Post 50: Slouching Toward Insolvency

 Ernest Hemingway’s 1926 novel The Sun Also Rises contains the following bit of dialog:

“How did you go bankrupt?” Bill asked.  “Two ways,” Mike said, “Gradually and then suddenly.”

This quote is the source of the title of the documentary on the 2013 Detroit bankruptcy, perhaps the most notorious municipal bankruptcy in American history.  At the time, Detroit had over $18 Billion in debt – an amount estimated to be more than 30 times its readily available assets.  That financial condition was not reached quickly as a result of some cataclysmic event, it was something that built slowly over decades as a result of bad luck mixed with bad decision after bad decision. 

At one time, Detroit was an American success story.  The city grew rapidly in the first half of the twentieth century reaching a population of 1.8 million in 1950.  Detroit was the fourth largest city in the country and had one of the highest per capita incomes.  But economically, Detroit was a one-horse town whose fate was tied to the auto industry.  The struggles of the American auto companies in the 70’s and 80’s popped the Detroit bubble.  That bad luck was reinforced by race riots, white flight, and urban renewal failures.  Efforts to restore its glory led the city to promise too much, spend too much and borrow too much.  The subprime mortgage disaster and the subsequent Great Recession were the final straws.

Fortunately, local government bankruptcies are relatively rare.  Only 31 general purpose local governments (out of nearly 39,000 such entities) have filed for bankruptcy since 2001. [1]  Many states, in fact, do not allow municipalities to file for bankruptcy or place severe limitations on the process.  However, the conditions that lead to bankruptcy – the inability to pay one's bills – are more of a threat than many people realize.  Many cities across the country are borderline insolvent and yet their citizens probably don’t know the full scope of the problems that exist or the ramifications that an unexpected economic blow could have for their day to day lives.

The issues are generally obscured by the gradual nature of the problem.  Insolvency is almost always a slow, meandering journey to the edge of a financial cliff, and bankruptcy is the abrupt shove that pushes you over the edge.  No one intentionally races into insolvency, we get there almost accidentally by not paying attention and by not looking ahead.  We get there by slouching step by step down a path we didn’t even know we were on.

A Local Example

My interest in this topic was piqued recently by two different articles that touched on different aspects of this problem.  The first was an article in my local paper on the difficulties that Kansas City, Kansas was having with bridge closures.  For those not versed in midwestern geography, Kansas City, Kansas (KCK) is the smaller and poorer sibling to the better known Kansas City, Missouri (KCMO).  KCK has a population which is about 70 percent smaller and a per capita income which is about a third lower.  It is also a city that is bordered by the Missouri River on the north and bisected by the Kansas River and broad rail yards.  Thus, bridges are an essential part of KCK’s connectivity to the rest of the metro area and from one part of the city to another.

The article in the Kansas City Star details six bridges that are currently closed for repairs, including the east-bound lanes of I-70 which connect downtown KCK with downtown KCMO and which abruptly closed just a couple of weeks ago for emergency repairs. [2]  What is particularly troubling is that two of the bridges over the Kansas River – the Central Avenue bridge and the Kansas Avenue bridge – have been closed to traffic for several years with no clear timeline for repairs and no funding in place.  Even if federal grants could be obtained for repairs, local leaders are not confident they could come up with the estimated 10 percent local matching funds.

If the repairs are critical, why not sell bonds to raise the necessary money?  The answer is that the city is already awash with debt, over $800 Million according to the recently adopted budget.  According to the County Administrator, nearly 44 percent of the property taxes collected by the city are used to finance debt, more than double what he considers to be healthy. [2]

The core issue is that Kansas City, Kansas has more infrastructure than its tax base can sustainably maintain.  Virtually all midwestern cities have suffered from low-density sprawl in recent decades, but Kansas City, Kansas is worse than most.  The value of its tax base per square mile is 40 percent lower than comparable cities such as Topeka or Wichita – and neither of those cities are in great financial shape themselves.  This is particularly problematic for a city reliant on high-dollar infrastructure such as bridges.  A cash strapped city can allow a roadway to crumble and it is annoying but not likely to be life threatening.  Allowing a bridge to crumble, on the other hand, can be catastrophic. 

Houston, We Have a Problem

During a budget meeting several months ago, Houston Mayor John Whitmire made the following statement in an effort to sum up their financial status:

“I think we can all agree on that, we are broke.”  [3]

This is likely as much political theater as it is a realistic assessment of Houston’s financial condition, but it is true that Houston has a serious budget gap that needs to be plugged (as with many large cities).  In Houston’s case, the shortfall is approximately $160 Million, or nearly 6 percent of the Houston budget.  Unfortunately, efforts to solve the problem are likely to be just bandages that cover up the problem temporarily only to have it resurface in a few years.  

The immediate problem is a recent agreement with the city’s firefighters that compensates them for being underpaid for the past seven years in which they worked without a contract.  The settlement is going to cost Houstonians $650 Million for back pay and an additional $180 Million for wage hikes over the next five years.  But the real mistake, in my opinion, is that Houston is proposing to pay these costs by selling a roughly $1 Billion bond that will take 25 to 30 years to pay off.  Paying a short-term operating cost with long-term general obligation bonds is almost always a bad idea.  As Strong Towns leader Charles Marohn points out,  “A child born today in Houston will make final payments on firefighter back pay from 2018 when they turn 30 years old.” [4]  And yes, if you do the math, that means that today’s operating cost problem isn’t likely to be paid off until roughly 2054.

Some observers have criticized the city for having too many employees (including firefighters) and paying them too well.  I’m going to stay out of the pay issue, but it is valid to ask why the city needs so many employees.  The answer is the same reason Houston has too many streets, too many water lines, too many fire hydrants, and on and on.  Houston is a prime example of uncontrolled, low-density sprawl.  The infrastructure and city personnel to support that development pattern is why Houston (and many other cities) are slouching toward insolvency.  

Marohn refers to this as the “growth Ponzi scheme.”  It appears to make financial sense in the short run – new growth delivers new tax revenue with relatively low initial maintenance cost (after all, everything is new).  But with each new subdivision, shopping center, and suburban office building comes a commitment made by the city to maintain that infrastructure forever.  In the long run, the tax revenue from the low density development cannot sustain the cost of infrastructure maintenance (and firefighters, police officers, maintenance workers, etc.).  To remedy the problem, cities chase more growth to gain more revenue which again seems to be helpful in the short term but simply makes long term problems worse because that growth comes with more infrastructure obligations – hence the Ponzi scheme analogy.

The Allure of Low Density Growth

The term “suburban sprawl” is almost always used in a derogatory manner, but there are a few  advantages to that form of development.  To begin with, Americans are used to living in a big country with lots of land relative to the population, and our nation has deep, agrarian roots that make us think of owning our own chunk of land as an essential part of the American dream.  For many of us, there is something psychologically fulfilling about owning a single-family home on a tract of land that is ours and ours alone.

Beyond that, however, low-density development is relatively inexpensive to build – assuming, of course, that transportation costs are low.  Hundreds of years ago when the structure of many European cities were being formed, transportation costs were high and most people never traveled more than a few miles from where they were born.  Consequently, the development pattern was relatively dense since most people walked from place to place making distance a major “cost.”  In the U.S., transportation  costs started high, but innovation after innovation has gradually changed the equation.  Particularly after World War II, personal transportation via the automobile made distance almost irrelevant.  

There are costs, of course – someone has to build the roads, install utility lines, buy the cars, etc. – but those up-front costs seem manageable to most people.  The problem is that there are a number of “hidden” costs that people don’t realize exist or have chosen to ignore.  The most substantial of these costs is long-term maintenance of physical assets such as roads, bridges and utility lines, and the ever expanding personnel costs associated with operating cities that are expanding geographically.  Calling these “hidden” costs is misleading, of course, because all of them can be estimated with relative precision if you are willing to do the work.  Unfortunately, these long-term costs can easily be dismissed as someone else’s problem which won’t need to be solved for decades.  From the point of view of a politician, is it better to set aside funds for future maintenance and personnel costs or to build something new and shiny for the voters to enjoy?  The answer is obvious and so are the eventual ramifications.

The other hidden cost is that if everyone is driving, then the initial street capacity built by the developer is never enough. New development inevitably attracts traffic demand from outside the immediate area.  After all, everything is new – new roads, new shops, new restaurants, etc. – who wouldn’t want to break away from the old parts of town to experience the latest and greatest?  At the same time, the focus on driving makes alternative transportation modes (walking, biking or transit) so inconvenient that there are no options left other than street expansion.  So money that could have been used to maintain infrastructure gets diverted to street widening projects which deliver only temporary relief because they just reinforce the belief that driving is the only way to move from place to place.  It becomes a feedback loop that is almost impossible to exit.

A Different Kind of Asset

If cities were run like private corporations, they would account for every asset (every road, bridge, fire hydrant, etc.) with maintenance schedules, depreciation tables, and replacement costs using what is known as the accrual method of accounting.  Cities, on the other hand, use what is known as modified accrual accounting which combines aspects of traditional accrual accounting with the simpler cash-basis accounting.  In general, the modified accrual method allows short term events (e.g. account receivables and account payables) to follow cash-basis rules while long term events (e.g. fixed assets and long-term debt) follow the accrual accounting rules.

The two approaches reflect fundamental differences between private business entities and governmental entities.  Private corporations are required to use accrual accounting because it allows stakeholders to see an accurate reflection of the company’s financial health.  Local governments, on the other hand, are more focused on whether current year revenues are enough to cover current year expenditures, and whether such expenditures are following the budget plan that they have adopted.  The modified accrual method accomplishes this task reasonably well. [5]

There are, however, a couple of important differences that apply to the accounting of long-term debt and infrastructure assets.  First, in full accrual accounting, long-term debt is recognized in the financial period in which it is incurred.  The modified accrual method recognizes the current portion of long-term debt as it matures, which means the impact is spread out over time.  Second, most public infrastructure is allowed to be treated as an “inexhaustible capital asset,” thereby eliminating the need for depreciation accounting. [6]  To take advantage of this modified approach, governments must demonstrate that they are maintaining the infrastructure to a selected condition level.  The problem is that defining the appropriate level of maintenance and assessing the degree to which that maintenance is being accomplished is largely left to the government itself which means there is a lot of room for fudging the true state of maintenance efforts and appropriate expenditure levels.

Many cities attempt to track all of their infrastructure assets and maintenance costs but the process is extremely labor intensive.  There is the potential payoff of better allocation of municipal resources but that goal is often undermined by political expediency which shifts money away from maintenance in order to solve a short term budget issue or build something with more political appeal.

Part of the problem is that an infrastructure asset is different from a normal business asset (like a factory) or personal asset (like jewelry).  To begin with, infrastructure assets are almost always acquired by the city for free.  The developer “gifts” the streets, water lines and storm sewers to the city as part of the development process.  The only “cost” is the implied promise to maintain those assets forever.  Second, the value of the infrastructure asset is very difficult to pin down.  No one wants to buy the sidewalk in front of my house so exactly what “value” does that asset have?  It does have some value to kids walking to school or people walking their dogs, but pinning that value down – and deciding how much money should be spent to maintain it – is very difficult.

Perhaps the best approach to the concept of value is to think of public infrastructure as an asset that enables the abutting private property owners to create value with their property.  After all, a shopping center wouldn’t have much value if it weren’t for the streets and bridges that allow goods to be sent to the shopping center and customers to reach the shopping center to make purchases.  The catch, however, is that two virtually identical assets (e.g. streets) can produce wildly different pools of value depending upon the success of the partnership between the city and the private property owners.  In some locations, the street may produce a great deal of value that lasts for a long time.  But in other locations, private development might not produce much lasting value at all due perhaps to poor planning, shoddy construction, or just bad luck. 

This approach refocuses the issue to be “how can cities encourage private property owners to create as much value as possible with the city’s infrastructure assets?”  There is no easy answer to that question because cities have other goals (such as maintaining a certain community character) that can conflict with the goal of maximizing property value.  Finding the right balance is never easy but to me it suggests a development approach which emphasizes design, durability and adaptability rather than simple development volume.

The Bottom Line

It probably shouldn’t be a surprise that few cities actually follow a detailed maintenance plan for their infrastructure.  Cities have a detailed plan, of course, they just find excuse after excuse for not following it.  For most cities, the infrastructure maintenance budget is a relatively random number that grows or shrinks depending upon other budget priorities.  Municipal decision-makers know they should spend more on maintenance but the allure of growth and the political appeal of something new and improved overwhelm their better judgment.  

What is really unfortunate is that every level of government, from the federal bureaucracy to the smallest village board, is structured to focus on building new infrastructure to support new growth despite the fact that the vast majority of cities and counties are actually static or shrinking.  It is almost always easier to get a grant to build something new than to get a grant to fix something that is old.  

Houston provides an interesting example of this phenomenon.  The City of Houston has approximately 16,000 lane-miles of streets that it is responsible to maintain.  Given the average life of a street, it means that they should be resurfacing roughly 400 lane-miles of street each year.  According to data from the City (via the Bill King Blog), the last time the city resurfaced that many lane-miles was 2004.  The average for the past five years has been 146 lane-miles.  Clearly, Houston needs help with street maintenance.  You might think the State of Texas would assist, but instead the State is pushing the North Houston Highway Improvement Project – estimated to cost between $7 Billion and $10 Billion – to improve Interstate I-45N from downtown Houston to Beltway 8.  Repairing stuff is boring, building something new and “improved” is always better!

Our country is growing and community needs change over time so new development is a necessity.  There is, however, a right and a wrong way to grow and more often than not American cities are opting for what is familiar and easy instead of doing the harder, more innovative work of building cities that are focused on the needs of the next 50 years rather than the past 50.  The Ponzi scheme is going to break down eventually, as all Ponzi schemes do.  The question is how much damage is going to be done to your city before you have slouched your way to insolvency?

Notes:

1 Jeff Chapman, Adrienne Lu and Logan Timmerhoff; “By the Numbers:  A Look at Municipal Bankruptcies Over the Past 20 Years;” The Pew Charitable Trusts; July 2020; https://www.pewtrusts.org/en/research-and-analysis/articles/2020/07/07/by-the-numbers-a-look-at-municipal-bankruptcies-over-the-past-20-years

2 Bill Lukitsch; “Leaders, residents alarmed by number of bridges on repair list;” The Kansas City Star; September 12, 2024.

3 Greg Groogan; “Mayor John Whitmire says the City of Houston is ‘Broke’ ”; March 2024; Fox 26 Houston; https://www.fox26houston.com/news/mayor-john-whitmire-says-the-city-of-houston-is-broke

4 Charles Marohn; “Here’s the Real Reason Houston Is Going Broke”; April 2024; Strong Towns; https://www.strongtowns.org/journal/2024/4/1/heres-the-real-reason-houston-is-going-broke

5 The Corporate Finance Institute; “Modified Accrual Accounting;” https://corporatefinanceinstitute.com/resources/accounting/modified-accrual-accounting/

6 Government Finance Officers Association; “Modified Approach for Infrastructure Reporting;” January 2019; https://www.gfoa.org/materials/modified-approach-for-infrastructure-reporting

Special thanks to Eileen Johnson and Gina Bauman for their advice on explaining accounting principles.

Post 49: Air Conditioning -- Hero or Villain?

It is August and it is hot outside.  Right on cue, the press is full of stories about record setting heat waves at both the local and global level.  I’m not a climate scientist or a meteorologist, but I have no reason to doubt the accuracy of these articles.  From my limited research, the overwhelming scientific consensus seems to be that the earth is warmer now than it has ever been since people started measuring temperatures on a systematic basis (roughly 150 years ago) and probably warmer than it has been for at least 120,000 years (according to paleoclimate scientists).

Where I sit at the moment, however, is a comfortable 72 degrees thanks to a wonderful invention known as air conditioning.  I suspect I could live without this invention – after all, billions of people currently do – but I really don’t want to find out.  It is central to my comfortable lifestyle.  As an urban planner, I also know that air conditioning is central to the development of modern cities and to the migration patterns that have shaped our country.

Unfortunately, the pleasure I take from air conditioning was undermined recently by an article in the Washington Post entitled “Addicted to Cool: How the dream of air conditioning turned into the dark future of climate change.”  The article pointed out the huge demand air conditioning places on our electrical supply grid and the greenhouse gasses created by our current generation sources – not to mention the leaking refrigerants which are greenhouse gasses in their own right.  In effect, the more we use air conditioning the more we need air conditioning.  It went on to view this situation with almost existential angst:

“It’s possible to see a future in which we are dependent on the perfect, continuous performance of air conditioning the way many people are dependent on lifesaving drugs, planes are dependent on air traffic control, and a colony on the moon or Mars would be dependent on perpetual sources of oxygen and water. It is a technology so deeply embedded in our daily lives, and so increasingly important to our survival, that when we think of it, it is not with pleasure, as a luxury, or with pride, as an exemplar of our technical ingenuity. Rather, it reminds us of our frailty.” [1]

Other articles have used terms like “climate antihero” [2] and “absolutely disastrous” [3] to describe our dependence on air conditioning.  Exactly how guilty should I feel?  I decided to dig a little deeper to learn more about a technology I have largely taken for granted, and then to take several steps back to gain some much needed perspective on how it fits into our society and economy, rather than simply viewing air conditioning through an environmental lens.

The History

Ancient Romans experimented with buildings that had double walls and the ability to circulate water in the space in between to keep the indoor rooms cooler.  Clever, but expensive and tricky to maintain.  People have long known that allowing a big chunk of ice to melt lowers the temperature of the surrounding air.  It is even more effective if you can blow air across the melting ice and circulate that throughout the building.  The first “air conditioned” buildings – such as Chicago’s Auditorium Building and New York’s Carnegie Hall – used this technique in the late 1800s.

Unfortunately, ice was expensive, particularly in the hot climates where it was needed the most.  Enter John Gorrie, an Apalachicola, Florida doctor who noticed that his patients symptoms became more severe during hot weather.  In order to help cool them, he invented a machine in 1851 that used compressed air to make ice in a 10” x 10” x 4” mold.  Despite the ingenuity of his device, it never became popular with the public.  In fact, he was mocked because what he was producing was not “God’s ice” and he ended up dying penniless a few years later.

Technology (and public opinion) moved on, however, and in a few decades mechanical ice production was far more efficient and more accepted.  In fact, the modern system for rating the capacity of an air conditioning system is referred to as “tons” of capacity.  One ton of capacity is technically the ability to remove 12,000 British Thermal Units (or BTUs) from a given space in one hour.  But it originated as the amount of heat necessary to melt a one-ton block of ice!

The next major step forward occurred in 1902 when Willis Carrier invented a mechanical way to cool and dehumidify a printing plant in Brooklyn, New York.  The plant did color printing which entailed running paper through a printing press multiple times – once for each layer of color.  The problem was that the heat and humidity would fluctuate during the day and cause the paper to expand or contract, thus ruining the quality of the color image. Carrier's invention solved both problems.

Air conditioning was initially popular primarily with industrial buildings that produced products that were sensitive to heat and humidity (e.g. pasta, chocolate, printing and chewing gum, etc.).  Industries that previously had to shut down for the summer could now operate year-round. [4]

Two decades later it started showing up in commercial buildings frequented by the public such as movie theaters and hotels.  On a hot day, people would buy a ticket to an air conditioned theater regardless of what movie was showing.  In 1928, the Milam Building in San Antonio became the first air conditioned, high-rise office building in the country.  Traditionally, urban office buildings were built in a “U” or “H” shape and covered with operable windows so that they could capture breezes on hot days.  Unfortunately, when it was really hot or the air was still you ended up with lots of sweaty (and unhappy) office workers.  Again, air conditioning became a boon to productivity.

After World War II, air conditioning technology became cheaper and more compact.  It became a standard feature of most new commercial buildings outside of areas that were traditionally cool such as the Northwest and Northeast.  In the 1950s, inexpensive window units became widely available in stores which made home air conditioning economically feasible for the first time.  It gradually was incorporated into suburban tract housing as “central air” and by 1957 ten percent of all households had some form of air conditioning.  By 1975, that number was over 50 percent of all households, and air conditioning was commonplace not only in buildings but in transportation vehicles such as personal automobiles.  In fact, the iconic features of suburban development – long commutes, enclosed shopping malls, and high-rise office buildings – would not have been nearly as popular absent the rise of air conditioning.

The Ripple Effects

Air conditioning did not just make us cooler, it changed our lives and our society.  The increase in productivity was mentioned briefly above, but it is hard to overstate the economic impact on our country.  People are simply more productive at working, thinking or learning when they are housed in a building with a relatively stable temperature range regardless of the outdoor weather.

This was a point that was not lost on the air conditioning and advertising industries.  Ads in the 50s and 60s depicted indoor workers as elegantly dressed in modern surroundings (made possible by air conditioning, of course) while outdoor workers were gritty and sweaty as they struggled with the heat.  A 1949 Carrier ad in the Saturday Evening Post showed a man sleeping outside under a sombrero with text that read:  “Temperature 102° – Productivity 0.” [1]  Executives of the day might have missed the subtle racism, but they certainly understood the potential impact on their bottom line.

The fact is that productivity drives the quality of life that we enjoy.  If we didn’t have air conditioning (and other productivity enhancing technologies), we also wouldn’t have many of the other perks that come with living in a country that is an economic powerhouse.

The productivity we have gained from air conditioning is not just an important technical detail, it is also an important geographic detail.  Air conditioning helped transform the southern swath of the United States from a sleepy backwater into an economic dynamo.  Hot, humid locales that many people found unlivable for much of the year suddenly became attractive as air conditioning became ubiquitous.  As an example, look at the chart below which shows the growth rate over the past 80 years for Florida, Texas and Arizona.

For comparison, the population of the United States went up by 250 percent during the period from 1940 to 2020.  The rate of growth in Texas over the same period was almost double that amount (455%), Florida grew by more than 1,100 percent, and Arizona grew by more than 1,400 percent.  The migration from north to south has been one of our country’s biggest demographic stories of the past century.

Air conditioning not only promoted migration to the south, it also facilitated migration from rural to urban areas.  Cities lost their image as hot, treeless deserts and became both literally and figuratively “cool.”  The urban heat island effect – which results in inner city temperatures that are 5 to 10 degrees warmer than surrounding rural areas in the summer – is certainly a real thing but it became irrelevant with air conditioning.

Unfortunately, what also became irrelevant was the ability to design buildings that fit their environmental surroundings.  Architects and builders spent centuries creating a design vernacular that reflected the local climate.  Buildings in the southwest were often made from adobe which could absorb heat during the day and slowly release it during the cool nights.  Southern residences often had enormous multi-level porches that served as shady outdoor living spaces when it was too hot to be inside.  Desert cultures employed evaporative cooling towers to take advantage of the arid climate and perforated screens to maximize airflow.  All of that was largely forgotten with the advent of air conditioning.

Creating a building that kept its occupants comfortable was no longer a matter of architectural design but simply a calculation of air conditioning capacity done by an HVAC engineer.  The architect’s job became delivering a building that was flashy in appearance but relatively inexpensive to build.  Hence the popularity of “glass cube” office towers consisting of a few simple geometric shapes sheathed in reflective glass.  Operable windows and “U”-shaped buildings were now a detriment.  The “U” shape that kept workers close to an open window on hot days now is a waste of potential leasable area, and operable windows simply mess up the balance of the HVAC system and increase costs.  

It didn’t make any difference what the local weather patterns were like or that the west facade and the north facade looked exactly the same despite wildly different solar heat gain coefficients.  Architects were focused on building construction costs – the cost of running an air conditioner in a poorly designed building was an operating cost that many architects chose to ignore.

It also meant that residential construction in Phoenix, Las Vegas and Palm Springs moved away from adobe and other forms of masonry to the same type of wood frame construction that was used in Minneapolis, Chicago and other northern cities.  Fast and cheap were the key parameters when comfort was simply an issue of twisting the thermostat dial a little bit further.

The Bad News and the Good News

Most current air conditioners use what is known as the vapor compression cycle.  A refrigerant vapor is compressed and sent to a condenser outside the building where it releases heat into the atmosphere and changes from a vapor into a vapor/liquid mix.  The refrigerant is then routed through an expansion valve where it drops in pressure and expands.  This change in pressure and form (the refrigerant is now about 75% liquid) causes the refrigerant to drop in temperature.  It is then run through an evaporator (inside the building) where it absorbs heat (i.e., cools the building) while converting from mostly liquid back to a vapor.

This is a reliable and effective form of cooling technology, but it has three environmental drawbacks.  First and foremost, the process uses a considerable amount of electricity.  It is estimated that roughly 6 percent of the electricity generated in the U.S. is used for cooling (globally it is closer to 10 percent).  Since about 60 percent of our electrical capacity comes from burning fossil fuels, it means that keeping cool contributes to the greenhouse gasses that in turn contribute to global warming.

Secondly, the heat that air conditioners release into the atmosphere actually makes a hot day even hotter.  The impact is pretty minimal, but in dense urban areas the combined heat from air conditioners could raise the ambient outdoor temperature by perhaps one degree.  Finally, many air conditioners use hydrofluorocarbons as refrigerants which are far more potent greenhouse gasses than carbon dioxide.  Of course, air conditioners are designed not to leak and refrigerants are designed to be recycled, but as equipment ages, leaks do occur and there are a lot of old air conditioners still in use. 

Fortunately, not all the news is bad.  We have steadily improved our air conditioning technology with better compressors, better heat exchangers, better refrigerants and better thermostats.  It is estimated that a modern air conditioning system is roughly 50 percent more energy efficient than a similar capacity unit from 30 years ago.  In addition, progress is being made on replacements for the vapor compression style of air conditioner that have the potential to improve efficiency by another 50 percent in the next 10 to 15 years.

At the same time, the sources of electrical power are getting greener each year.  As recently as 2007, nearly half of all U.S. electricity was generated by coal-fired plants – the dirtiest source we have.  As of 2023, that share was down to just 16 percent and it will continue to fall.  Most of that loss in electrical capacity was replaced by power plants fueled by natural gas – another fossil fuel – but one which is far cleaner than coal. 

In addition, the use of renewable sources for electricity has been booming.  The amount of electricity generated by renewables has increased by more than 250 percent between 2007 and 2023, and that share will continue to grow. [5]  In the first half of 2024, just over 20 gigawatts of commercial-scale generating capacity was added to the electrical grid.  Of that amount, approximately 60 percent was solar, 12 percent was wind, and 21 percent was utility-scale battery storage.  Just 2 percent of new capacity was powered by natural gas. [6]  Assuming those trends continue, in 10 years the US electrical grid will have very little contribution from coal-fired plants, and renewables plus nuclear will account for well over half of total capacity.

The Bottom Line

The end result is that we have become lazy and complacent in the use of air conditioning, and that is indeed a bad thing.  It is not that difficult to design buildings that have lower air conditioning (and heating) loads, and the resulting buildings not only have lower operating costs and a reduced environmental impact but often are more interesting to look at.  Building owners and developers need to insist that architects pay more attention to those details.

On the other hand, while we certainly could be more efficient in our use of air conditioning, I have a hard time understanding why air conditioning should make us feel any more guilty than Bitcoin mining or massive AI server farms or any of hundreds of other power-intensive activities.  Air conditioning has had enormous benefits for human health and productivity that seem to more than offset the environmental impact.

I find it fascinating that articles decrying our dependence on air conditioning seem far more common than articles advising a reduction in our dependence on furnaces to keep warm in the winter.  At least air conditioning has the potential to get “greener” as the electrical grid continues to shift toward renewables, while heating technology is still reliant to a considerable degree on the direct burning of fossil fuels such as natural gas, heating oil and even wood.  Yes, global warming is slowly increasing the need for air conditioning and reducing the need for furnaces, but the disparity is hard to understand.

Given that countries around the globe have missed climate target after climate target, I think the goal of stopping or reversing global warming at any time in the foreseeable future is mostly wishful thinking.  Realistically, I think we need to start thinking about adapting to a warmer world and air conditioning seems like a key technology in that regard.  We should, of course, continue to improve its efficiency and continue to expand the use of renewable energy sources, but disparaging a technology that might be crucial to our societal well-being seems silly.

A more rational approach would be to encourage greater energy efficiency in all of our daily activities.  If anything, we should favor technologies that are largely electrical like air conditioning since the impact of renewable power sources for electricity are likely to decrease our overall carbon footprint over time.  City planners have a role in encouraging urban design strategies that reward energy efficient buildings and lessen the urban heat island effect – but that is a topic for a different post.  In the meantime, I’m not going to feel guilty about keeping the AC on until fall weather arrives.

Notes:

1. Philip Kennicott; “Addicted to Cool:  How the dream of air conditioning turned into the dark future of climate change”; The Washington Post; September 2023; https://www.washingtonpost.com/style/of-interest/interactive/2023/air-conditioning-climate-change/

2. Casey Crownhart; “Why air-conditioning is a climate antihero”; MIT Technology Review; July 2023; https://www.technologyreview.com/2023/07/27/1076774/air-conditioning-climate-antihero/?gad_source=1&gclid=Cj0KCQjwiOy1BhDCARIsADGvQnCMq3it_HKW4UAv2n1JL0EIV_xkwAWV4uR0-XmVMjAjoDT01SxdeigaAmb0EALw_wcB

3. Charlotte Elton; “Absolutely Disastrous: Air conditioners take horror toll on the environment, campaigners warn”; EuroNews; July 2022; https://www.euronews.com/green/2022/07/30/absolutely-disastrous-air-conditioners-take-horror-toll-on-the-environment-campaigners-war

4. Matt Largey; “Birth of the cool: A brief history of air conditioning”; KUT News; July 2018; https://www.kut.org/science/2018-07-17/heat-hot-weather-invention-of-ac

5. “Electricity explained”; U.S. Energy Information Administration; March 2024; https://www.eia.gov/energyexplained/electricity/electricity-in-the-us.php

6. “Today in Energy: U.S. power grid added 20.2 GW of generating capacity in the first half of 2024”; U.S. Energy Information Administration; August 2024; https://www.eia.gov/todayinenergy/detail.php?id=62864#:~:text=Plans%20for%20changes%20in%20capacity,and%20wind%20(4.6%20GW).