Cap and Trade
Millions
Slip Past Affordable Housing Developers
By Bendix Anderson
While the
federal proposal to fight global warming is stalled on the steps of Capitol
Hill, a regional program to cut greenhouse gas (GHG) emissions has raised
hundreds of millions of dollars.
The Regional Greenhouse Gas Initiative (RGGI) is a “cap and
trade” program. The ten states participating in the RGGI—Connecticut, Delaware,
Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode
Island, and Vermont—agreed to cap the amount of CO2 emissions they allow from
the power sector and reduce emissions by 10% by 2018.
Under the
RGGI, states sponsor auctions at which utilities can buy allowances for GHG
they produce. The millions of dollars raised at these auctions are put into a
program to reduce the amount of GHG in the atmosphere via low-carbon-intensity
solutions, including energy efficiency and clean renewable energy such as solar
and wind power. The auctions are managed by RGGI, Inc., a nonprofit created by
the states to manage and provide technical support to the program.
RGGI held five quarterly auctions between September 2008 and December 2009, by which time the auctions had raised $432 million.
Missing the Party?
The
process of handing out the money raised is just beginning. Affordable housing
developers had been hoping to use RGGI funds to make their apartment properties
more energy efficient—but it’s unclear how much, if any, of RGGI’s pot of gold
will go toward affordable rental housing. As the money moves through a tangle
of state agencies and programs, only a trickle seems to be headed to
apartments.
“In some
jurisdictions we won’t have any success getting to capital,” said Bill Kelly,
president of the housing advocacy group Stewards of Affordable Housing for
the Future (SAHF). He is working on a plan to use RGGI money to make
energy improvements costing a few thousand dollars per unit at 2,000 to 3,000
apartments over the next six months. But the deal is so tenuous that Kelly
declined to name the developer involved or even the states where the apartments
are located.
Energy
experts interviewed for this story could not name any other plans to use RGGI
funds for rental housing that were close to fruition.
The states
that have spent the most funds, including Connecticut, Maryland, Massachusetts,
and New Hampshire, have funneled funds through existing programs, often
including weatherization, exposing a problem in the programs.
“Energy
efficiency funding programs have served multifamily very badly,” says Steve
Burrington, an energy consultant with Serrafix Corp. That’s
because most state governments and utilities companies have designed their
programs around single-family homes or commercial buildings. The programs don’t
take into account the unique needs of apartment buildings, which are physically
very different from single-family homes and whose residents have totally
different patterns of energy use, water consumption, and transportation needs
than the workers who use office and industrial buildings.
“Some
states have tried to move money into multifamily, but it’s very difficult,”
says Burrington. For example,
the millions raised by Massachusetts will flow into energy efficiency programs
administered by utility companies. Other states have had not yet included
affordable apartment properties in their RGGI plans. The New Hampshire Public
Utilities Commission released a request for proposals for nine grant programs
through its Greenhouse Gas Emissions Reduction Fund. The first round of the
fund will distribute $5.6 million of the $20 million the state raised in the
first four RGGI auctions. None of the grant programs in the announcement
mentions housing.
But there
are some glimmers of hope. For example, Maryland is distributing the proceeds
from its RGGI auctions through its Strategic Energy Investment Fund, developed
by the Maryland Energy Administration. The fund committed $8 million to low-
and moderate-income weatherization out of the $82 million it raised in its
first four RGGI auctions. This money includes the Low and Moderate Income
Energy Efficiency Retrofits program, which specifically includes “property
owners who rent” apartments to low-income households.
As
affordable housing developers struggle to find and win their share of the RGGI
cash, the stakes are high. Advocates like Kelly hope that money from RGGI might
eventually help more make more than 100,000 apartments more energy efficient.
Carbon Offsets Program
Still Green
RGGI also
allows power companies to buy a different kind of allowance called “carbon
offsets,” though that piece of RGGI has not yet begun to raise money.
Power
companies buy offsets directly from private enterprises whose activities reduce
GHG, such as planting trees or reducing methane emissions from landfills. RGGI
certifies that these activities do reduce GHG and that the offset money is
funding new activities that would not have been accomplished without RGGI
funding. Developers could not use offset money to pay for a renovation that
they plan to compete even without funding from offsets.
The first
applications were due June 30 from private enterprises seeking to certify
carbon offsets they would like to sell. The approval process takes at least 90
days. RGGI declined to comment on how many or what kind of applications it
received in that first round.
For now,
energy experts say the sale of offsets is unlikely to bring major sums of money
to affordable housing projects. “Just to get an offset project verified—the
cost will be close to or more than the worth of the offsets,” says Jürgen
Weiss, managing director of energy consultant Watermark Economics.
Currently,
power companies can buy only 3.3% of their total RGGI emission allowances through
carbon offsets, according to RGGI rules. Given that the auctions of allowances
brought in $366 million in their first year, the sale of offsets from that year
is limited to around $10 million.
Private foundations such as Enterprise Community Partners have experimented
in creating voluntary carbon offsets through its Green Communities Offset Fund,
in which companies voluntarily contribute dollars to activities that reduce
carbon in the atmosphere in exchange for the public relations benefits or to
fulfill part of their organization’s missions. The sums of money are not large,
however—for example, the developers of Silver Gardens, a 66-unit affordable
housing community in Albuquerque, N.M., announced a deal last year to use
$6,600 from the program to put a wind turbine system on its roof.