A couple of commenters argued that I was being too negative in yesterday's "It Can't Possibly Be That Easy" post in assuming that existing housing stock would have to be replaced, and that it was possible to retrofit existing homes to be zero net emissions. I think they have a point, but at the same time, I don't think it changes my larger point that getting to zero emissions cannot be without impact on growth.
A nice case study is a house in Boulder, Colorado, which is detailed in articles in the Daily Camera and Ecofutures. The couple in question carried out a $125,000 retrofit (of which $60,000 was their own money), adding solar hot water collectors feeding radiant floor heating in a new basement slab, a 6KW PV panel array, an extra layer of wall outside the existing wall, more insulation in the roof and foundation, energy auditing to remove air leaks and thin spots in the insulation, new windows, etc.
So this is definitely cheaper than throwing away the existing house and starting over. But it's still a massive project (it took them two years) and requires a lot of economic resources.
I stress that I'm not saying we shouldn't do this - we should! I want to do this for my own family at some point. But to the extent we are putting our resources into fixing up the housing (and other infrastructure) we have like this, we are not putting those resources into building more/bigger/better houses, etc. I think we should acknowledge that fact.
Also, Krugman has a response to his critics here. I found it sketchy and unpersuasive.
15 comments:
The place to look is at the Affordable Comfort Institute's 1,000 Home Challenge - they are using German style passivehaus models and retrofitting 1,000 homes. And yes, they are expensive - Pat Murphy of the Community Solution did one and spent more than 100K as well.
Sharon
The U.S. is overhoused with oversized, underinsulated, badly built McMansions.
Retrofitting older, smaller houses and building smaller decent houses from scratch will help the economy just as much, a dollar spent, is a dollar spent; and provide real long term value for all conceerned.
The problem of course, is that thanks to the real estate bubble and subsequent economic collapse, is that there is no money available for good or bad houses.
Glenn
But did all of those improvements in your case study reduce our GNP? I don't think so. In fact doing this kind of thing is an economic stimulant. Sure there are real costs - but what is important is how we choose to allocate our time and energy. That's what economics is all about - and given the appropriate incentives it just might be possible to channel our efforts towards lower emissions without a large hit to the GNP.
What's the shape of the curve for improvements/price? Obviously you can do a lot to tighten up one's home without spending $60-120k. A nationwide drive to install weather stripping would do a lot to cut back on emissions.
It's like Glenn said. If I spend $200,000 to buy a new, second house, or I spend $200,000 to upgrade my existing house, economically, that's a wash. That's $200,000 spent on goods and services that will contribute to GDP that year, either way. More/bigger/better houses has nothing to do with it. It's spending more on domestic goods and services that counts.
As Calculated Risk keeps pointing out, residential investment is steady or declining. But GDP is increasing again. The people who are spending money are just spending it on different things, like IPads. If no one in the country spent another dime on a new house, we could continue to have GDP growth as long as we spend the money on other goods and services.
Gary/Kjm
It's a very interesting point. Certain environmentalists are always complaining that GDP measures the wrong things, including some things that are not really desirable, but maybe here that effect works for us - these kinds of retrofits are not what (most) people would choose to spend their money on, so in some sense it's not the growth they wanted, but it may look ok in the stats anyway.
Still, I suspect if you were to try to compel everyone to do this mainly via high carbon prices, you will a) trigger a recession, and b) trigger a big political backlash.
Thinking further on it, I guess what's required is a combination of carrot and stick. On the one hand, you can't price carbon so high that you trigger a recession - you need to give people other incentives to go ahead and do these kinds of retrofits.
OTOH, you need enough of a carbon price to avoid Jevon's paradox. At the moment, individual acts of conservation do no good at a systemic level because they just lower the price and ensure that someone else will be increase their usage somewhere else. Carbon pricing is required to avoid that kind of thing.
The economic optimum for residential energy retrofits is far short of net-zero.
Although zero-energy houses are a great proof of concept, the same 100K could have insulated 50 uninsulated attics and saved maybe 20X the annual energy savings of a single zero-energy house retrofit.
As a wild swag, the most effective 20% of the net-zero retrofits would produce 80% of the energy-savings benefits. Insulation has a financial and energy return on investment that is ~5X the ROI on PVs or solar thermal (of course insulation suffers from diminishing returns as more is added too).
Timing also has a lot to do with economics of energy retrofits. Replacing worn-out windows with new R-15 units makes much more financial sense than ripping out new, functional, but energy inefficient windows before the end of their useful life.
Stuart,
We seem to have plenty of capacity to produce stuff. We haul tons of junk away in our garbage every day. Rather it seems to me that we are missing the necessary incentives to put our productive capacity to work in the best ways. Jevon's paradox may work against us, but all the more reason for strong incentives.
More untested - is it possible to have GDP growth without energy growth? I'm not convinced that this is impossible, but we have never been put in a position where such a strategy would be the most profitable.
I am an owner of a "vintage" home (built in 1920, minimal insulation in the attic, none in the walls or floor, original single pane windows). I can tell you that, at least in our climate (Houston) and at today's energy prices, a deep energy-conserving retrofit makes very little sense financially. And I'm only talking about insulation, no PV.
If energy prices rose to the point where monthly savings from efficiency measures exceeded the cost of the monthly payments to finance the improvements, then this stuff would take off.
Problem is if we let energy prices get that high without compensating in other areas (tax cuts, for example) no one will be able to afford to finance anything.
I am a fan of the idea to phase-out the payroll tax and ramp-up taxes on non-renewable resource extraction.
Tom:
Right, but the original context of the discussion was what would be required to make Krugman's claim of no effect on economic growth but 83% reduction in carbon emissions true. That requires that most normal infrastructure be pretty much zero carbon emissions.
One of the interesting effects of the 2008 oil price spike was how it played out in the Northeast, which as you all probably know, uses almost all of the nation's heating oil. While heating oil is a small percentage of total heating, it is more than 50% for many New England states and much of rural upstate NY where I live.
What happened was that the rise in prices for heating led to some reinsulation, but because the prices spiked, it led to exactly the opposite equally often - now spending more of their income just heating their home, most middle and low income people found themselves unable to engage in high or even fairly moderate cost retrofits because so much of their income was being shifted to heating energy. So what happened here was that most people desperate for a viable solution didn't insulate - they bought wood or coal stoves, and my local stores started selling coal.
I'm a bit skeptical, that barring a miraculous and thorough recovery, it is possible to price carbon at the magic point Stuart mentions and have net positive effects. I wish I thought it was, though. I think substantial energy gains would have to be done mostly through out and out subsidies - not tax breaks, either, because the people most likely to make choices that compromise gains are the ones who don't pay net taxes.
Sharon
Sharon - as I'm sure you know the EIA tracks sales of No. 2 Fuel Oil, which doesn't show much more than the usual secular trend down. A commenter on TOD had an interesting anecdote about a friend using straight road diesel in his burner, getting a much lower upfront cost as a result; and the consensus was it likely wouldn't hurt the burner too. Hard to say how common that was though.
I just posted a breakdown of US domestic heating sources in Drumbeat, too, if you're curious.
Stuart,
My guess is that the economic optimum for de-carbonization would combine 90% reduction with home energy use with renewables for the remaining 10%, rather than 100% reduction in home energy use. Once home energy use is that low, air source heat pumps or even resistance electric are adequate and easily powered by renewable electricity.
I do agree with the thrust of your article that Krugman is too Pollyanna about carbon reduction economics.
I've posted a response to Krugman's post that you linked to:
http://turtlethought.com/2010/04/whats-stopping-the-negawatt/
I've tried to explain the challenges that we in the energy efficiency business face. It's certainly not all it's made out to be.
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