The City of New York enacted in April six laws, collectively called the Climate Mobilization Act, that establish the most aggressive set of sustainability goals of any city in the United States. The Act is designed to address climate change and is aligned with the City’s 2014 commitment to reduce its Greenhouse Gas (GHG) emissions by 80% by 2050, with an interim goal of reducing GHG emissions by 40% by 2030. Central to this Act is Local Law 97, which limits GHG emissions and allows the City to fine any covered building for exceeding its GHG cap.
What Buildings Are Covered?
Any building in New York City of more than25,000 square feet in size (the approximate size of a typical 35-unit apartment building)is considered a covered building, with some exceptions:
Landmark buildings are included under this law, but they are eligible for a three-year extension in cases where significant building improvement is demonstrated as impossible or infeasible.
Buildings demonstrating financial hardship or an unfavorable economic outlook may qualify for a one-year reprieve, if they have pursued all available funding avenues.
Buildings with special circumstances, such as high-density occupation, 24/7 operations, or high-energy usage process equipment may be granted alternative compliance criteria if they meet certain thresholds. Those criteria are: for 2024-2029, a CO2e limit equal to 70% of 2018 GHG emissions; for 2030-2035, a CO2e limit equal to 50% of 2018 GHG emissions.
Not-for-profit hospitals can apply by July 21, 2021 for alternative compliance criteria: for 2024-2029, a CO2e limit equal to 85% of 2018 GHG emissions; for 2030-2035, a CO2e limit equal to 70% of 2018 GHG emissions.
Other exceptions include the following: most affordable housing; houses of worship; NYCHA-owned public housing; other City-owned buildings, which have a stricter target, and steam/electric generating facilities.
How Are the Fines Applied?
Buildings have been assigned a GHG emissions cap, based on building area and occupancy type. Commercial, residential, and medical buildings are each held to different standards, given their differing usages; however, in each category, the 20% greatest GHG emitters will be fined during the first period (2024-2029), with the bulk of covered buildings potentially receiving fines in the second period. Goals are aligned with New York City’s 80 x 50 GHG reduction plan, available here.
Implementation is broken down into three main phases. Starting in 2024, the greatest 20% of GHG emitters will be fined. Then, starting in 2030, the emissions cap is cut in half, impacting most buildings unless clean energy becomes more readily available. Even stricter caps are scheduled for future phases; however, these phases are still expected to be modified, based on a future evaluation of the law’s implementation progress.
While this will result in a wide range of fines depending on a number of factors, a few buildings illustrate typical fines. A sample 500,000 SF commercial building with an Energy Star score of 56 would not have to pay a fine in 2024 but would pay a fine of $200,000 starting in 2030. This is equivalent to $0.40/SF in added cost. A sample 200,000 SF residential building with an Energy Star score just over 75 would also be clear until 2030, when it would pay a fine just over $10,000. On the other hand, according to the current law, a sample data-center-dominated 1,000,000 SF commercial building would pay more than $4.5 million annually starting in 2024, increasing to $6 million in 2030.
How Can the Fines be Avoided?
While renewable energy credits can partially offset penalties, the only long-term plan to effectively avoid significant fines is to carry out energy conservation measures (ECMs)to improve building energy efficiency. With five years to prepare, the city’s current greatest 20% of GHG emitters have time to implement changes and carry out retrofits that may allow them to avoid a fine in 2024.
The Climate Mobilization Act also includes a Sustainable Loans law that makes available low-interest funding to finance ECMs. Con Edison and NYSERDA also have significant amounts of funding available to assist in ECM implementation.
When considering the potential upcoming penalties, and the available funding, now is the time to discuss energy conservation measure opportunities. For more details, the full text of the Climate Mobilization Act’s Greenhouse Gas Cap component can be found here.
Tristan Schwartzman is a Principal and Director of Energy Services at Goldman Copeland. Under his leadership, the firm has certified more ENERGY STAR® buildings in the tri-state area than any other firm. He can be reached at tschwartzman@goldmancopeland.com.
