Carbon Taxes on Utilities Should Not Bypass Landlords

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For 12 of my 20 years in Seattle, I have lived in drafty old rental houses with antique oil furnaces. After 7 years of paying well over $2000 a year for oil to heat our half of a duplex, we discovered that the house was completely uninsulated.  When the tenant upstairs decided oil was too expensive and started heating with space heaters, my utility bills got even higher. But because I did not own my house, there was not much I could do about it beyond putting on another sweater.

The motivating power of carbon taxes to affect change only works when the people paying the tax have the authority and the resources to change their choices.  Energy producers can shift fuel sources, upgrade systems, and adopt more efficient technology. Tenants, as energy consumers, can only make small choices to reduce energy use. We could choose not to turn the thermostat higher than 63, to turn off lights, and to seal windows with plastic in winter,  but the possibilities for larger-impact choices are outside of a tenant’s control.  We can’t replace the furnace, or upgrade the appliances or insulate the house, or upgrade the windows or install a solar array. That responsibility falls to the landlord, who is generally unmotivated to make improvements that would lower utility bills because utilities are paid by the tenants.

When building owners and landlords have no responsibility for utility costs or taxes, we miss the opportunity to motivate the party with the most power to affect energy improvements to buildings.  If however, building owners received a tax bill for their building’s energy use, even if they passed those costs on to their tenants, they would be subject to several of the influences we have discussed in class.

Giving Feedback: Owners would be more aware of the energy costs of their buildings and of the seasonal and event-oriented influences on those costs. Bearing some of the carbon costs of their building shifts awareness and responsibility back on the person who can change them the most.

Loss aversion:  Lowering your tax bill can be a big motivator for change. People dislike the idea of paying taxes enough that they will often spend more money than they save to lower their tax bill.

Reputation/Recognition: Some people are so motivated by metrics that they will make changes just to improve their “scores,” and may use their energy efficiency scores to market their building to tenants.

Tradeoffs: The costs of improvements can be balanced against internalized energy costs, allowing the owner to see the costs of improvements offset by tax savings where otherwise they might be seen as pure expense.

Giving Information:  Building owners would also become more aware of programs and products offered through utility companies (like appliance rebates, home energy audits, and insulating and weatherizing programs) that can lower energy costs and taxes. Tenants are aware of these programs because they get the info sheets with their bills, but can rarely take advantage of because they do not own the building.

When energy is sold directly from utility companies to building tenants, bypassing building owners, this can be seen as a market failure because those with the most power to make buildings more efficient are left out of the equation.  Imposing carbon/energy taxes in a way that makes landlords and building owners feel responsible for them can help create a more water-and-energy-efficient building stock for the carbon-efficient city.

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