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CALGreen: Regulatory Nirvana

Now and then, circumstances come along that put in perspective the level of regulatory autonomy currently enjoyed by our governments. A prominent example is the implementation in California of “CALGreen” building standards, which entered effect on January 1. Shepherded through the legislature in 2008 by Arnold Schwarzenegger, CALGreen proposes to reduce the greenhouse-gas (GHG) emissions attributable to California’s newly constructed buildings — residential and nonresidential — by 3 million metric tons per year in 2020.

Much has been written by conservatives about the poor economic timing of the CALGreen implementation. But two of its other features are worth particular note. The first is that 3 million metric tons of GHG is vanishingly small compared with the globe’s total anthropogenic GHG emissions. Those global emissions were calculated at 31.3 billion metric tons in 2009. A reduction of 3 million metric tons represents .0096 percent of that global total (the actual fraction is .000096). Considering the number of state-government agencies involved in administering CALGreen, and the building industry’s estimate that it will increase construction costs 3 to 12 percent depending on the project, the cost of CALGreen is a questionable commitment in light of its projected benefits.

The other feature of note is CALGreen’s promise to relieve builders of $30,000 to $50,000 per project — by CALGreen’s estimate — in design and private inspection costs. Builders who wish to “build green” have, until now, sought the services of firms that specialize in complying with the industry standards promulgated through the Leadership in Energy and Environmental Design (LEED) Program. With some state and local governments making LEED compliance mandatory, contractors have been driven to pay private consultants for their expertise. By setting very specific state requirements, however, CALGreen’s documentation implies that it will eliminate the leeway in design and execution that creates a demand for such expert judgment. And as the CALGreen publicity material points out, state inspectors — unlike private consultants — will not represent an additional cost to the builder.

Not in the builder’s capacity as a builder, at any rate. In his capacity as a taxpayer, he will naturally be paying every bit of the cost of CALGreen regulation. And the difference between privately contracted experts and publicly funded regulators is that the latter get paid regardless of the market’s demand for their services. That reality will be a highly visible one in California’s foreseeable future: as observed by the developer interviewed by the San Fernando Valley Business Journal (link above), “There is really no one building anything right now.”

To paraphrase Blaise Pascal, regulation has its reasons which reason does not know. Average Californians want a thriving economy, accountable schools, reliable police and fire services, a functioning penal system, and fiscal responsibility from the state. Sacramento is giving them instead a new set of regulations — for a dormant industry — which will employ hundreds of public servants to keep the CALGreen promise of reducing global GHG emissions .0096 percent by 2020. Meanwhile, the public is invited to rejoice that more of the cost of green regulation will be borne by the taxpayer. I’m not sure the art of regulation for regulation’s sake can be perfected much more than this.


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