Given the news headlines about New York City’s significant moves toward reducing the environmental impact of its buildings, we decided to dig a bit deeper to find out more about what’s already enacted, what’s in the pipeline and what the implications are. Alexandra Blakeslee, one of my colleagues local to New York City, attended the first of a series of briefings on the Climate Mobilization Act passed in New York City (NYC) in April and is co-writing the blog with me this month to share this experience.
This briefing series was hosted by the Building Energy Exchange (BE-EX) which is an organization based in NYC dedicated to reducing the effects of climate change by improving the built environment. Under Richard Yancey’s leadership, they have been doing great work leading the way in getting people together to shape the future of sustainability in NYC.
By way of background, NYC’s Climate Mobilization Act imposes a series of local laws with the goal of drastically reducing greenhouse gas emissions in NYC’s buildings over the next 30 years. This first briefing focused on Local Law 97, of which the most eye-catching tenet is the setting of emissions targets on buildings to cut carbon emissions over 80 percent by 2050. Of course, this 80-percent reduction won’t happen overnight, so there are also mile markers along the way.
The first mile marker will be in 2024 when buildings over 25,000 square feet will experience an emissions cap. These emissions caps will be different for each building type depending on which “use group” it falls in. Hospitals, for example, inherently require higher energy use and therefore have one of the highest 2024 caps at 0.02381 tons CO2e/square feet. In contrast, businesses (office buildings) will have a lower cap at 0.00846 tons CO2e/square feet. To put this into perspective, the 50th percentile of the current NYC office building stock has an emission of approximately 0.006 tons CO2e/square feet, and approximately 70 percent of office buildings are currently operating at or below this target.
The next mile marker will be in 2030 when emissions caps will tighten further. Those same hospitals and office buildings will then have to meet targets which are cut in half at 0.0119 and 0.0045 tons CO2e/square feet respectively. Currently, only the top 10 percent of the office building stock in NYC operates at this latter level.
Energy coefficients used to calculate the amount of greenhouse gas emissions generated through use of electricity, natural gas, fuel oil, steam, etc. are a question mark for the future. While these coefficients are already available, electricity coefficients, in particular, are expected to change over time because it is not clear what the composition of the NYC grid will look like in the future in terms of source energy (e.g. renewables, natural gas, coal). Of course, if the grid becomes powered totally by renewables, any energy used from it will be emission-free, but because that is quite a challenging goal, focusing on building energy-efficiency improvements are very important. The implementation of an advisory board is also part of Local Law 97, which will provide alternatives for how to measure emissions and make recommendations for future emissions targets.
For us, the most interesting takeaway was the fact that NYC has found a way to monetize carbon emissions. Energy is relatively cheap in the U.S. and, up to now, it hasn’t always been cost effective for building owners to make energy-efficiency improvements to their buildings, especially envelope retrofits. Local Law 97 will impose building code violation fees which are not cheap – $268 per ton of emissions – and at the same time the city will be providing incentives to property owners, such as free consultancy through their NYC Retrofit Accelerator. As an example, a 300,000-square-foot office building currently operating at 0.009 tons CO2e/square feet (worst 20 percent of current building stock) would be charged a penalty of about $43,000 annually starting 2024 (for a 162 ton overage), and $360,000 (for a 1340-ton overage) annually starting in 2030.
With accruing annual penalties like these, the payback on major NYC building improvements including envelope retrofits could become cost effective pretty quickly. There is interest in enacting similar strategies in other cities across the U.S., which would be a multiplier for envelope retrofits. As we highlighted last month, the NYC real estate community is not supportive of this legislation because of the up-front cost for energy-efficiency improvements. However, improving older, low-performing envelopes doesn’t just help building energy performance and reduce greenhouse gas emissions, it also significantly improves the thermal comfort and productivity for the occupants working in close proximity. Building envelope improvements also increase the rental value of the building, and with energy “grades” being posted on buildings starting in October 2020 (NYC Local Law 95), investing in higher energy performance should make for higher occupancy and lease rates. A win-win for both business and the planet.