Congress Is Voting on Efficiency Legislation Next Week. Here’s Why It’s Bad News

The Senate is expected to vote on the Energy Savings and Industrial and Competitiveness Act, sponsored by Sens. Jeanne Shaheen (D–N.H.) and Rob Portman (R–Ohio). Here are six reasons why it should concern you.

1.   Federal Paternalism Makes Us Worse Off. When the government forces efficiency measures on people, it takes away choices or, at the very least, overrides them. When families and firms are not spending money for the most energy-efficient technology, it is not that they are acting irrationally—they simply have other preferences, budget constraints, and other tradeoffs.

2.   Duplicates Federal and State Programs. Taxpayers have already funneled billions of dollars to similar initiatives, and plenty of state programs exist to promote efficiency. The 2009 stimulus law allocated $32 billion for energy efficiency and retrofits, which included billions for weatherization projects, worker-training programs, and federal, state, and tribal building-efficiency improvements. On top of that, the Department of Energy (DOE) provides a list of more than 4,200 state programs including targeted tax breaks, rebate programs, revolving loans, low-interest loans and regulations—with most promoting efficiency measures and renewable energy.

3.   Corporate Welfare. Shaheen–Portman purports to improve transparency, direction, and collaboration in DOE’s Advanced Manufacturing Office (AMO), which provides grants to companies to improve manufacturing efficiency. Taxpayers provided tens of millions of dollars to automotive and chemical companies that have huge market capitalizations and, in some cases, spend more than a billion dollars on research and development. Congress should provide some real direction by eliminating this egregious corporate welfare program.

4.   If You’re Paid, Is It Voluntary? The bill authorizes $200 million of taxpayer money to “incentivize and assist” states and tribal groups to meet allegedly voluntary building codes. But the taxpayer did not volunteer to help states and tribes pay for efficiency improvements.

5.   Forcing Energy Efficiency in Mortgage Appraisals. The legislation lumps in the Sensible Accounting Value Energy (SAVE) Act of 2013—which will effectively further subsidize government-backed mortgage loans under the pretense of energy efficiency and corrode the housing market by micromanaging the home appraisal process. These regulations go further than most of the current mortgage rules by dictating an increase in the amount of money that people will be able to borrow. For starters, the proposal requires the “expected energy cost savings” from conservation programs to be included in borrowers’ debt-to-income test.

In other words, loan applicants will effectively have their income increased because underwriters will be required to reduce borrowers’ estimated future living expenses.  Further, it requires appraisers to increase their assessment of a home’s value based on amorphously defined energy efficiency metrics. Currently, an appraiser will capture a home’s energy efficiency qualities to the extent that they add or subtract market value.  Under this legislation, the appraiser would be forced to add value to an assessment if a home has certain characteristics based on the whims of politicians rather than on market demand.  This is absurd.  Buyers may not like the look of solar panels and such an add-on could very well detract from a home’s value. The appraiser’s job is to make such determinations. But this legislation takes authority from those with expertise in the private sector and transfers it to bureaucrats and politicians. Such distortions will result in inflated housing appraisals and inevitably lead to over borrowing—ultimately contributing to a further corrosion of the housing market.

6.   Throwing Good Money After Bad on Workforce Training. Shaheen–Portman also creates multiple programs and allocates millions of dollars to wasteful workforce training programs. The fact is that if efficiency improvements really saved that much money, and if demand for more energy-efficient buildings and manufacturing processes existed, these programs would not be necessary. As the private sector expands, it trains workers appropriately to meet demand and capture more opportunities—and will make those investments with its own resources. Taxpayer-funded workforce training for efficiency is another tried-and-failed part of the stimulus.

The federal government can play a very limited role in providing information to help consumers make well-informed decisions and in improving energy efficiency within the government. Several titles in the Shaheen–Portman bill adhere to this concept, but the legislation largely oversteps the boundaries of the role that the federal government should play in the energy sector.