Marriage of Two Economic Sectors Presents Opportunity

Carbon emission trading is becoming a revenue source for affordable, green homes in California. NACEDA Intern Sydney Mann explains how.

August 10, 2015

The connection between the Carbon Emission Trading (CET) industry and the Community Economic Development (CED) field is a budding, promising relationship. In short, those with environmental interests have the ability to fund sustainable, affordable housing development through certain regulations, like carbon emission allowance allocation, or offsets. Carbon emission allowance allocation is the amount of carbon apportioned by the government that a firm is allowed to emit into the air, and firms have the ability to incur fines when the mandated reduction in carbon emissions is not met.

Furthermore, there are CET programs in place with effective ways to distribute and award the offset fines collected to causes and industries in need. Ultimately, these fines can be utilized as a substantial revenue source for firms or individuals impacted by climate change policy, or even as a means to generate revenue for socially desirable policy purposes.

The California model

For example, in California, a portion of the fines incurred by firms is awarded by the government to the CED community, often times for the production of affordable and sustainable housing. In 2014, the California State Assembly passed a bill allocating a share for affordable housing with a significant prescription mandating that 25% of all the carbon offset funds be put towards low-income communities for housing and/or public transportation. In addition, California Governor Jerry Brown’s Cap-and-Trade Expenditure Proposal for Year 2014-15 allocates 12% solely to building environmentally sustainable communities, specifically for “disadvantageous communities”.

The precedent set in California makes sense as a model for the nation, and for each state to adopt. In fact, European countries have used this approach for years, and have been extremely successful with it. Down the road, I sincerely believe that the CET and CED industries and their causes will become co-dependent due to the tendency for there to be a higher concentration of pollution in lower income areas and the increase in sustainability regulations for new construction.

According to Environmental Health News, people in low-income areas are generally more exposed to pollution.The Washington Post refers to this phenomenon as “environmental injustice,” which leads to an understanding that pollution can be segregated as well. Very few of us would willingly choose to live next to areas of high pollution, such as landfills and highways. Therefore, these areas become less expensive and present an opportunity to attract people with lower incomes who have a need for affordable housing.

A revenue source for affordable, green homes

Since poorer places are more likely to be exposed to pollutants, it is reasonable to assume that there is more pressure to build affordable homes that are also environmentally sustainable. The CET industry then looks at these communities as opportunities to utilize their offset revenues, and as a result, could award a substantial amount of money towards environmentally sustainable, affordable homes for the benefit of both the CET and CED fields.

In addition, sustainability regulations on affordable housing unit production are becoming stricter, and with that, more expensive. The Urban Land Institute states that in major metropolitan areas, specified types of public and private developments are required to meet Green Building Standards, which are largely enforced by state-level CET regulations. Trends like the 2030 Carbon Neutrality Challenge, the proposal that “all buildings, developments, and major renovations shall be carbon-neutral by 2030," indicate that standards will only become more stringent as time goes on. As jurisdictions increase requirements for green building standards, it makes perfect sense for the cost associated to be funded by carbon offsets. In the end, it will increase the affordability of energy costs for those who need it most.

Looking ahead, the CED and CET co-dependency will only grow. Success stories in California demonstrate functional CET programs financially supporting environmentally sustainable, affordable housing initiatives within low-income areas. Environmental sustainability leads to eventual economic sustainability through a reduction in energy costs, which only continues to benefit both parties. If the CED community continues to look towards the CET industry as a revenue source in the future, we can all look forward to more affordable and sustainable homes for everyone.

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