In May, President Trump released his first-ever budget proposal, the funding request submitted to Congress by White House administrations each year. In keeping with promises made on the campaign trail, the document called for deep cuts to a number of federal agencies, and the elimination of more than 50 programs administered by the Environmental Protection Agency (EPA).
Among those slated for the chopping block was Energy Star, an EPA program that has become integral to NAIOP members across the country and the commercial real estate industry as a whole. Created in 1992, Energy Star has two components: a certification framework for appliances, lighting, and other products (those deemed “efficient” are stamped with a recognizable blue logo sought by consumers); and a buildings program which sets industry standards for efficient water and energy usage. The latter also houses Portfolio Manager, a free online tool that helps building owners and managers measure the performance of their properties. Often referred to as “TurboTax for energy management,” Portfolio Manager is currently used to track 50 percent of all commercial square footage in the U.S., to the tune of about 500,000 buildings and 44 million square feet.
For building owners, participation is voluntary, but presents a number of benefits. Buildings certified by the EPA as Energy Star-rated tend to be more desirable to institutional investors, and have been shown to command higher rents from commercial tenants. Users can also choose to remain anonymous, and simply use Portfolio Manager to compare their performance to similar properties.
There is one important caveat. Though participation in the Energy Star program is voluntary at the federal level, several municipalities and cities – and even some states – have laws on the books that require owners to track and maintain energy usage data through Portfolio Manager. (For example, California requires the disclosure of this data when the property is sold.) In fact, if you live in a major metropolitan area, chances are that Energy Star plays a role in your business.
To be sure, the practice by some localities of structuring mandates around a voluntary federal program is questionable policy for this very reason. But given that these laws are firmly in place, the elimination of Energy Star would likely result in widespread compliance nightmares, rather than a rollback of the underlying disclosure laws themselves.
In addition to being woven into the fabric of the commercial real estate industry, Energy Star is a proven job creator; saves billions of dollars on utility bills for families and businesses each year; promotes energy independence; and encourages the construction of resilient buildings and infrastructure.
For all of these reasons, NAIOP joined with more than a dozen organizations in the real estate community and called on Congress to save the program. Fortunately, key lawmakers in the House took note and are working to maintain Energy Star funding.
While the president’s budget presented an ominous sign for the future of the Energy Star program – and signaled his desire to scale back the influence of the EPA – the task of establishing federal spending levels is ultimately left to Congress. It was therefore significant when, in late July, lawmakers included the following language (found on page 56) in their legislative report: “The Committee continues to support the Energy Star program and does not terminate the program as proposed.” However brief, the statement clearly conveys Congress’s understanding of the importance of Energy Star, and their commitment to keeping the program in place.
There are still a number of hurdles to overcome before the champagne corks can be popped, though. For starters, the appropriations process is in its early stages; even once it’s completed, there is still no guarantee that President Trump will sign the legislation. Furthermore, the House report language goes on to suggest that a shift in the “roles and responsibilities” of the Energy Star program might be warranted. (In addition to EPA, the Department of Energy plays a role in administering the program.) With pressure mounting to cut costs at both agencies specifically their energy-efficiency program budgets – the effect of these changes is hard to predict, and could have far-reaching consequences.
While work remains to be done, this latest development represents a significant win and sets a positive tone as Congress leaves for the summer recess.