Congress Should Reject a LEED Monopoly

Originally published by: The HillMay 21, 2014

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We don’t just have one wireless carrier, one brand of soda, or even one charity review site to choose from. Competition is one of the hallmarks of capitalism and has allowed America’s economy to grow and thrive—yet environmental activist groups are urging Congress and state governments to reject competition and award a monopoly on green building rating systems to the U.S. Green Building Council (USGBC), a multi-million dollar private non-profit.

The USGBC operates the LEED (Leadership in Energy and Environmental Design) rating system for green buildings, which up until recently was the only rating system endorsed by the General Services Administration (GSA) for the certification of new federal buildings. Last fall, the GSA changed course and recommended that federal agencies be allowed to choose to have their new buildings certified under either LEED standards or a competitor, the Green Globes system run by the Green Building Initiative (GBI).

Though this was essentially a step just to level the playing field a bit, the LEED-supportive environmental activist groups (Greenpeace and the Sierra Club) have instead resorted to attacking GBI and its rating system through a new campaign, “Greenwash Action.” The project, run by the Sierra Club and Greenpeace, accuses Green Globes of not adequately addressing climate change and urges GBI to be “forthright about the fact that it is not equivalent to more rigorous rating systems like LEED.”

LEED is far from a perfect rating system. A number of news organizations and professors have highlighted a fundamental flaw with the standards’ ability to truly determine a building’s “green-ness”— LEED doesn’t take into account a building’s actual energy use once it’s occupied. Many buildings certified under LEED, therefore, have been shown to be less energy efficient than comparable non-certified buildings.

Of course energy efficiency isn’t the only measure of what makes a building green, but if—as Greenwash Action claims—the goal is to tackle climate change, energy efficiency should be a very large part of what constitutes a green building. Especially since the Environmental Protection Agency (EPA) notes that buildings account for 30 percent of greenhouse gas emissions and 65 percent of electricity usage.

Competition from other rating systems, including Green Globes, should inspire the USGBC to take a hard look at its own product and make improvements or even borrow from the criteria used by other rating systems. For instance, the EPA’s Energy Star rating system takes into account actual water and electricity use by examining buildings’ utility bills. Buildings therefore can’t receive green building recognition until after they’ve proven it.

Any rating system has trade-offs, but for many years federal, state, and local lawmakers have mandated that new taxpayer-funded buildings achieve LEED certification, guaranteeing a long line of customers for the USGBC. Some cities, like Washington D.C., even require new private buildings to go through the LEED certification process.

The financial implications of federal and state laws giving LEED preference is enormous, so it’s little surprise the USGBC wants to protect its virtual monopoly. However, if taxpayers and private builders have to pay additional costs for buildings to be “certified” as green, there is a clear incentive to choose a certification standard that is more cost effective.

The GBI worked with a researcher at Drexel University to put out a new study showing that the Green Globes certification process is both faster and less expensive than LEED. While the study was just of a single building, it underscores the importance of competition. Having Green Globes and other rating systems as competitors should encourage LEED to bring down the cost of certification to stay competitive.

Congress has a long history of breaking up monopolies. Policymakers should reject USGBC’s stranglehold on the green building certification market. If green buildings are the goal, competition is the solution.

Joseph is a business professor at the George Washington University School of Business.

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