At Greenbuild 2014 in New Orleans, Mahesh Ramanujam, the President of the Green Building Certification Institute (GBCI) said that the GBCI intends to broaden its mandate. Today, the GBCI is known for supporting the third party verification efforts for the U.S. Green Building Council’s (USGBC) Leadership in Energy and Environmental Design (LEED) rating system. But going forward, Ramanujam said the GBCI intends to host new third party environmental programs that will address third party certification of the following four concentrations of the built environment: energy efficiency, sustainable landscape, health and wellness, and financial markets. The rating systems for energy efficiency (LEED), sustainable landscape (SITES), and health and wellness (WELL) already have taken shape, but we are yet to see what is behind door number four. What could the GBCI have in store for financial markets?
There are markets that trade in commodities associated with the environment such as the California emissions market, the international carbon emissions market, and the renewable energy credits (REC) market. We could envision a new market where building owners can trade in excess “points” to projects that could use those points in order to get certified.
For example: a new five story 50,000 square foot Courtyard by Marriott is going up in Washington D.C. Due to D.C.’s new Green Building Code, the project must attain LEED Silver Certification. Around the same time, a new Hilton Garden Inn is going up in Falls Church, Va. Falls Church requirements also mandate LEED Silver certification. Due in part to its location in a dense urban environment, the Courtyard in D.C. is racking up LEED points. They are within a half mile of a metro stop, within walking distance to 10 or more basic services, and have a green roof with vegetable gardens and beehives that support their farm to table kitchen.
A Challenge to Reach LEED Silver
On the other hand, despite its best efforts, the Hilton in Falls Church is having a hard time scoring the 50+ points it needs to get to LEED Silver. Their energy performance is hitting walls due to the strict constraints of the Hilton prototype, they are not in an urban location, and the project owners do not have the funding necessary to install green roofs or solar panels. They are doing what they can in terms of using low-emitting paints and coatings, and their general contractor is being as diligent as possible about recycling construction waste and tracking the recycled and regional contents of all of the products in the project.
After 24 months, they are both built. Marriott ends its green building effort with 53 LEED points, three more than necessary for LEED Silver. The Hilton did not have the same fortune, it looks like it will only net 47 points, and fall three points short of Silver. The project team looked for ways to earn more points, but their sweat is for nothing; they will fall short of their goal.
According to the point structure of the LEED rating system, each of these “points” is representative of a unit of environmental impact. At 47 points, the Hilton falls short in terms of the environmental impact necessary to warrant LEED Silver. At 53 points, the Marriott has gone three units of impact above and beyond the reduction in environmental impact necessary to earn LEED Silver. Too bad for these owners that there is no way for them to trade points.
Possible Future Scenario
In a future financial market for LEED credits, the Hilton Garden Inn in Falls Church could be able to purchase the three units of environmental impact that it needs from a project, such as the Marriott, that has more than enough. This trading in environmental impact would be similar to the trading system for the emissions and renewable energy credit markets.
Is this what GBCI has in mind for its “financial market”? And if so then at what point in the certification process can the credits be traded? How will these credits be valued? Who can trade these credits? For example, will there be brokers and brokerage houses that trade these credits like “commodities” and how do they propose to solve issues such as double counting (i.e. selling credits from renewable energy systems twice—once in the LEED market and once in the REC market, sometimes called “credit stacking” (see http://wqt.epri.com/pdf/credit-stacking-environmental-opportunities-and-risks.pdf for an analysis of credit stacking)?
The GBCI would have to address these and other questions to get a market off of the ground.
About the Author
Bill Anglin is a networker, negotiator, and fan of the movie, “Boondock Saints.” As Chief Estimator/V.P. of Business Development at Above Green he crunches numbers, talks money, and wins bids. Before going green he worked as an analyst at the Pentagon and as an officer in the U.S. Marine Corps. With his background in economics and policy Bill sees a strong future in the development of green financial markets. He holds an MBA from Norwich University and Bachelors in Economics from the University of Houston. Connect with Bill on LinkedIn.
About Above Green
As one of the first companies to specialize in LEED consulting, Above Green has spent the last seven years immersed in the building certification process. Above Green completed the first LEED Platinum building in Caribbean and has worked with end-use clients including Hilton Hotels & Resorts, Bank of America, Pret A Manger, and every branch of the U.S. military. Above Green specializes in all facets of the LEED certification process, marketing and promotion of certified buildings, and strategic evaluation of different building certifications. Recently, Above Green has added other types of certifications to its services including NGBS, Enterprise Green Communities, and local green standards. To learn more go to abovegreen.com.
