The Chronicle of Higher Education has a piece announcing the “Better Buildings Initiative, an effort to improve building efficiency by 20 percent—will get $2-billion from government agencies through a presidential memorandum, and colleges and universities, cities, private companies, and other entities will collectively contribute the other $2-billion.”
So, this appears to be a subsidy to nudge building managers to pursue energy efficiency. If the price of electricity is expected to go up, and if managers must pay their own electricity bills, then will energy efficiency be pursued? Why is government intervention necessary here? Will you point to the carbon externality associated with electricity consumption? Or will you point to soft budget constraints? Or inertia and a lack of information about the future benefits of such long term investments relative to the upfront costs? For a subtle discussion, see Tom Tietenberg’s paper in REEP.