Lost Opportunities

Lost Opportunities: Predicting the Adoption of Building Energy

Codes in the U.S. by Hal T. Nelson hal.nelson@cgu.edu

 Agenda
A d
 Why?
 Theory and Literature Review
 Research Design, Data and Methods
 Findings
 Implications
 Future Extensions

1
 Importance of Building Energy Codes
 Buildings use over 40% of all primary energy in the
country.
 In 2004/2005
 residential buildings
g accounted for almost 22% of p
primary
y
energy use
 commercial buildings represented the balance of 18% of
primary
p y energy
gy use ((US DOE, 2007).)
 Codes reflect (non) “Lost Opportunities”
 Energy efficiency measures have to be installed during
construction or else they wont be
 50+ year life of buildings
 Long life of capital equipment means its not cost effective
to replace before end of equipment’s
equipment s life
2
What are Building Energy Codes?
 Energy
gy codes are standards and p
practices that
builders must follow when constructing or
renovating a building
 Examples:
 Wall insulation requirements
 Windows: glazed or double or triple paned
 Heating Ventilation and AC equipment
 Roofing materials
 Reduce overall building energy use by installing
more efficient equipment, design, processes
3
Effects of Policy Interventions
 California
has led
the nation
in energy
efficiency
 Title
Titl 24
building
codes are
California
specific
p
4
Extreme Variations in Code Adoption
 Much different
picture today
than in 2000
when 14 states
didn’t have
codes

5
Explaining Energy Code Adoption
 Higher
g energy
gy p
prices?
 Political capacity?
 Political ideology?
 Climate (energy use)?

6
Theoretical Explanations
 Environmental protection: “states w/liberal public opinion, strong
environmental
i t l iinterest
t t groups, lib
liberall llegislatures,
i l t and
d
professionalized legislatures are the most committed to
environmental protection” (Hays, Elser, Hays 1996, pg. 41).
 Kuznets Curve: increased wealth leads to more demands for
environmental protection.
 Expected utility: states with higher electricity prices, and that use
more energy,
energy are more likely to adopt energy saving policiespolicies.
 Spatial: states with efficient neighbors are more/less likely to
adopt.
 Environmental federalism of Oates (2001) vs diffusion of Berry
and Berry (1990).
 Political capacity: large enforcement component to energy codes
means states with low capacity will not enact because they know
they will not be able to enforce.
7
 Research Design
 Dependent variables: Estimated vintage of building energy code:
 Residential (1992
(1992-2005):
2005): No statewide code =0
=0, oldest code = 1
1,
newest = 7
 Commercial (2000-2005): No statewide code =0, oldest code = 1,
newest = 4
 E l
Explanatory
t variables
i bl ((expected
t d sign):
i ) source
 Log of population (+): US Census
 Log of Gross State Product per capita (+): US Bur. Econ. Analysis
 Climate: NOAA
 Heat degree days: # of days requiring heat (+)
 Cool degree days: # of days requiring cooling (+)
 Political ideology % voting for republican in previous presidential
election (-):
( ): US elections commission
 3 year average of Relative Political Capacity (RPC) 3 year average (+):
Calculated from US census, BEA data (see next slide)

8
 RPC Variable
 1992-2005 (we have available updated 2006 data )
 50 US States
Two stage equation
 First stage: predict tax effort as percent of gross state product using the
following functional form

TaxEffort / GSPi ,t  0   1Yeari ,t   2GSPcapitai ,t   3Transfers / GSPi ,t

  4 IGExpendituresi ,t   5 Popi ,t  eit
 Year = data field year
 GSP capita = current per capita Gross State Product
 Transfers = intergovernmental revenues (from US) as a percent of total
current g
gross state p product
 IG expenditures = intergovernmental expenditures as a percent of total
current gross state product
 Pop = state population
 Second stage:
g calculate relative p political capacity
p y
 Actual tax effort / predicted tax effort
9
 Estimation Techniques
 OLS with panel corrected standard errors
 Primary estimation technique—easily interpretable
 Dependent variable is lagged one period
 Corrects
C t ffor autocorrelation
t l ti amongstt error terms
t
 Without lagging, estimators are inefficient and

standard errors might be to low

 Robust standard errors to prevent heteroskedasticity,
contemporaneous error correlation
 Ordinal logit for validity check
check—coefficients
coefficients difficult to
interpret
 Used to calculate predicted probabilities

10
Results
1 2 3 4
OLS Ordinal Logit OLS Ordinal Logit
res_code res_code comm_code comm_code
? Ln Population 0.616*** 0.605*** -0.134*** -0.264
(0.0738) (0.0997) (0.0457) (0.183)
! Lagged Ln GSP/capita 1.106*** 0.0477 1.018*** 2.252***
(0.424) (0.452) (0.379) (0.868)
%VVoting
ti Republican
R bli -0.0460***
0 0460*** -0.0345***
0 0345*** 0 0267***
0.0267*** 0 0789***
0.0789***
(0.00723) (0.0113) (0.00578) (0.0207)
Relative Political Capacity 0.454 -1.055 4.751*** 11.02***
(1.282) (1.510) (0.689) (1.819)
Lagged Electricity Prices 0.107*** 0.103** 0.0704** 0.253***
! (0.0302) (0.0436) (0.0284) (0.0938)
Cool Degree Days -0.00223*** -0.00191*** -0.000403*** -0.00115***
? Heat Degree Days
(0.000121)
-0.000595***
(0.000261)
-0.000567***
(5.52e-05)
-0.000219***
(0.000430)
-0.000625***
(7.54e-05) (9.73e-05) (3.25e-05) (0.000220)
0 south 0.632*** 0.137 -0.0553 -0.108
((0.124)) ((0.256)) ((0.157)) ((0.411))
0 coastal 0.299 0.349 0.312** 0.396
(0.199) (0.228) (0.149) (0.420)
! Residential Energy Code 0.202*** 0.428***
(0.0147) (0.0571)
Constant 0.867 -6.869***
(1.964) (1.920)
Observations 575 575 288 288
R-squared 0.281 0.096 0.468 0.24
Standard errors in parenthes 11
*** p<0.01, ** p<0.05, * p<0.1
Interpretation of Findings
 Population: mixed results
 Positively related to residential code adoption
 Weakly negative relationship with commercial code adoption
 Perhaps population density a better measure?
 Differential impact of politics in each code type
 More republican presidential votes predicts weaker residential codes
codes, stronger
commercial codes
 An explanation of why SC codes weren’t adopted in 1994; “Opposition was based on the
need for local governments to raise taxes or fees to implement the codes.” (DOE, 2008)
 More democrats predicts weaker commercial codes: union opposition?
 Political capacity: matters for commercial codes
codes, but not residential
 Enforcement for commercial buildings more concentrated
 Kuznets curve: Wealthy states more likely to adopt
 Although lower income states have greater relative need
 Spend more on energy as % of total income
 Expected utility: higher retail prices predict more recent code adoption
 Climate (HDD & CDD) negatively predicts adoption
 Surprising. Added the variable for coastal states but this didn’t account for it
 Perhapsp an interaction term between these two variables?
 Residential code adoption predicts commercial code adoption
12
Predicted Probabilities
 Ideal type #1
 Poor, interior state, with low electricity prices
(coal/hydro) and no residential code
 Predicted probability of no commercial energy code
= 98%
 Ideal type #2
 Rich, coastal state, with high electricity prices
(gas/nukes) with residential code
 Predicted probability of no commercial energy code
= 1%
 Cumulative predicted probability of having a recent
(3 or 4 out of 4 possible) commercial energy code =
82% 13
Implications for a Carbon Constrained
W ld
World
 States with growing populations are more likely to adopt
codes in the future
 Rural areas are being left further behind?
 Higher energy prices due to a carbon tax is likely to improve
building energy codes
 Clear differences between building types regarding ideology
 Consensus will need to be made on adoption
 RPC predicts commercial code adoption—but not
residential.
 Expectations of a lack of enforcement might be deferring
residential
id ti l adoption?
d ti ?
 Poor states need incentives/regulations to adopt statewide
codes
 G tti energy code
Getting d adopted
d t d forf one building
b ildi type
t is
i likely
lik l
to lead to adoption of the other type 14
Future Extensions
 Extend commercial code data back to 1992
 Include educational attainment measure (?)
 Spatial variable for contiguous state code
adoption
 Implementation
p measures
 Whether executive agencies or legislatures are
responsible for code cycle improvements
 Suggestions and comments are welcome
 THANKS!!!

15
 Residential Energy Codes
 Coding by code and year
 Codes age relative to new model energy codes
 BCAP data from 2000-2007
 US DOE data uses to estimate 1992-1999

residential code
YEAR 2004/2006
2003/2000 98 1995 1993/92 1990 1989/88 1985/83 1979/81 1975/76 1973 none
1992 7 6 5 4 3 2 1 0
1993 7 6 5 4 3 2 1 0
1994 7 6 5 4 3 2 1 0
1995 7 6 5 4 3 2 1 0
1996 7 6 5 4 3 2 1 0
1997 7 6 5 4 3 2 1 0
1998 7 6 5 4 3 2 1 0
1999 7 6 5 4 3 2 1 0
2000 7 6 5 4 3 2 1 0
2001 7 6 5 4 3 2 1 0
2002 7 6 5 4 3 2 1 0
2003 7 6 5 4 3 2 1 0
2004 7 6 5 4 3 2 1 0
2005 7 6 5 4 3 2 1
16
0
2006 7 6 5 4 3 2 1 0
2007 7 6 5 4 3 2 1 0
Commercial Energy Code
 Coding by code and
year
 Codes age
g relative to
new model energy YEAR
1992
2004
commercial code
2001 1999 1989 none
4 0

codes 1993
1994
1995
4
4
4
0
0
0
1996 4 0
1997 4 0
1998 4 3 0
1999 4 3 0
2000 4 3 2 0
2001 4 3 2 0
2002 4 3 2 0
2003 4 3 2 0
2004 4 3 2 1 0
2005 4 3 2 1 0
2006 4 3 2 1 0
2007 4 3 2 1 0

17
Correlations
. corr comm_code res_code lnpop ln_gsp_cap repub threerpc1 rtl_elec cdd65 hdd65 south
(obs=288)
( )

comm_c~e res_code lnpop ln_gsp~p repub threer~1 rtl_elec cdd65 hdd65 south

comm_code 1.0000
res_code 0.5537 1.0000
lnpop 0.1717 0.2864 1.0000
ln_gsp_cap 0.1926 0.2630 0.1895 1.0000
repub -0.2047
0 2047 -0.3514
0 3514 -0.2632
0 2632 -0.3938
0 3938 1 0000
1.0000
threerpc1 0.2859 0.0248 0.1498 -0.2805 -0.1197 1.0000
rtl_elec 0.3047 0.3069 0.1083 0.3522 -0.6367 0.1111 1.0000
cdd65 -0.0983 -0.1725 0.3745 -0.1814 0.1865 -0.0626 -0.1381 1.0000
hdd65 -0.0604 -0.0045 -0.5120 0.1234 -0.0685 0.0502 0.0804 -0.8857 1.0000
south -0.0262 -0.0428 0.2617 -0.3412 0.2656 -0.0707 -0.2317 0.5970 -0.6459 1.0000

18
Descriptives

Variable Obs Mean Std. Dev. Min Max

comm_code 399 1.822055 1.280277 0 4

lnpop 800 8.114868 1.008993 6.118 10.495
laggsp 800 3.374588 .257788 2.71 4.24
repub 700 45.00714 9.223614 27 72.7
threerpc1 600 1 001
1.001 .0981889
0981889 .64
64 1 58
1.58

lagelec 700 8.524429 2.333758 4.5 20.7

cdd65 864 1206.063 761.6984 218 3404
hdd65 864 4819.25 1824.06 681 8127
south 801 .2808989 .449719 0 1
coastal 900 .44 .4966629 0 1

res_code 797 3.805521 2.625937 0 7

19