April 27, 2021

New York City is Taking on GHG Emissions from its Building Sector

Posted on April 27, 2021 by J. Kevin Healy

In June 2017, the City of New York announced its commitment to achieve emission reductions consistent with the goals of the Paris Agreement. Three months later, it released a plan entitled 1.5°C: Aligning New York City with the Paris Climate Agreement, which detailed the near-term and long-term actions it would take to achieve those reductions. These commitments are impressive, but actual progress has been spotty: GHG emissions in the City actually increased slightly between 2017 and 2019, although they were down 15 percent as compared to 2005.

However, on April 18, 2019 the City Council enacted the Climate Mobilization Act, a slate of local laws that in one stroke shifted the City’s GHG emissions reduction program into high gear. The centerpiece of the Climate Mobilization Act is Local Law 97, a groundbreaking law that tackles emissions from the building sector, which is responsible for about 70 percent of the City’s GHG emissions.

The law imposes a mandate on 50,000 of the City’s largest buildings (those with 25,000 or more gross square feet of floor area), requiring that they reduce their GHG emissions by 40 percent by 2030 and 80 percent by 2050. Buildings with 35% or more rent-regulated units, housing authority buildings, hospitals, religious institutions, utility buildings and a few other categories are exempted from the mandatory limits specified in the law, although some are subject to alternative mandates requiring that they implement certain energy efficiency improvements or achieve different (less stringent) emission reductions.

In the near term, the law sets “building emissions intensity limits” for two “compliance periods” (2024 through 2029 and 2030 through 2034). Those limits are expressed in terms of metric tons of CO2 equivalent/square foot per year – and vary for each of 10 different “occupancy groups,” including among others residences, hotels, factories, business and storage, and educational institutions. The City will ratchet down those limits in each of the following 5-year compliance periods as necessary to achieve the law’s “80 by 50” mandate.

Local Law 97 has real teeth. Building owners failing to meet the limits face penalties of up to $268 per ton of excess emissions – with a maximum exposure of $5 million annually. Penalties are to be assessed by “a court or tribunal” – apparently on a case-by-case basis – after consideration of the building owner’s good faith efforts to comply, history of compliance, access to financial resources, and the impacts of compliance on “facilities critical to human life and safety.” One wonders how the City will handle the enormous caseload generated by the 50,000 buildings subject to the law.

While Local Law 97 is long on mandates, it is short on the details of how those mandates are to be achieved. It calls for an “advisory board,” assisted by several “working groups,” to get into the weeds. The advisory board is responsible for developing recommendations on how Local Law 97 should be implemented (and adjusted) by January 1, 2023.

It would be hard to overstate the magnitude of the task that building owners face in complying with the mandates of the law. Although the emissions intensity limits imposed for the first compliance period are not particularly restrictive (only 20 percent of covered buildings fail to meet them today), those limits will become increasingly stringent as we approach 2050. Heating, cooling and lighting systems will have to be overhauled, windows will have to be replaced, and building envelopes will have to be improved. But even with all these improvements many buildings will not pass muster. Therefore, the law includes some limited safety valves: it allows the Department of Buildings to make adjustments on a case-by-case basis for building owners who can demonstrate that meeting the limits would be technologically infeasible or cause undue hardship. Curiously, such adjustments are to remain effective for limited periods – no more than three years in the case of technical infeasibility and one year in the case of financial hardship.

The law also allows some limited alternative means of meeting the emission reduction mandates. For example, it allows deductions from reportable emissions for owners that purchase tradeable renewable energy credits (RECs) — but only if those RECs are generated by projects located in the City or connecting directly into the City grid. Governor Cuomo’s 2022 budget bill had included a provision that would swoop down and remove these restrictions, but those provisions appear to be dead on arrival, at least for now. The law also allows a deduction of up to 10 percent of reportable emissions for GHG emission offsets purchased by building owners, and allows another deduction for clean distributed energy sources installed to serve a building. However, these deductions are permitted only for the first compliance period.

Perhaps the most intriguing aspect of the law is a provision that requires the Mayor’s Office to prepare a study on the feasibility of a citywide trading scheme for GHG emissions from buildings. Because the statutory language requires the report to include an “implementation plan,” it appears that the City Council favors such a scheme. However, it deferred putting a building emissions trading system into place in Local Law 97 due primarily to concerns that it might disadvantage environmental justice communities.

An emissions trading program for buildings at the scale envisioned by Local Law 97 would be revolutionary: only one such program exists today, in Tokyo, and that program covers about 1400 buildings. The City will have to address a host of technical, administrative and legal issues to establish a credible, transparent and effective trading system. Readers interested in a deeper dive into such issues should see two informative sources: Local Law 97: Emissions Trading for Buildings?, Danielle Spiegel-Feld, NYUL Rev. Online, 2019, and a report issued by the Urban Green Council entitled Trading: a New Climate Solution for Buildings.

Clearly, implementation of Local Law 97 is a work in progress, and adjustments are inevitable as its mandates begin to take hold. Nevertheless, City leaders, environmental advocates, community leaders and the real estate industry have thus far expressed an unwavering commitment to achieving its goals.