Proposed rules for emissions caps leave neither side happy

Department of Buildings lays out how to calculate and offset building emissions

A photo illustration of Mayor of New York City Eric Adams (Getty)
A photo illustration of Mayor of New York City Eric Adams (Getty)

The city has drafted rules for buildings to cut carbon emissions as the first deadline to do so rapidly approaches.

The Department of Buildings on Thursday proposed regulations for Local Law 97, including how to calculate a building’s energy use and emission limits and how property owners can offset emissions through renewable energy credits.

Building owners have a lot riding on the rules. They have been bracing for the law and seeking ways to comply with it before annual fines running into the millions of dollars begin in 2024.

The proposal states that property owners can purchase credits — which are generated by projects such as wind and solar farms — to offset the greenhouse gas emissions attributed to utility-supplied electricity. Most of that power comes from natural gas.

The provision is a blow to buildings that use far more natural gas and oil than electricity — typically, residential buildings with heating systems powered by fossil fuels. Owners of these buildings were hoping to use renewable energy credits to offset their carbon emissions and avoid Local Law 97’s large fines. If the draft rules are enacted, that will not be possible.

Commercial buildings that use a lot of electricity, such as those with data centers or trading floors, are not off the hook either. Although the draft rules would limit competition from residential buildings for renewable energy credits, there still will not be enough credits to go around when the law kicks in.

That is because the credits must be connected to New York City’s grid. No one expects many wind turbines or solar farms to appear in the five boroughs. However, projects outside the city that connect to its grid will be eligible.

Two such projects, the $11 billion Clean Path New York and the Champlain Hudson Power Express, will generate credits eligible for Local Law 97 offsets, but the law’s fines will kick in long before those projects come online. They are not even under construction yet.

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The first set of emission limits under Local Law 97 apply in 2024, when buildings larger than 25,000 square feet must begin to meet stringent greenhouse gas emissions caps or face penalties. Stricter limits kick in six years later, and buildings citywide must reduce emissions by 80 percent in 2050.

To be sure, the environmental lobby is not happy with the proposed rules on renewable energy credits either. The green groups say they are too permissive and will give some building owners an alternative to cutting their carbon footprints through energy efficiency retrofits.

A coalition that includes Food & Water Watch, New York Communities for Change, New York Public Interest Research Group and Treeage is calling on the Adams administration to cap energy credits at 10 percent of a building’s total pollution or 30 percent of the emission volume above a building’s cap.

“If Mayor Adams allows building owners to ‘opt out’ of upgrading their buildings by buying renewable energy credits, the law will be gutted, eliminating thousands of jobs and leading to massive air pollution hazards,” the group said in a statement.

But the real industry argues that if building owners have an incentive to buy the credits, more clean-energy generation and transmission projects will be built. The credits can be a crucial part of such projects’ financing.

The industry has asked that property owners be allowed to use renewable energy credits generated outside the city. That proposal ultimately did not move forward.

The rules proposed Thursday also specify that owners cannot double dip on offsets for clean energy generated onsite. In other words, if they use energy credits for electricity generated by solar panels on the premises, they are not eligible for a separate deduction granted for producing clean energy onsite.

One real estate industry source said one helpful aspect of the proposal is that it lays out how to calculate a building’s carbon footprint. The math can be quite complicated, and the rules will aid building owners trying to figure out their exposure to fines under Local Law 97, and how to comply with the statute.