"Despite its high visibility and sometimes grandiose claims, LEED's impact on building energy efficiency has been modest to date. If LEED is to fulfill its potential to steadily push the leading edge of "green building" practice, public policymakers will need not only to continue to support that effort, but to act assertively to pull along the trailing edge of "brown building" practice as well. The voluntary model that LEED represents is inevitably bumping up against its limits,"says David M. Hart in an MIT-IPC Energy Innovation Working Paper in March, 2009.
Too big to fail?
Since its inception in 1998, the Leadership in Energy and Environmental Design (LEED) family of rating systems for buildings and its parent organization, the United States Green Building Council (USGBC), have grown at an extraordinary rate.
The professional certification system and building, community and retrofit certification system is not merely preeminent among environmentally-inclined property developers and owners, having "no major competitor" in this niche; its advocates claim that it has become a "de facto standard" for new class A office space in the U.S.
"The business case [for LEED] is so strong," according to the president of the National Association of Industrial and Office Properties (NAIOP), that "you would be foolish to ignore it."
LEED certification is taken by many casual observers to be synonymous with energy efficiency.
After all, the first "E" in the LEED acronym stands for "energy."
A recent study, however, by the New Buildings Institute found that comparable buildings that had received the same LEED rating used vastly different amounts of energy. Some LEED-certified buildings used more energy than permitted by code, which is supposed to define "the worst possible building you're allowed to build."
LEED's flexibility permits builders to define and fulfill their responsibilities in many ways, reflecting the diversity of environmental demands put upon them across the country and the specific opportunities available in any given project.
The advantages of flexibility have to be balanced with the limitations.
LEED is a much bigger program than it would have been if it had used a rigid checklist instead of a menu of alternatives.But these achievements, impressive as they are, hardly mean that the U.S. building industry is destined for a high-efficiency future, as is required to stave off climate change.
Awareness of "green building" is much broader, too, penetrating the mainstream of the industry and even public consciousness to an unprecedented degree.
LEED's success depended on collaborators and allies, and its future impact on energy efficiency will also depend on what other actors do. Chief among these other actors are governments at all three levels - federal, state, and local.
LEED is widely perceived to be (as Thomas Friedman puts it) a "perfect example of an energy/environment standard that did not come from government down, but from society up."
Yet government agencies, in their roles as buyers and owners of buildings, as land use and taxing authorities, and as regulators of construction, undoubtedly helped to catalyze LEED's explosive growth in the past decade.
While USGBC may well have been "the right idea at the right time," its leaders skillfully seized both political and business opportunities. The paper returns in the later sections to the role of LEED in future efforts to improve building energy efficiency, which may be perceived with greater clarity once its past and present are better understood.
The research paper cited in this article (Don't Worry About the Government? The LEED-NC "Green Building" Rating System and Energy Efficiency in U.S. Commercial Buildings, by David M. Hart ) describes the history, development, and current operation of USGBC and LEED, particularly with regard to energy efficiency in commercial buildings, the subsector in which LEED has had its greatest impact.
The narrative situates "green building" in a political as well as a business context.
LEED's Market Perspective
From the market perspective, USGBC seems to have set the balance effectively.
- As of December 2008, approximately 17,500 commercial projects had registered with LEED (all programs) and over 2100 had been certified.
- The growth rate is accelerating, to the point that (according to a November 2007 report by Deutsche Bank's real estate investment arm) "green building is fundamentally altering real estate market dynamics."
- Ernst and Young's Real Estate Market Outlook 2007 similarly opines that "green is no longer a luxury."
- The Costar Group recent year-end round-up put it this way: "2008 was the year when green building became inevitable."
These analyses equate "green" with LEED.
Large Private Institutions' Roles in LEED-Dominance
Large private institutions made up a second group of early adopters.
The non-profit sector, composed mainly of private universities and schools, made up an additional 21% of LEED-NC registrations through the end of 2005.
LEED-NC quickly gained traction as well among firms and other organizations that wanted to project an image of environmental responsibility, especially when constructing a new headquarters or other high-profile building.
These early adopters were typically owner-operators, who stood to reap any
long-term cost savings or price appreciation (as well as goodwill) that LEED certification might
bring.
Speculative builders, who account for a large portion of commercial construction in the U.S.,
take a shorter-term view than owner-occupants. They typically seek to minimize construction
costs in order to keep prices competitive and profits up. Their interest in LEED took off about
three or four years ago, as a result of several convergent factors.
- USGBC developed new
programs, LEED for Core and Shell (LEED-CS) and LEED for Commercial Interiors (LEEDCI),
that targeted speculative builders.
- The cost differential between construction of LEEDcertified and construction of non-LEED-certified buildings declined, too, as "green building" practices and materials were routinized in LEED's early years.
- Some perceived a broader change in public priorities and the preferences of buyers and lessees, associated to some degree with the movie "An Inconvenient Truth."
- Energy prices
soared, helping to extend LEED's appeal well beyond the "true believers."
Politicians have been trying to "out-green" each another.
One of the first adopters of LEED-NC was the U.S. General Services Administration (GSA),
which manages much of the federal government's real estate portfolio.
The federal government
is the nation's largest real estate owner and lessee.
Attracted by the system's flexibility and
required by executive order to "green" government buildings, GSA adopted a policy of LEED certification for new construction and leasing in January 2000. Several Federal agencies
outside of GSA's purview, notably the U.S. Navy, which was the first federal agency to win a
LEED certification, enacted similar policies. State and local governments were also in the
vanguard of LEED-NC adoption. Seattle, for instance, was the first city to enact a LEED
mandate for municipal buildings, requiring Silver certification in 2001.
41% of all LEED-NC
registrations through the end of 2005
were government buildings.
But the business case for LEED has not yet been made.
The challenge is similar to that for building energy performance; the database remains too small to draw definitive conclusions, rhetoric notwithstanding.
A March 2008 study by the CoStar Group touting the enhanced financial value of LEED buildings, which was promoted by USGBC and reported widely in the trade press, for instance, faced a withering critique from the executive director of the Green Building Finance Consortium, because it used small samples and inappropriate reference groups.
An April 2008 study released by the Program on Housing and Urban Policy at University of California, Berkeley, by contrast, found that LEED buildings did not command higher rents.
The Berkeley study did find that Energy Star-labeled buildings, which have an energy performance in the 75th percentile or better of comparable buildings, earned higher rents.
This finding suggests that, if the ratcheting up of LEED-NC's energy efficiency elements leads to more consistent energy performance improvements, LEED buildings might also earn higher rents.
Energy Efficiency Business Case
An effective link between LEED-NC and LEED-EB (which incorporates Energy Star by reference), similarly, could enhance the business case by improving transparency for prospective buyers about energy performance and thus anticipated operating costs.
On the other hand, if energy prices continue to slide, the savings associated with energy efficiency may affect real estate values less in the future than they have in the recent past.