Who should pay? Construction costs and the price of carbon

Column by Robert Politzer

As the owner of a construction company, I’m angry that politicians say we can’t do anything about climate change because it would hurt business. From my perspective, not doing enough about climate change is already hurting business – and will do much more damage in the future.

Here’s just one small example: When we prepare a bid for a construction project, we typically start by providing line item pricing for all of our general conditions expenses. These usually include things like project supervision and labor, waste disposal and equipment rental. In the past (We’ve in business since 1998), we did not have to include costs for protection against the elements. Sure, we always anticipated having to cover parts of a jobsite with tarps for waterproofing, but this was never enough of a cost to identify it as its own line item. It just wasn’t significant.

However, in recent years we see that the rainstorms that bear down on our projects are more intense. Conventional blue tarps that are inexpensive and that we have used for years no longer protect our jobsites from such intense rainstorms. So we have had to purchase new hurricane-strength tarps and to put much more time into securing these tarps to our jobsites to effectively waterproof them.

The new tarps cost nearly 10 times what conventional tarps cost, and the additional labor time adds up to thousands of dollars per project. So now all of our bids for new construction projects include a new line item that we call “protection against the elements.” This line item is listed as an allowance, which means that we will bill for all the work required, but will have no idea how much work and cost will be incurred given the increasingly unpredictable and intense storms.

Our situation is not unique. According to the EPA, “In recent years, a higher percentage of precipitation in the United States has come in the form of intense single-day events. Nationwide, nine of the top 10 years for extreme one-day precipitation events have occurred since 1990.The occurrence of abnormally high annual precipitation totals (as defined by the National Oceanic and Atmospheric Administration) has also increased.”

In fact, these trends are exactly what the climate change models of the Intergovernmental Panel on Climate Change (IPCC) have been predicting.  Simply put, the enormous increase in greenhouse gas (GHG) emissions, most notably carbon dioxide and methane, from the burning of fossil fuels (oil, coal and natural gas) has resulted in a greater amount of heat from the sun being trapped inside the Earth’s atmosphere. With greater heat, the atmosphere temporarily stores more water that later falls in greater-intensity storms.

It’s clear to me that climate change resulting from greater greenhouse gas emissions is hurting my business with direct and quantifiable costs.

So who should pay for these costs? My clients? Me? The government? How about the responsible party: the fossil fuel industry?

In a responsible market economy, costs are included in the pricing structure and so the producers are responsible for them. But in our current dysfunctional market, the costs of climate change have been hidden, and producers have received windfall profits. Economists call these hidden costs, externalities. I call them unfair and irresponsible.

One simple way to pay for these costs and hold those who pollute responsible would be to put a price on carbon. And it might be politically possible, even in today’s current political atmosphere. At a recent summit of the American Sustainable Business Council (ASBC), a libertarian panelist expressed his concerns about externalized costs and his interest in a price on carbon.

Imagine a scenario in which these carbon fees – potentially in the hundreds of billions of dollars – were allocated toward infrastructure projects that are known to create very high-paying jobs along with a corporate and personal tax cut. The economic stimulus from this program would be enormous and we would get a major push toward a more sustainable energy sector and a more sustainable economy.

We could right the dysfunctional market and address climate change in a profound way. Now that would be good for business.

Robert Politzer is president and CEO of Greenstreet Inc., a construction and development firm that specializes in high performance buildings, based in New York City.