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Sins of emission in the 2013 Budget

The Rider Bill’s proposed cuts to green energy programs make bad fiscal sense and harm Israel’s global standing

In an almost annual ritual, Israel’s Finance Ministry lays on the Knesset docket an “Arrangements Bill” – the rider that accompanies Israel’s proposed budgetary law. And invariably it contains dire environmental implications. Among the hundreds of seemingly banal provisions, the bill typically slips in pernicious development projects or expunges ecologically important safeguards. This year is no exception, with government economists not missing an opportunity to take aim at a particularly critical environmental objective. This time, the unsuspecting victim is Israel’s nascent efforts to facilitate energy conservation and combat climate change. And this time the Knesset should say “no”.

When the government of Israel sent a sizable delegation to the UN’s 2009 Climate Change convention in Copenhagen, the team was headed by President Shimon Peres himself. Peres took the stage in front of more than 180 national delegations and promised the world that Israel would at long last join international efforts to prevent climate change by reducing its greenhouse gas emissions. The government’s very public commitment was for a 20 percent emissions reduction by the year 2020. The step may have been designed to convince the developed OECD nations that had already begun transforming their economies to meet such targets, that Israel too could be a globally responsible country. And indeed, half a year later, the doors to the esteemed club of economically prosperous nations opened to Israel.

Last week, the Ministry of Finance decided to revert to Israel’s traditional myopic position on the issue of global warming by calling for a three-year delay in an energy conservation strategy that was designed to meet this commitment. The Ministry bureaucrats apparently forgot that these policies were not selected so much for their environmental dividends as for their clear economic benefits.

A large group of activities were long ago named by climate policy wonks as No Regrets measures; not only are they good for the planet – they save money. The government of Israel could happily announce in the post-Copenhagen reporting period that it had embraced three such initiatives. In an unfortunate turnaround, Yair Lapid’s Finance Ministry would freeze them.

The first is a program that subsidizes trade-ins of old, wasteful appliances (refrigerators, air conditioners, hot water heaters, etc.) with new energy efficient ones. Pursuant to the program, 50,000 old refrigerators, that every day gobbled copious quantities electricity, have already been replaced with new ones that utilize just a quarter of the energy. The program was designed with social equity criteria: weaker socio-economic participants receive a 60 percent subsidy as opposed to wealthier owners of aging refrigerators who only receive 30 percent towards the new fridge. With last week’s unprecedented increase in electricity prices, such profligate appliances impose an extremely high ongoing cost on the very same populations that have a hard time paying a normal bill to the electric company. Without government assistance, they will continue to do so.

A second initiative that would be tanked involves subsidies for projects in municipalities or large corporations that make it possible for them to afford the high price of becoming more energy efficient. The criteria for funding prioritize new Israeli energy saving technologies, enabling these innovative companies to penetrate the market and create a critical proof of concept. Besides saving huge quantities of electricity, there are sure to be benefits for future employment (and exports) in Israel’s poorly supported clean-tech sector. By now, some 150 million shekels in grants have been made for such infrastructure investments, with impressive immediate results. But the Finance Ministry’s proposal would leave hundreds of similar projects without initial cash flow – undermining local entrepreneurs in the field.

The third victim of the government proposal is “Green Building.” More than fifty percent of electricity is consumed by buildings, both residential and commercial. Historically, Israeli construction was done under extreme time pressure and budgetary constraints. This left most Israelis working and living inside buildings with minimal if any insulation and without standard green building elements (healthy ventilation, double glazed windows, etc.) which save on both heating and cooling and keep residents healthy.

Many countries around the world have come to understand the market failure behind inefficient buildings and the clear return on investment associated with retrofitting. Costs are covered within a just a few years. For fuel importing nations, the reduced electricity consumption and balance of trade deficits also have compelling advantages. Dozens of government funds have been created to help the public help themselves through such green makeovers. Retrofitting creates interesting jobs and reduces energy consumption. Green buildings are marginally more expensive to build, but quickly produce enormous savings. Surely this program makes environmental and economic sense in Israel. But the Ministry of Finance has an inexplicably short time horizon – and astonishingly is trying to pass a cabinet resolution that would prohibit any new building standard that might raise housing costs.

A national energy conservation program will reduce electricity consumption even as Israel’s population continues to grow at a rate of 1.8 percent a year. Rather than sending our shekels abroad for imported fuels, a transition to efficient appliances and buildings will leave cash in the pockets of the public and public institutions. As it considers the Treasury’s proposals, the Knesset needs to decide whether it wants to ignore its commitments to the international community and to continue to be part of the climate crisis. Fortunately, with modest investments, it can insist that the Israeli government act responsibly – and strengthen the economy.

About the Author
Professor Alon Tal, is the chair of the Tel Aviv University Department of Public Policy and a veteran environmental activist.