Large (50k sq ft) and Mid-Sized Buildings (25k sq ft) in New York City Source: NYC Mayor’s Office, PLUTO

Landlords Pay Penalties for Tenant Energy Use per Local Law 97

This Spring, New York City passed one of the nation’s most ambitious climate legislations — Climate Mobilization Act (CMA). With our buildings responsible for 71% of our city’s greenhouse gas (GHG) emissions, the “Green New Deal of NYC” aims to accelerate the reduction of our built environment’s carbon emissions to help achieve the city’s 80x50 vision (reduction of GHG emissions by 80% from 2005 baseline by 2050).

Much has been written on all 6 measures of the CMA, especially its cornerstone Local Law 97 2019 (LL97), which requires

… buildings over 25,000 square feet to meet strict greenhouse gas emissions limits based on occupancy group by 2024. The emissions limits become more stringent for calendar years 2030 to 2034, with the NYC Department of Buildings (“DOB”) establishing limits for 2035 and beyond by regulation.

Source: Building Energy Exchange — LL97 emission limits

Now that the building industry and community-at-large has had some time to digest LL97, the tenor of the dialog is shifting away from “what”, to “now what?”, especially when the penalties associated with the non-compliance with LL97 are very real. At $268 x (reported emissions — emissions limit), it could mean millions of dollars in annual penalties for some of the city’s largest landlords. A great real-life example was brought up during last week’s Building Energy Exchange’s “WISE tackles the Climate Mobilization Act” panel.

1 Bryant Park (Bank of America Tower) completed in 2009, was developed and is operated by the Durst Organization, it was one of the first LEED Platinum certified skyscrapers in New York City. Based on the building’s energy infrastructure and design, it should be one of the most energy efficient high rises, so how is it possible that its projected carbon emissions penalties under the current LL97 limits will be in excess of $2mm per year?

Bank of America Tower overlooking NYC’s Bryant’s Park

It is not so puzzling when you consider the fact that trading floors take up nearly 1/3 of Bank of America Tower’s 2.2 million total square feet. The fields of workstations, and the associated servers, heating, cooling, lighting systems required to enable the operations of the trading floors 24/7, suck up enormous amounts of energy. But neither the developer nor the architect had any control over this.

For developers like Durst who tried to do the right thing by the environment, I can see why LL97 could be frustrating and I would not be surprised if most major NYC landlords who are projected to incur material penalties might chose to litigate. The city, however, has been clear that LL97 is a collaborative work-in-progress and if we want to keep our eyes on the prize (GHG emission reductions), future amendments must address one fundamental flaw. For too long,

tenants, who are responsible for 40% — 60% of a building’s energy load, have been given a pass for our consumption.

Source: One City Built to Last The Working Group Report 2016

Sure, landlord-centric incentives like GHG emissions credits to “first mover” LEED developers or perhaps a new exemption category for 24/7 offices could emerge, but those will not advance the carbon reduction agenda. Conversely, tenant-centric changes may better align action and outcome, here are a few ideas:

1. Organizations like REBNY can help develop new standard lease language similar to Japan’s Green Lease to (i) Facilitate sharing of energy data between tenants and landlords (ii) Encourage tenants to partner with landlords in taking energy efficiency action (iii) Share in the energy savings AND penalties in accordance to the sub-metered energy data
2. Establish a grading system for tenants based on their energy efficiency levels, one that is similar to LL33 2018 where Buildings are required to post an energy efficiency letter grade in their lobbies. To help landlords decide if the tenant will potentially jeopardize their building’s energy grade

To execute something as complex as LL97 in a city as diverse and as vast as NYC is a gargantuan undertaking and between now and May 1st 2024, it will continue to morph as the different working groups debate and refine the details. No matter how the details shake out, I hope we never lose sight of the fact that we are all trying to deliver real change for a more sustainable future and as corny as it may be, I do believe other cities will follow because “if we can make it here, we can make it anywhere”.