On Tuesday I had lunch with Jay Stein, executive VP of E Source — a local information services company (sort of a think tank) for the energy industry. He’s one of Boulder’s leading experts on energy issues and projects, and their environmental impact.

As Stein and I discussed the Boulder Carbon Tax Tracker project, he pointed out one especially intriguing aspect of this issue. He observed that the 2002 city council resolution in which Boulder adopted the goals of the Kyoto Protocols (resolution 906) emphasized the principle of cost effectiveness. “It’s even in the resolution title, right up there. They chose to play up that concept,” he said.

Indeed, the formal title of that resolution is, “Establishing a policy to take cost-effective actions that benefit the community by reducing local greenhouse gas emissions” [emphasis added].

That resolution never spelled out exactly what “cost effective” means. However, it did set forth a specific emission reduction goal: 7% below the city’s estimated 1990 emissions — which means preventing emissions of 350,000 metric tons of carbon dioxide. The city’s Climate Action Plan (called for in that resolution, and finalized September 2006) established a target time frame for reductions: by 2012.

The bottom line is, this significant reduction is due in not a whole lot of time. In order to achieve this self-assigned goal, Boulder will need to get the biggest bang possible for its carbon tax bucks.

Therefore, it’s useful to explore what “cost effective” really means, and how much that principal is really driving the city’s climate action efforts…

Cost effectiveness is not a fuzzy concept. It can be quantified — and indeed, that’s exactly what happens for major energy-saving projects in business, and even in some governments.

More than a year ago, Stein began asking city officials what kinds of cost effectiveness benchmarks or guidelines they would apply when deciding which steps to take to meet Boulder’s emission reduction goals. According to an op-ed by Stein published in the Feb. 6, 2006 Daily Camera, Boulder Mayor Mark Ruzzin told him “I am not sure how the term [cost effective] is meant to be considered.”

At Ruzzin’s suggestion, Stein put the same question to Sarah Van Pelt of the city’s Office of Environmental Affairs, who at the time replied to him, “We have not attempted to define cost-effectiveness.”

Keep in mind, those exchanges happened more than a year ago. I figured I should check into the city’s current thinking on this issue.

Yesterday I asked Van Pelt, via e-mail:

“Could you explain to me how, if at all, the city government determines cost effectiveness for the climate action measures and program it chooses to implement? For instance, do you perform economic analysis on them? Do you require a certain return in terms of emissions reduced/dollar over the project life, etc? Also, could you give me an example of where a decision about a specific climate action program or measure was made on the basis of cost effectiveness, to illustrate how this works?”

Van Pelt responded promptly this morning:

“We certainly have used economic analysis for the strategies in the Climate Action Plan. We have not established specific criteria or a cost-effectiveness test as is commonly used by utilities.”

So the official word is that the City of Boulder currently is not using specific cost-effectiveness benchmarks in its climate action program and spending decisions.

Van Pelt continued:

“If you look at the [Climate Action] Implementation Plan, section VI, you will see that most of the summary tables include a cost per ton of greenhouse gas emissions reduced. These costs reflect the city’s cost and as noted, are a summary from the more detailed programmatic analysis we completed.”

Here’s that table (click to see full size). You’ll find it on page 57 of the city’s final Climate Action Plan:

Van Pelt elaborated further:

“You will note that a large portion of the CAP budget is directed to energy efficiency. One reason for this emphasis is that energy efficiency has a very low or negative cost per ton. Property owners benefit because their costs are reduced and the community benefits because those energy cost savings remain in the community instead of leaving the state as payments to the utility.”

That concept makes sense to me, but I’m puzzled by the table.

Looking at just the first row — the cost and savings projections for energy efficiency measures — the city projects that by investing a total of $3,332,678 of public sector funds toward energy efficiency programs, the city will end up with a net income of $463 for each metric ton of carbon dioxide emissions prevented.

Even if you assume that city spending on education programs will spur Boulder residents and organizations to undertake lots of projects on their own dime and take full advantage of utility rebate programs (which is in the realm of possibility), the numbers as shown don’t add up. There must be some missing information.

I’d like to know how the city calculated a return of $463/ton on the portion of our carbon tax dollars that’s going toward energy efficiency-related programs. Also, I’d like to see that projected energy cost savings of $63,869,500 (over the life of implemented efficiency measures) explained in more detail.

Since those rosy projections are so striking, they warrant clear explanation. If Boulderites can be assured that these potential rewards aren’t too good to possibly be true — and if they could see how they’d directly benefit financially — that clarity might affect the scale and pace of big local energy-saving projects.

Obviously combatting climate change isn’t all about money — but when it comes to getting big projects done quickly, money does matter. No doubt many Boulderites are willing to pay substantial sums out of their own pockets for energy-saving measures strictly based on environmental conscience. However, many others would need to know how (and how fast) they’d recover that expense before committing to costly projects.

(UPDATE JULY 4: Sarah Van Pelt e-mailed me yesterday to let me know she’ll get me further clarification on those savings estimates shortly. Stay tuned.) 

This entry was posted on Friday, June 29th, 2007 at 12:05 am and is filed under Choices & actions, Follow the money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.