Abstract
The Property Assessed Clean Energy (PACE) Program is an innovative financing approach to meeting environmental goals. PACE financing is structured as an assessment to the property and paid along with the property tax bill. In addition to the direct environmental benefits, it also yields co-benefits of enhanced economic output and employment. This paper estimates the economic impacts of PACE in California by one of its major financing companies. These impacts include direct spending on structural improvements, reduction in spending on centralized power and water services, reallocation of spending from energy and water bills savings, and solar investment tax credits, among others. It also includes general equilibrium effects of these various factors. Our results indicate PACE financing yields sizable economic benefits. At the same time, the increased economic activity results in increased energy and water use that partially offsets some of the direct environmental gains. Furthermore, PACE has been subject to criticism because it gives financing companies the first lien on mortgages and because of anecdotal examples of some customers being lured by unscrupulous contractors. The direct environmental benefits and economic co-benefits of PACE should be factored into the policy debate over whether the Program should be further expanded or regulated.