for many different uses. 00:23:11.980 --> 00:23:15.370 align:middle line:84% The energy efficiency may not be the principal concern 00:23:15.370 --> 00:23:16.720 align:middle line:90% of the owner. 00:23:16.720 --> 00:23:19.360 align:middle line:84% Market structure may inhibit people 00:23:19.360 --> 00:23:22.150 align:middle line:84% from investing in energy efficiency. 00:23:22.150 --> 00:23:24.700 align:middle line:84% For example, if you're in a highly competitive market, 00:23:24.700 --> 00:23:27.460 align:middle line:84% you may simply not choose to invest in energy efficiency, 00:23:27.460 --> 00:23:29.620 align:middle line:84% because none of your competitors are. 00:23:29.620 --> 00:23:32.890 align:middle line:84% You may lack available financing and capital 00:23:32.890 --> 00:23:35.320 align:middle line:84% to help you make those energy efficiency investments. 00:23:35.320 --> 00:23:38.390 align:middle line:84% And you simply may be myopic, which is, of course, 00:23:38.390 --> 00:23:41.150 align:middle line:90% a natural human characteristic. 00:23:41.150 --> 00:23:43.820 align:middle line:84% So I teach this paper every single year, 00:23:43.820 --> 00:23:47.110 align:middle line:84% this paper that's 42 years old, because I would argue to you, 00:23:47.110 --> 00:23:49.780 align:middle line:84% and I think you all probably recognize, that many 00:23:49.780 --> 00:23:51.560 align:middle line:90% of these barriers still exist. 00:23:51.560 --> 00:23:54.200 align:middle line:84% They're still barriers we need to overcome. 00:23:54.200 --> 00:23:58.540 align:middle line:84% And so the question we had was, if all of these barriers vary 00:23:58.540 --> 00:24:01.300 align:middle line:84% greatly by individuals-- whether or not you're a tenant, 00:24:01.300 --> 00:24:04.060 align:middle line:84% or what kind of owner you are, or what kind of individual you 00:24:04.060 --> 00:24:04.600 align:middle line:90% are-- 00:24:04.600 --> 00:24:07.550 align:middle line:84% how do I identify who's affected by which barrier? 00:24:07.550 --> 00:24:10.490 align:middle line:84% And how do we target our policies better? 00:24:10.490 --> 00:24:13.370 align:middle line:84% So this brings me to how benchmarking works. 00:24:13.370 --> 00:24:15.950 align:middle line:84% And it's really an argument about market transformation 00:24:15.950 --> 00:24:16.940 align:middle line:90% heterogeneity. 00:24:16.940 --> 00:24:19.320 align:middle line:84% So if you start in the upper-left-hand corner, 00:24:19.320 --> 00:24:21.860 align:middle line:84% you start with the diffusion of innovation curve. 00:24:21.860 --> 00:24:25.640 align:middle line:84% And information enables us to identify 00:24:25.640 --> 00:24:27.560 align:middle line:84% who's an innovator, who's an early adopter, 00:24:27.560 --> 00:24:28.880 align:middle line:90% and who's a laggard. 00:24:28.880 --> 00:24:31.005 align:middle line:84% But the fundamental question we're trying to get at 00:24:31.005 --> 00:24:33.530 align:middle line:84% is, what information will cause action? 00:24:33.530 --> 00:24:35.370 align:middle line:84% When you move to the upper-right-hand side, 00:24:35.370 --> 00:24:36.950 align:middle line:90% you can see building owners. 00:24:36.950 --> 00:24:38.720 align:middle line:84% And the question for building owners 00:24:38.720 --> 00:24:41.000 align:middle line:84% is, well, how efficient is my building? 00:24:41.000 --> 00:24:42.620 align:middle line:84% Do I know how fresh my building is? 00:24:42.620 --> 00:24:45.320 align:middle line:84% And who will I be judged against in a marketplace? 00:24:45.320 --> 00:24:46.850 align:middle line:84% So the question for building owners 00:24:46.850 --> 00:24:49.550 align:middle line:84% is, what building should I be compared to? 00:24:49.550 --> 00:24:51.720 align:middle line:84% Now, if you know you're compared to other buildings, 00:24:51.720 --> 00:24:53.637 align:middle line:84% and if you know that your building can perform 00:24:53.637 --> 00:24:55.970 align:middle line:84% six times better, then you actually 00:24:55.970 --> 00:24:58.860 align:middle line:84% want to understand, how do I make my building work better? 00:24:58.860 --> 00:25:01.130 align:middle line:84% And so that you want to go see what other building 00:25:01.130 --> 00:25:02.580 align:middle line:90% is performing well. 00:25:02.580 --> 00:25:06.230 align:middle line:84% So if the data was public, you can not only 00:25:06.230 --> 00:25:08.390 align:middle line:84% have an incentive to invest, you'd 00:25:08.390 --> 00:25:10.490 align:middle line:84% also have an incentive to go find out what 00:25:10.490 --> 00:25:12.260 align:middle line:90% works for a similar building. 00:25:12.260 --> 00:25:14.150 align:middle line:84% And that leads us to the question of, what 00:25:14.150 --> 00:25:16.077 align:middle line:90% investments are cost effective? 00:25:16.077 --> 00:25:17.660 align:middle line:84% And if you make those investments that 00:25:17.660 --> 00:25:20.270 align:middle line:84% are cost effective, then, if you skip 00:25:20.270 --> 00:25:23.990 align:middle line:84% to the lower-left-hand corner, you can see potential buyers. 00:25:23.990 --> 00:25:26.610 align:middle line:84% Potential buyers will reward you for having 00:25:26.610 --> 00:25:28.790 align:middle line:84% a more energy-efficient building if it saves them 00:25:28.790 --> 00:25:31.670 align:middle line:84% money, which leads us kind of a circle back to, 00:25:31.670 --> 00:25:33.470 align:middle line:84% what determines the building energy 00:25:33.470 --> 00:25:38.480 align:middle line:84% performance we're seeing in the first place in our information? 00:25:38.480 --> 00:25:40.280 align:middle line:84% If this information doesn't exist 00:25:40.280 --> 00:25:43.190 align:middle line:84% in the upper-right-hand corner, then this whole cycle 00:25:43.190 --> 00:25:43.730 align:middle line:90% can't work. 00:25:43.730 --> 00:25:45.690 align:middle line:90% And this is a virtuous cycle. 00:25:45.690 --> 00:25:47.480 align:middle line:84% But if the government passed a law, 00:25:47.480 --> 00:25:51.350 align:middle line:84% as it did with Local Law 84, to gather the information 00:25:51.350 --> 00:25:53.840 align:middle line:84% or compel building owners to gather information 00:25:53.840 --> 00:25:56.600 align:middle line:84% at relatively low cost, once you inject the information 00:25:56.600 --> 00:25:58.580 align:middle line:84% to the market, you can get building owners 00:25:58.580 --> 00:26:00.178 align:middle line:90% to act towards investment. 00:26:00.178 --> 00:26:02.720 align:middle line:84% You can get potential buyers to reward those building owners. 00:26:02.720 --> 00:26:06.140 align:middle line:90% It becomes a virtuous cycle. 00:26:06.140 --> 00:26:08.560 align:middle line:84% So what we found in some of the initial reports 00:26:08.560 --> 00:26:10.360 align:middle line:84% was that different property types 00:26:10.360 --> 00:26:14.710 align:middle line:84% comprise very different portions of the total energy 00:26:14.710 --> 00:26:16.120 align:middle line:90% use of the city. 00:26:16.120 --> 00:26:18.748 align:middle line:84% But even more interesting to us was 00:26:18.748 --> 00:26:20.290 align:middle line:84% that if you looked at the buildings-- 00:26:20.290 --> 00:26:23.350 align:middle line:84% and we coded them to keep them anonymous on the bottom. 00:26:23.350 --> 00:26:25.270 align:middle line:84% But also, on the horizontal axis, 00:26:25.270 --> 00:26:27.440 align:middle line:84% we actually grouped them by consultant. 00:26:27.440 --> 00:26:29.440 align:middle line:84% You can see that different groups of consultants 00:26:29.440 --> 00:26:32.440 align:middle line:84% actually came up with really different results for what 00:26:32.440 --> 00:26:34.130 align:middle line:84% the energy use was in the buildings. 00:26:34.130 --> 00:26:35.530 align:middle line:84% And this is simply because people 00:26:35.530 --> 00:26:36.640 align:middle line:90% have different processes. 00:26:36.640 --> 00:26:38.230 align:middle line:90% They measure different things. 00:26:38.230 --> 00:26:41.510 align:middle line:84% They also look at the data differently. 00:26:41.510 --> 00:26:42.710 align:middle line:90% And so it was interesting. 00:26:42.710 --> 00:26:44.877 align:middle line:84% We actually would get all the consultants in a room. 00:26:44.877 --> 00:26:46.300 align:middle line:90% And we'd show them this graph. 00:26:46.300 --> 00:26:49.243 align:middle line:84% And we'd show them how much their energy use 00:26:49.243 --> 00:26:50.410 align:middle line:90% they measured was different. 00:26:50.410 --> 00:26:52.780 align:middle line:84% And we were trying to improve the data quality. 00:26:52.780 --> 00:26:54.940 align:middle line:84% So this is to say that if you are trying 00:26:54.940 --> 00:26:57.430 align:middle line:84% to affect the overall market, we first 00:26:57.430 --> 00:27:00.017 align:middle line:84% want to work through building owners to gather the data. 00:27:00.017 --> 00:27:02.350 align:middle line:84% But then we recognize there is a relatively small number 00:27:02.350 --> 00:27:05.120 align:middle line:84% of consultants servicing all these owners. 00:27:05.120 --> 00:27:08.680 align:middle line:84% So in New York City, when we first 00:27:08.680 --> 00:27:10.630 align:middle line:84% implemented this law, when New York City first 00:27:10.630 --> 00:27:14.110 align:middle line:84% implemented this law for buildings over 50,000 00:27:14.110 --> 00:27:17.590 align:middle line:84% square feet, it only affected about 10,000 buildings. 00:27:17.590 --> 00:27:20.290 align:middle line:84% But those 10,000 buildings were serviced by a much smaller 00:27:20.290 --> 00:27:21.760 align:middle line:90% consultant industry-- 00:27:21.760 --> 00:27:24.350 align:middle line:84% I think roughly 500 consultants so. 00:27:24.350 --> 00:27:26.150 align:middle line:90% Still a very large number. 00:27:26.150 --> 00:27:27.820 align:middle line:84% But if you think about the fact you're 00:27:27.820 --> 00:27:29.680 align:middle line:84% trying to affect a million buildings, 00:27:29.680 --> 00:27:32.860 align:middle line:84% it's much easier to work through 10,000 building owners and 500 00:27:32.860 --> 00:27:37.510 align:middle line:84% consultants than it is to try to tackle the entire city 00:27:37.510 --> 00:27:40.010 align:middle line:84% or make it a public information campaign. 00:27:40.010 --> 00:27:43.520 align:middle line:84% Having said that, you know that all your building owners are 00:27:43.520 --> 00:27:44.120 align:middle line:90% owned-- 00:27:44.120 --> 00:27:46.620 align:middle line:84% your office buildings are owned by a relatively small number 00:27:46.620 --> 00:27:48.560 align:middle line:84% of owners, whereas multifamily buildings, 00:27:48.560 --> 00:27:51.560 align:middle line:84% there's many more buildings, but also, many more owners 00:27:51.560 --> 00:27:53.090 align:middle line:84% or many different kinds of owners. 00:27:53.090 --> 00:27:55.850 align:middle line:84% This suggests you need different kinds of campaigns 00:27:55.850 --> 00:27:59.220 align:middle line:84% to target this information to different owners. 00:27:59.220 --> 00:28:03.870 align:middle line:84% So to give you a sense of some of the results from this law, 00:28:03.870 --> 00:28:06.470 align:middle line:84% this is something I found in a 2017 paper, 00:28:06.470 --> 00:28:10.520 align:middle line:84% that the first three or four years, my co-authors and I 00:28:10.520 --> 00:28:13.520 align:middle line:84% found that this law actually reduced energy use 00:28:13.520 --> 00:28:16.100 align:middle line:84% intensity, which is the energy use per square foot, 00:28:16.100 --> 00:28:19.770 align:middle line:84% by about 12% to 14% over the first three years. 00:28:19.770 --> 00:28:24.692 align:middle line:84% We were quite surprised how much energy reduction it delivered 00:28:24.692 --> 00:28:26.900 align:middle line:84% because that's much more aggressive than the building 00:28:26.900 --> 00:28:28.220 align:middle line:90% codes I told you about before. 00:28:28.220 --> 00:28:32.210 align:middle line:84% That's roughly about 3% or 4% per year at a minimum. 00:28:32.210 --> 00:28:35.150 align:middle line:84% If you look over the last 10 years of data, 00:28:35.150 --> 00:28:38.270 align:middle line:84% from the benchmarked emissions and energy trends, 00:28:38.270 --> 00:28:41.420 align:middle line:84% you can see that site energy use and total emissions 00:28:41.420 --> 00:28:44.150 align:middle line:84% have steadily decreased over the last 10 years. 00:28:44.150 --> 00:28:48.340 align:middle line:84% This is from a report from the Urban Green Council in 2022. 00:28:48.340 --> 00:28:51.560 align:middle line:84% To make the point again that this is unusual data, 00:28:51.560 --> 00:28:53.480 align:middle line:84% or this is a new data set that we really 00:28:53.480 --> 00:28:56.690 align:middle line:84% didn't have 10 years ago, this is a data 00:28:56.690 --> 00:28:58.940 align:middle line:90% from the effects of COVID-19. 00:28:58.940 --> 00:29:02.480 align:middle line:84% And you can see that the Urban Green Council graphs it here. 00:29:02.480 --> 00:29:04.970 align:middle line:84% We saw that energy use had decreased 00:29:04.970 --> 00:29:07.940 align:middle line:84% in January and February and decreased in April and May 00:29:07.940 --> 00:29:10.330 align:middle line:90% between 2019 and 2020. 00:29:10.330 --> 00:29:12.080 align:middle line:84% And we knew that from the electric utility 00:29:12.080 --> 00:29:14.660 align:middle line:84% because the electric utility delivers all the power. 00:29:14.660 --> 00:29:17.690 align:middle line:84% But what we didn't know before developing this benchmarking 00:29:17.690 --> 00:29:21.380 align:middle line:84% data set was how it affected different buildings 00:29:21.380 --> 00:29:23.840 align:middle line:84% and how it affected different buildings in different places 00:29:23.840 --> 00:29:25.500 align:middle line:90% in New York City. 00:29:25.500 --> 00:29:28.920 align:middle line:84% For example, we knew that energy use was going down 00:29:28.920 --> 00:29:30.210 align:middle line:90% at the beginning of COVID. 00:29:30.210 --> 00:29:32.220 align:middle line:84% And we knew that estimated occupancy 00:29:32.220 --> 00:29:33.590 align:middle line:90% went down quite a bit. 00:29:33.590 --> 00:29:36.340 align:middle line:90% 00:29:36.340 --> 00:29:39.070 align:middle line:84% But we didn't necessarily know where. 00:29:39.070 --> 00:29:41.140 align:middle line:84% Some of the benchmarking data revealed to us 00:29:41.140 --> 00:29:43.630 align:middle line:84% for the first time that water energy use 00:29:43.630 --> 00:29:45.773 align:middle line:84% decreased in Manhattan and increased 00:29:45.773 --> 00:29:46.690 align:middle line:90% in the outer boroughs. 00:29:46.690 --> 00:29:48.340 align:middle line:84% This is clearly because people aren't 00:29:48.340 --> 00:29:49.660 align:middle line:90% commuting into Manhattan. 00:29:49.660 --> 00:29:52.870 align:middle line:84% Roughly 4 million people used to come into Manhattan 00:29:52.870 --> 00:29:54.010 align:middle line:90% every single day. 00:29:54.010 --> 00:29:55.780 align:middle line:84% And we know that some Manhattan residents 00:29:55.780 --> 00:29:58.000 align:middle line:84% were more likely to decamp for places 00:29:58.000 --> 00:30:01.170 align:middle line:84% outside of New York City when the pandemic occurred. 00:30:01.170 --> 00:30:04.330 align:middle line:84% So we can actually see in a localized way 00:30:04.330 --> 00:30:09.370 align:middle line:84% where energy and water use are increasing or decreasing. 00:30:09.370 --> 00:30:11.820 align:middle line:84% And so what we've seen over the last 10 years 00:30:11.820 --> 00:30:15.360 align:middle line:84% is an explosion of these benchmarking laws. 00:30:15.360 --> 00:30:16.860 align:middle line:84% When I first got involved in this 00:30:16.860 --> 00:30:18.280 align:middle line:84% I think about 10 years ago, there 00:30:18.280 --> 00:30:19.860 align:middle line:84% were about five or six cities that 00:30:19.860 --> 00:30:23.122 align:middle line:84% had passed benchmarking laws and had not yet implemented them. 00:30:23.122 --> 00:30:25.080 align:middle line:84% New York City wasn't the first to pass the law. 00:30:25.080 --> 00:30:26.857 align:middle line:90% I think San Francisco was. 00:30:26.857 --> 00:30:28.440 align:middle line:84% But New York City was one of the first 00:30:28.440 --> 00:30:30.450 align:middle line:84% to really put that data into action. 00:30:30.450 --> 00:30:32.670 align:middle line:84% And because New York City has the most buildings, 00:30:32.670 --> 00:30:35.940 align:middle line:84% it was the most interesting data set for me and others 00:30:35.940 --> 00:30:36.840 align:middle line:90% to analyze. 00:30:36.840 --> 00:30:38.910 align:middle line:84% You can see at this point, benchmarking 00:30:38.910 --> 00:30:42.210 align:middle line:84% has spread to about 40 or 50 cities. 00:30:42.210 --> 00:30:44.700 align:middle line:84% This is a very popular map that the Institute for Market 00:30:44.700 --> 00:30:47.280 align:middle line:84% Transformation keeps updated because they've 00:30:47.280 --> 00:30:49.800 align:middle line:84% helped pass these laws in many of these places 00:30:49.800 --> 00:30:54.960 align:middle line:84% through lobbying and through education of public officials. 00:30:54.960 --> 00:30:58.320 align:middle line:84% And so to give you another sense of how important building 00:30:58.320 --> 00:31:01.500 align:middle line:84% energy efficiency policies are and where they're going, 00:31:01.500 --> 00:31:03.840 align:middle line:84% this is always a report I'd like to show. 00:31:03.840 --> 00:31:07.020 align:middle line:84% This is another graph that McKinsey consultants 00:31:07.020 --> 00:31:11.010 align:middle line:84% use quite a bit, but also other business-type consultants use. 00:31:11.010 --> 00:31:13.050 align:middle line:90% It's called a waterfall graph. 00:31:13.050 --> 00:31:15.090 align:middle line:90% It shows you where you start-- 00:31:15.090 --> 00:31:17.740 align:middle line:84% let's say, in 2050, business as usual-- 00:31:17.740 --> 00:31:19.440 align:middle line:84% and what steps you'd have to take 00:31:19.440 --> 00:31:22.950 align:middle line:84% to reduce to your goal, which is 2050 carbon 00:31:22.950 --> 00:31:26.250 align:middle line:84% reductions, deep carbon reductions by 2050 for New York 00:31:26.250 --> 00:31:27.180 align:middle line:90% City. 00:31:27.180 --> 00:31:29.790 align:middle line:84% The somewhat entertaining thing I find about this report 00:31:29.790 --> 00:31:31.290 align:middle line:84% is that this is from a report called 00:31:31.290 --> 00:31:34.650 align:middle line:84% "New York City's Pathways to Deep Carbon Reductions." 00:31:34.650 --> 00:31:37.800 align:middle line:84% It was issued on December 30 of 2013, 00:31:37.800 --> 00:31:39.810 align:middle line:84% essentially the last day that Michael Bloomberg 00:31:39.810 --> 00:31:40.830 align:middle line:90% was in office. 00:31:40.830 --> 00:31:43.440 align:middle line:84% And he issued this report because he'd already 00:31:43.440 --> 00:31:46.337 align:middle line:84% done a lot to try to pass [INAUDIBLE] policies. 00:31:46.337 --> 00:31:48.420 align:middle line:84% But this is kind of the equivalent of the midnight 00:31:48.420 --> 00:31:50.370 align:middle line:84% report you pass for your predecessor 00:31:50.370 --> 00:31:52.075 align:middle line:90% to have to deal with. 00:31:52.075 --> 00:31:53.700 align:middle line:84% Bill de Blasio, when he came to office, 00:31:53.700 --> 00:31:56.970 align:middle line:84% actually increased the climate commitments of New York City. 00:31:56.970 --> 00:31:59.370 align:middle line:84% But the crucial thing I want to show in this report 00:31:59.370 --> 00:32:02.400 align:middle line:84% is that the 2050 business-as-usual case 00:32:02.400 --> 00:32:05.940 align:middle line:84% is a very slight reduction from the 2005 emissions levels 00:32:05.940 --> 00:32:09.300 align:middle line:84% that the Kyoto Protocol measures against. 00:32:09.300 --> 00:32:13.800 align:middle line:84% But you can see of the 55.7 million metric tons of carbon 00:32:13.800 --> 00:32:16.890 align:middle line:84% dioxide equivalent just from New York City, 00:32:16.890 --> 00:32:19.800 align:middle line:84% of the savings to get to the 80-by-50 goals, 00:32:19.800 --> 00:32:23.040 align:middle line:84% or the 80% reduction by 2050, roughly half of that 00:32:23.040 --> 00:32:25.080 align:middle line:84% is going to come from buildings alone. 00:32:25.080 --> 00:32:27.630 align:middle line:84% Most of it is going to come from existing buildings' energy 00:32:27.630 --> 00:32:28.530 align:middle line:90% efficiency. 00:32:28.530 --> 00:32:31.410 align:middle line:84% Some is going to come from fuel switching in buildings. 00:32:31.410 --> 00:32:33.960 align:middle line:84% And a little bit is going to come from making new buildings 00:32:33.960 --> 00:32:34.920 align:middle line:90% energy efficient. 00:32:34.920 --> 00:32:37.410 align:middle line:84% That again reinforces the point that most 00:32:37.410 --> 00:32:40.170 align:middle line:84% the buildings we're going to have in 2050 are already built. 00:32:40.170 --> 00:32:42.120 align:middle line:84% We need to change the behavior of people 00:32:42.120 --> 00:32:44.867 align:middle line:84% living in those buildings or owning those buildings. 00:32:44.867 --> 00:32:46.950 align:middle line:84% The power sector-- we're going to get some savings 00:32:46.950 --> 00:32:49.380 align:middle line:84% from clean power and distributed generation. 00:32:49.380 --> 00:32:50.880 align:middle line:84% For the transportation sector, we're 00:32:50.880 --> 00:32:52.350 align:middle line:90% going to get some savings. 00:32:52.350 --> 00:32:54.480 align:middle line:84% We're going to get relatively little savings 00:32:54.480 --> 00:32:55.530 align:middle line:90% from solid waste. 00:32:55.530 --> 00:32:58.860 align:middle line:84% But you add the buildings, the power, the transportation 00:32:58.860 --> 00:33:02.130 align:middle line:84% sector together, and you get to fairly deep carbon reductions 00:33:02.130 --> 00:33:03.570 align:middle line:90% for New York City-- 00:33:03.570 --> 00:33:08.430 align:middle line:84% more than 80% reduction by 2050, which was the original Paris 00:33:08.430 --> 00:33:10.080 align:middle line:90% Agreement goal. 00:33:10.080 --> 00:33:12.180 align:middle line:84% Now our goals have become net zero 00:33:12.180 --> 00:33:15.720 align:middle line:84% by 2050, which is more aggressive still. 00:33:15.720 --> 00:33:19.140 align:middle line:84% To give you a sense of how some of this kind of analysis 00:33:19.140 --> 00:33:21.930 align:middle line:84% percolated into city-level reports, 00:33:21.930 --> 00:33:23.880 align:middle line:84% this should be a familiar graph to you. 00:33:23.880 --> 00:33:26.580 align:middle line:84% This is a marginal abatement cost curve. 00:33:26.580 --> 00:33:28.740 align:middle line:84% But this is specifically for the building sector 00:33:28.740 --> 00:33:30.030 align:middle line:90% in New York City. 00:33:30.030 --> 00:33:31.920 align:middle line:84% So you can see that they've measured out 00:33:31.920 --> 00:33:35.620 align:middle line:84% all the possible savings you can have in buildings. 00:33:35.620 --> 00:33:37.290 align:middle line:90% These are all the negative ones. 00:33:37.290 --> 00:33:39.120 align:middle line:84% Almost everything is negative compared 00:33:39.120 --> 00:33:43.050 align:middle line:84% to this few interventions that are relatively-- 00:33:43.050 --> 00:33:44.310 align:middle line:90% cost more. 00:33:44.310 --> 00:33:50.053 align:middle line:84% But I would argue that anything below about $150 per ton 00:33:50.053 --> 00:33:52.595 align:middle line:84% essentially is something that we should do because it's lower 00:33:52.595 --> 00:33:55.740 align:middle line:90% than the social cost of carbon. 00:33:55.740 --> 00:34:03.570 align:middle line:84% That pretty much describes about 23 00:34:03.570 --> 00:34:07.590 align:middle line:84% of the 28 total metric tons carbon dioxide 00:34:07.590 --> 00:34:09.780 align:middle line:90% equivalent per year potential. 00:34:09.780 --> 00:34:11.850 align:middle line:84% You can look at the biggest area is probably 00:34:11.850 --> 00:34:13.380 align:middle line:90% residential freezers. 00:34:13.380 --> 00:34:16.739 align:middle line:84% Again, not necessarily a topic you thought you might focus on, 00:34:16.739 --> 00:34:20.360 align:middle line:84% but a topic that has very high impact. 00:34:20.360 --> 00:34:22.900 align:middle line:84% And so to get to the most recent New York City 00:34:22.900 --> 00:34:28.840 align:middle line:84% law, passed in 2019, these are carbon budgets for buildings. 00:34:28.840 --> 00:34:31.060 align:middle line:84% The highlights are that it affects buildings greater 00:34:31.060 --> 00:34:33.449 align:middle line:90% than 25,000 square feet. 00:34:33.449 --> 00:34:36.130 align:middle line:84% It sets increasingly stringent limits 00:34:36.130 --> 00:34:40.699 align:middle line:84% on carbon emissions per square foot in 2024 and 2030. 00:34:40.699 --> 00:34:44.677 align:middle line:84% So in two years, we're coming up on the first marker, which 00:34:44.677 --> 00:34:45.969 align:middle line:90% is not the most aggressive one. 00:34:45.969 --> 00:34:49.150 align:middle line:84% 2030 is a much tougher target to meet. 00:34:49.150 --> 00:34:50.860 align:middle line:84% It gives building owners the flexibility 00:34:50.860 --> 00:34:53.679 align:middle line:84% to comply with this law through renewable energy credits 00:34:53.679 --> 00:34:55.179 align:middle line:90% or emissions offsets. 00:34:55.179 --> 00:34:57.850 align:middle line:84% And notably, the city of Cambridge 00:34:57.850 --> 00:35:00.770 align:middle line:84% is considering similar carbon budgets for buildings. 00:35:00.770 --> 00:35:02.930 align:middle line:84% But they're not allowing renewable energy credits, 00:35:02.930 --> 00:35:04.763 align:middle line:84% which means that a building owner can't just 00:35:04.763 --> 00:35:09.550 align:middle line:84% go on the market and purchase a renewable energy credit, which 00:35:09.550 --> 00:35:12.353 align:middle line:84% may not have the decarbonizing impact we want it to have. 00:35:12.353 --> 00:35:14.020 align:middle line:84% I'll talk about renewable energy credits 00:35:14.020 --> 00:35:16.630 align:middle line:90% more in a few lectures from now. 00:35:16.630 --> 00:35:18.430 align:middle line:84% It allows for some affordable housing 00:35:18.430 --> 00:35:20.350 align:middle line:84% to choose low-cost energy savings 00:35:20.350 --> 00:35:24.330 align:middle line:84% measures instead of meeting these emissions limits. 00:35:24.330 --> 00:35:26.285 align:middle line:84% It sets up a new Office of Building Energy 00:35:26.285 --> 00:35:28.660 align:middle line:84% and Emissions Performance at the Department of Buildings, 00:35:28.660 --> 00:35:31.930 align:middle line:84% again, spreading this throughout the city government. 00:35:31.930 --> 00:35:34.420 align:middle line:84% It has a strong advisory board to help refine emissions 00:35:34.420 --> 00:35:36.010 align:middle line:90% metrics and limits. 00:35:36.010 --> 00:35:39.970 align:middle line:84% And also, crucially, it calls for creating a carbon trading 00:35:39.970 --> 00:35:44.740 align:middle line:84% study and implementation plan because even relatively 00:35:44.740 --> 00:35:46.720 align:middle line:84% new buildings in New York City will not be 00:35:46.720 --> 00:35:48.580 align:middle line:90% able to meet the 2030 limits. 00:35:48.580 --> 00:35:52.480 align:middle line:84% Let's say you built a new building around 2000. 00:35:52.480 --> 00:35:54.940 align:middle line:84% And you got a LEED gold certification 00:35:54.940 --> 00:35:56.740 align:middle line:84% even though your building had natural gas. 00:35:56.740 --> 00:35:59.260 align:middle line:84% Or natural gas at the time was relatively clean 00:35:59.260 --> 00:36:02.320 align:middle line:84% compared to consuming other forms of fuel. 00:36:02.320 --> 00:36:05.290 align:middle line:84% By 2030, that building may be out of compliance. 00:36:05.290 --> 00:36:06.790 align:middle line:84% And so what you might do is actually 00:36:06.790 --> 00:36:08.710 align:middle line:90% choose to trade carbon credits. 00:36:08.710 --> 00:36:10.810 align:middle line:84% This is essentially a cap-and-trade program 00:36:10.810 --> 00:36:12.040 align:middle line:90% just for buildings. 00:36:12.040 --> 00:36:14.920 align:middle line:84% You may choose to spend your money not on upgrading 00:36:14.920 --> 00:36:17.980 align:middle line:84% your 20-year-old natural gas system, but upgrading, 00:36:17.980 --> 00:36:20.290 align:middle line:90% let's say, 10 buildings in-- 00:36:20.290 --> 00:36:23.800 align:middle line:84% 10 multifamily buildings in the outer boroughs because that's 00:36:23.800 --> 00:36:26.980 align:middle line:84% relatively cost effective and has the exact same greenhouse 00:36:26.980 --> 00:36:30.040 align:middle line:84% gas emissions abatement potential, which is to say it's 00:36:30.040 --> 00:36:32.260 align:middle line:90% cap and trade for buildings. 00:36:32.260 --> 00:36:34.160 align:middle line:84% We want to look for the lowest-cost, 00:36:34.160 --> 00:36:36.890 align:middle line:90% highest-impact alternatives. 00:36:36.890 --> 00:36:40.180 align:middle line:84% And it does give very stringent penalties for non-compliance 00:36:40.180 --> 00:36:45.060 align:middle line:84% and also gives variances for financial hardship for owners. 00:36:45.060 --> 00:36:47.280 align:middle line:84% With the Urban Green Council, in 2019, 00:36:47.280 --> 00:36:52.900 align:middle line:84% I analyzed the economic and employment effects 00:36:52.900 --> 00:36:54.930 align:middle line:90% for this city. 00:36:54.930 --> 00:36:57.390 align:middle line:84% It does affect the total output of the city. 00:36:57.390 --> 00:36:59.700 align:middle line:84% And it does affect the earnings of the city. 00:36:59.700 --> 00:37:01.410 align:middle line:84% But crucially, look at the number 00:37:01.410 --> 00:37:04.470 align:middle line:90% of jobs in 2024 and 2030. 00:37:04.470 --> 00:37:07.140 align:middle line:84% To meet the less stringent 2024 goals, 00:37:07.140 --> 00:37:11.670 align:middle line:84% we were going to-- it's expected to create nearly 20,000 jobs. 00:37:11.670 --> 00:37:14.460 align:middle line:84% But to meet the 2030 goals, it's expected 00:37:14.460 --> 00:37:19.470 align:middle line:84% to create, but also require, 180,000 more jobs. 00:37:19.470 --> 00:37:22.140 align:middle line:84% We talk about this as a good thing in terms of green jobs, 00:37:22.140 --> 00:37:24.390 align:middle line:90% to create 200,000 jobs. 00:37:24.390 --> 00:37:26.440 align:middle line:84% But it could also be a potential constraint, 00:37:26.440 --> 00:37:28.620 align:middle line:84% which is to say that if you can't 00:37:28.620 --> 00:37:31.230 align:middle line:84% get enough affordable housing or enough people to fill 00:37:31.230 --> 00:37:35.230 align:middle line:84% these 200,000 jobs, this carbon budget may not happen. 00:37:35.230 --> 00:37:38.700 align:middle line:84% So this is to say that workforce is considered 00:37:38.700 --> 00:37:41.430 align:middle line:84% to be one of the biggest possible obstacles to achieving 00:37:41.430 --> 00:37:43.770 align:middle line:84% the carbon budgets for buildings. 00:37:43.770 --> 00:37:46.050 align:middle line:84% We can increase the value of the buildings. 00:37:46.050 --> 00:37:48.625 align:middle line:84% We can increase output and earnings in New York City. 00:37:48.625 --> 00:37:50.250 align:middle line:84% Building owners may be willing to do it 00:37:50.250 --> 00:37:51.730 align:middle line:90% because it's cost effective. 00:37:51.730 --> 00:37:53.670 align:middle line:84% But if you can't find the workers, 00:37:53.670 --> 00:37:56.780 align:middle line:90% the policy may not be effective. 00:37:56.780 --> 00:38:08.000 align:middle line:90%