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Concentration of CO2 in the Atmosphere

NYC’s Climate Mobilization Act

What Does It Mean for Building Owners?

By Marc Zuluaga

In April of this year, Introduction 1253-2018 was approved by the New York City Council along with several other major pieces of legislation as part of a Climate Mobilization Act. While it will take some time to more precisely gauge the Climate Mobilization Act’s impact across the industry, the Urban Green Council described it as “arguably the most disruptive in our lifetime of the NYC real estate industry.”

Previous building energy legislation in NYC has focused primarily on providing the market with access to information in the form of benchmarking and audits. In response to increasing demands for more urgent climate action, this new local law will require energy performance levels – and significant retrofits in some cases – in most existing buildings over 25,000 square feet between now and 2030 and deeper reductions beyond 2030.

How It Will Work

The law establishes targets for carbon-emissions intensity per square foot for buildings based on occupancy class. For instance, multifamily buildings, office buildings, schools, and storage facilities will have different intensity targets. Mixed-use buildings will have their targets set based on a weighted average of their different spaces. Across all segments, these targets will get reduced over time. Building on the type of data submitted as part of annual benchmarking, all tenant and owner energy used at a particular building will be converted to carbon intensity per square foot.

Starting in 2024, buildings will be fined on an annual basis for carbon footprint that exceeds their targets. Based on their performance today, approximately 20% of buildings exceed the 2024 – 2029 targets while approximately 75% of buildings exceed the 2030 – 2034 targets (https://council.nyc.gov/press/2019/04/18/1730/). As an alternative to this performance-based framework, rent-regulated multifamily buildings with at least one rent-stabilized apartment will be required to implement a prescriptive list of upgrades by 2024. These upgrades include indoor temperature sensors providing feedback to boilers and apartment thermostatic controls.

What It Will Mean to the Market

The lowest carbon intensity buildings today will not be at risk of fines, while higher carbon intensity buildings today will have to reduce their carbon footprint through deep-energy retrofits by 2030 to avoid fines of $268 per ton of carbon emissions in excess of the building’s limit. With a carbon-based metric, fuel sources matter in addition to energy intensity. For instance, #2 oil results in approximately 40% more carbon emissions than gas per British thermal unit (BTU). To meet the 2030 target, older steam-heated multifamily buildings will have to implement a number of upgrades, while in office buildings, tenant electricity loads that dominate carbon footprint will need to be addressed systematically over time.

Additionally, the legislation allows for reported greenhouse gas (GHG) emissions to be reduced each year through the purchase of clean electricity or GHG offsets. Although the basic carbon reporting metric is relatively simple, evaluation of credits in the form of purchased carbon-free electricity or greenhouse gas offsets will require thoughtful analysis in order to identify the most cost-effective pathway for any building to comply. The law will require an advisory group to make recommendations regarding a carbon trading approach that could allow the market to more optimally allocate resources across buildings.

Bottom Line

The lack of support or, in some cases, legislative rollbacks, from the current administration has galvanized U.S. cities and communities to take action locally. Major cities like New York, Washington DC, Chicago and others are taking different approaches in hopes of achieving similar results: triaging and reducing GHG output from the highest emitters and setting net-zero goals for new construction.

While particular strategies may vary based on building systems and ownership structure, smarter buildings that align carbon-reduction strategies to most positively impact asset value and tenant experience are a good place to start. Visit www.smartbuildings.nyc for further resources and information that focus on whole-building solutions to reduce carbon emissions.

Marc Zuluaga is the CEO of Steven Winter Associates.

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