Environmental and Energy Efficiency Trading - A New Opportunity for Building Performance

What is Environmental and Energy Efficiency Trading?

Today, credits for environmental emission reduction and energy efficiency are being traded as a commodity in various environmental and utility markets. Through the introduction of environmental cap and trade systems, energy efficiency certificates, and utility capacity trading, credit for energy efficiency is being monetized into a tradable commodity. As programs such as cap and trade and energy efficiency certificates expand from state and regional programs into national and international programs, the demand for raters to measure and certify compliance to the emission or efficiency targets will dramatically increase.

Opportunities for Raters

Raters will be needed to calculate and verify energy and environmental savings from a building's improvements so that value can be traded in emissions and energy efficiency markets.
Certified raters will be needed in the environmental emission, energy efficiency certificate and forward capacity markets that will invest in reductions in energy usage.
The potential for energy efficiency to create certificates that can be included in Energy Efficiency Portfolio Standards (Compliance Markets) or voluntary clean power markets (White Tags)
Creation of a new revenue source for building owners to finance the energy performance of their homes and offices and for third parties to aggregate and sell the value of savings
New service raters can offer to their builder clients
By applying the existing RESNET standards for energy efficiency to energy efficiency trading, raters and builders would avoid the hassle of learning a new set of standards

Types of Energy Efficiency Trading

Carbon Cap and Trade

A cap and trade system sets a limit on the amount of carbon dioxide (or other greenhouse gases) that can be emitted. Individual companies are then required to reduce their company's emissions to the new limit. Those companies that reduce their emissions below their limit are given credits which they can sell to companies that still have not sufficiently reduced their emissions. In other words, companies are given the option of either reducing their own emissions or purchasing credits from companies who are below the limit. For more information click on carbon cap and trade.

Environmental Trading

Environmental trading seeks to reduce pollution emissions through a market-based solution. Companies and utilities are tasked with either reducing their own emissions or buying credits from companies that have reduced their emissions below the required level. Markets have already been created to reduce the emissions of sulfur oxides (Sox), nitrogen oxide (NOx), and mercury. The cap and trade of carbon dioxide (CO2) is expected follow in the near future. For more information click on environmental trading.

Energy Efficiency Certificates

States and the federal government are exploring establishing mandatory energy efficiency portfolio standards that require regulated utilities to meet a certain percentage of their projected power needs through energy efficiency. Under these regulations a utility has an option of reducing consumer energy usage or buying energy efficiency certificates from a third party as an offset. For more information click on energy efficiency certificates.

Forward Capacity Trading

Today, the United States' utility grid is being strained by the increasing demand for electricity and the lack of capacity to meet the growing demand. One cost-effective way to ensure that the power can meet the demand for electrical services is to create forward utility capacity trading programs. Forward capacity trading allows companies to enter the capacity market and sell energy savings on an equal playing field as those who wish to build new power plants. For more information click on forward capacity trading.

Why Focus on Residential Efficiency?

Traditionally, regulators and utilities look to construct new power plants in meeting the increased demand for power. There is now a new realization that energy efficiency is a cost-effective option to meet the demand for electrical services. Energy use from residential buildings accounts for 36.5% of electricity consumed in the U.S. and 21% of carbon emissions. High performance buildings can play a significant role in meeting utility energy efficiency targets.

Source: U.S. Energy Information Agency

What Should the Building Performance Industry Do?

There is increasing interest by state regulators to reduce pollution emissions and meet future power demand through a system of cap and trading. It is certain that states will be adopting these market-based mechanisms in the upcoming years. It is uncertain, though, whether or not commercial and residential buildings will be included in the program. It is vital that raters advocate that residential and commercial buildings are included in cap and trade programs. Raters can begin by forming partnerships with industry, consumer and environmental advocacy groups, and sitting on local regulatory meetings.

Advocacy on the local, state, and regional level will be an important step in ensuring that buildings are included in a national cap and trade programs. Raters should also educate decision makers of home energy ratings as a cost effective to calculate and verify emission and energy efficiency savings in buildings.

The RESNET Board of Directors has adopted an action plan on environmental, forward capacity and energy efficiency certificate trading. The plan spells out actions that RESNET will undertake to promote building performance as an offset to cap and trade systems. To download the action plan click here.

As a resource to raters to educate their staff, clients and state regulators on the opportunity that residential energy efficiency performance presents RESNET has developed a series of fact sheets. To down load a fact sheet click on one of the links below: