Biting Back

In New York City USA, about 70 percent of CO2 emissions come from the built environment; a number much higher than most cities. This is mostly due to a high building density and many of those buildings need upgrades to their HVAC systems and the exterior envelopes. Often times, the tenants pay the energy bill which does not incentivize the property owner to perform potential costly energy upgrades, which adds to the problem.

To curb climate change, it is essential to address the problem’s biggest contributors and devise a system to drive energy retrofits. In 2019, the New York City government passed the Climate Mobilization Act, the most ambitious carbon emission reduction plan passed by any city in the world. The centerpiece is Local Law 97 which calls for a strict cap of carbon emissions of all buildings more than 25,000 square feet by 2024. This includes approximately 50,000 of the city’s 1 million buildings. Those facilities account for about 60percent of the city's total floor area. These buildings must subsequently comply with even stricter 40 percent caps on emissions by 2030 compared to a 2005 baseline. By 2050 there must be an 80 percent CO2 reduction.

The law includes a flexible scheme of energy credits and emission offsets. The city is scheduled to release a report on the potential inclusion of carbon trading by early 2021. The program is relying on both carrots and sticks. It offers a low-interest loan program for financing retrofits and educational programs for building owners. It is also launching a retrofit accelerator program to connect owners with retrofit specialists to help fast track the projects. Starting in 2024 any annual energy consumption above the established limits will result in financial penalties.

The buildings are assessed by examining its function, size and HVAC system and then measured against the energy bills. In December 2019, a climate advisory board was formed which created eight working groups to develop more detailed rules from the law and methodologies for calculating and verifying individual buildings’ greenhouse gas emissions.

The program is designed to address the 20 percent worst emitters by 2024 and then the next 75 percent by 2030. Statistically, the average building will pass the 2024 deadline but will have to perform some sort of retrofit by 2030. As designing and executing retrofits take years, the function of the law gives FMs enough time to meet the deadlines. The energy trading program will provide financial rewards for energy efficient buildings via credits. This financial benefit will compound over the years. 

Innovative solutions

In June 2020, the Urban Green council published a report titled Trading: A New Climate Solution for Buildings detailing how non-compliant buildings can purchase energy credits from buildings that consume below the maximum levels. Purchasing local renewable energy credits can offset up to 100 percent of annual emissions. There are also deductions for greenhouse gas offsets and peak energy storage.

Proptech innovations will also play a role in measuring and controlling the microclimate in buildings to lower total energy use without compromising the occupants’ environment. There are numerous startups focusing on how building occupancy feedback loops can be used to further understand how buildings are used and develop innovative energy saving solutions.

Product innovations such as compact geothermal heat pumps and façade integrated photovoltaics are becoming viable retrofit options.

How is the emissions limit estimated?

The U.S. Environmental Protection Agency’s free Energy Star Portfolio Manager is a good reference for energy compliance. Every building in New York City with more than 25,000 square feet should be included and benchmarked per the 2019 deadline. This system can convert energy data into carbon emission information which will then determine whether the building is compliant. Although the method used in Portfolio Manager is slightly different than the method required in Local law 97, it is a good starting point to see how close the building is to compliance.

Based on Local Law 97, occupancy classification will determine the allowable amount of building emissions based on kilograms of CO2 emitted per square foot each year. Below are a few examples of building typology limits measured in annual kilogram of CO2 per square foot for 2024 followed by the stricter 2030 deadline.

 

To prove compliance, building owners must submit an annual emissions intensity report that is certified by a registered design professional beginning in 2025 or risk paying substantial fines. There are additional fines for submitting false reports.

Failure to comply with the carbon caps can incur a penalty of $268 per metric ton of CO2 in access to their allowed annual carbon footprint.

What can FMs do to reduce building emissions?

Besides potential retrofits of HVAC and exterior envelopes there are numerous ways of reducing a building's energy usage. IFMA offers a series of sustainability courses through the Sustainable Facility Professional (SFP) program. It helps facility managers make data-driven decisions and utilize assessment based tools to understand sustainable best practices. The credential equips FM’s with methods on how to take a systematic approach to operate a building and evaluate the building performance. It also provides tools of cost/benefit analysis in order to prioritize the best outcome. There is an estimated 5 percent average potential savings by just optimizing the building operations.

Retrofits

The proposed law is considered the biggest disruption of the NYC real estate industry. In the less than four years remaining until the implementation of the law, it is estimated to cost about $2.2 billion to bring the majority of buildings into compliance. Between 2024 to 2030, an additional $18 billion will be needed for all buildings to be brought up to acceptable levels. It is estimated that there will be about 140,000 new jobs created in the retrofit market by 2030.

Incentives

To support building owners in financing retrofits, the Property Assessed Clean Energy (PACE) program was created. This can provide owners up to 100 percent funding for energy efficiency and renewable energy projects. It is designed with little to no upfront cost, has low interest rates and long-term loans to minimize the financial burden on building owners. PACE was made available in early 2020 and will help unlock an estimated $20 billion needed for retrofits. The available financial support per property is assessed based on the building's property tax bill.

The impact of COVID-19

As the COVID-19 crisis has financially hit the city hard, some industry voices are stating that the virus is making it harder to meet the energy goals. Some buildings have installed hospital-grade filters and increased air circulation, increasing HVAC loads and energy use. Other criticism is that sustainable credits are only good for energy generated within New York City’s five boroughs, where there is limited space to install solar, wind or other sustainable energy sources. Although many buildings have been mostly empty, energy use has only dropped by about 30 percent.

"There is a lot of phantom use that is going on when buildings are empty which is a tremendous learning moment. The one thing we know for sure is that climate change is not going to put itself on pause for coronavirus, so we have to find a way to manage both simultaneously,” said John Mandyck, CEO of the Urban Green Council.