NYC Emissions Law Discourages Dense Office Buildings, Lacks Clarity: Report

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A new report from the Citizens Budget Commission (CBC) found several issues with the city’s new emissions reduction law for buildings, including a lack of clear guidance from the New York City Department of Buildings ahead of the law’s first deadline in 2024, no realistic framework for landlords to purchase renewable energy credits, and rules that discourage densely populated office and retail buildings. 

Local Law 97, signed into law by Mayor Bill de Blasio in 2019, aims to reduce carbon emissions for large buildings by 40 percent by 2030 and by 80 percent by 2050. The emissions caps apply to most properties larger than 25,000 square feet beginning in 2024, with deeper emissions cuts expected in 2030, and then every five years through 2050. 

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CBC found that 24 percent of the buildings covered by the law don’t comply with the 2024 emissions standards, and 75 percent of them won’t meet the 2030 requirements. 

A median noncompliant building would have to reduce its emissions by 20 percent by 2024 and by 33 percent by 2030. The penalties for failing to meet the carbon reduction targets in 2030 could average about $1 per square foot, and total $218 million annually for all properties affected by the law, according to CBC. 

The report also points out that penalizing landlords for exceeding the emissions caps on a per-square-foot basis discourages more densely occupied office buildings. 

“More workers or residents per square foot will consume more energy in that building — and hence emit more [greenhouse gases] — than less-dense uses,” CBC’s Andrew Perry wrote in the report. “However, density can be beneficial on a citywide basis, for example allowing more workers to use New York’s low-emissions transit systems or needing fewer square feet of office space producing lower emissions per worker.”

The law includes set-asides for certain kinds of energy-intensive uses — such as hospitals — but not for others, such as data centers and restaurants, CBC’s analysis pointed out.

Landlords are also running their ventilation systems for more hours of the day and are implementing more energy-intensive HVAC measures in order to counteract the spread of the coronavirus. All of this will translate into significantly higher carbon emissions once buildings are fully occupied, and creates another complicating factor for commercial landlords who are already struggling to meet benchmarks. 

In addition, office occupancy remains at, or below, 50 percent in New York City, as the delta variant of the coronavirus surges throughout the five boroughs. And fewer people in buildings, along with slow leasing during the pandemic, may leave some landlords with less capital to make the necessary retrofits for Local Law 97. CBC argues that the city should reexamine how the pandemic may impact implementation for the 2024 deadline. 

One key component of the law allows landlords to buy renewable energy credits in order to offset higher emissions. But as long as New York City’s grid relies on fossil fuel, those credits are not available for purchase. CBC argues that landlords should be allowed to buy credits from wind farms located off of Long Island and other parts of the state. 

The law also mandates that the Mayor’s Office of Sustainability is supposed to release a report on developing a carbon-trading scheme for landlords, who want to transfer or sell emissions credits between properties that meet the emissions caps and ones that do not, with some eyeing the blockchain as the solution. The report was supposed to be delivered to the New York City Council by Jan. 1, 2021, but it has not been made public yet. 

A City Hall spokesman said the pandemic had delayed the report, but did not provide a date for its release.

Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.