How Does the ETO Loophole Work in Building Codes?

The ETO loophole does not further energy efficiency and does not benefit home owners.

The equipment trade off (ETO) loophole means that a builder can weaken a home envelope’s efficiency in exchange for putting more efficient equipment that they were going to install anyway.

Take as an example, furnaces: The federal furnace standard of 80 AFUE is so outdated that builders can’t even buy furnaces that meet it.  So even though the federal furnace standard is 80 AFUE, most builders are already installing 90 AFUE.  Reinstating the ETO allows that builder to weaken the envelope by installing the same furnace he would have installed without the ETO.

But it gets worse, because the trade-off is not net-net.  First, while the furnace may last 25 years and will most likely be replaced by an efficient furnace, the envelope features are unlikely to ever be upgraded (who’s going to tear down their walls to install new insulation?).  Second, the less efficient envelope will also require larger equipment that will now have to work harder to heat and cool the house, which means a less efficient house overall.