New York City is less than six weeks away from the implementation of Local Law 97, which aims to reduce the carbon emissions from the city’s largest buildings by 40 percent by 2030. Institutional owners will be required to retrofit existing buildings and build higher-quality new properties in order to comply with the law.
Rohit Aggarwala, commissioner of the New York City Department of Environmental Protection and chief climate officer, told panelists at the PERE America Forum in New York last week that the legislation will be a critical step forward for decarbonization in the city.
“Once you find yourself in a hole, job number one is to stop digging,” Aggarwala said. “We have to reduce our carbon emissions and make an effort to slow down climate change. If we don’t, we are going to pay for it. We are a city with 500 miles of coastline and, as sea levels continue to rise and our weather continues to get more extreme, there are going to be massive costs.”
“Once you find yourself in a hole, job number one is to stop digging”
While 70 percent of New York’s carbon emissions come from buildings, 50 percent of that total comes from the 5 percent of properties classified as large buildings, Aggarwala said.
“Fifty thousand of our buildings make up more than half of our total energy consumption. These are relatively sophisticated skyscrapers, co-ops, or other residential complexes. Those are the buildings that were targeted under Local Law 97.”
The city has been working on climate change issues for more than 15 years, with Aggarwala citing a divergence between public and private sector efforts during that time. While New York City government buildings aggressively decarbonized and the city made numerous investments in renewable power, the real estate sector did not take the same steps, he noted.
With six weeks to go until the law takes effect, the city is close to finalizing the rules, Aggarwala said.
“The first rules identified how carbon emissions will be calculated and this year was spent working on the enforcement approach, which includes the definition of a good faith effort [toward compliance]. Those rules were issued in September, and we are taking some of the public comments we received. We will promulgate the rules at the end of the year.”
Owners of noncompliant buildings will face potential taxes. “We are serious about enforcing this because there is no other way for New York City to decarbonize its large buildings,” Aggarwala added.
If it is not possible for buildings to comply in the near term, owners can develop a strategy toward compliance through at least 2030. “As long as they submit that strategy and keep to milestones, then they will not have to pay the fines [associated with non-compliance],” Aggarwala said.
The reality is that the implementation of Local Law 97 is about mobilization. “You can’t coach a soccer team by telling them you’ll punish them if they lose the game. You have to tell them what they have to do to win,” Aggarwala said.
Mobilization includes helping owners figure out how to finance retrofits and new construction. This includes C-PACE financing, a federal program administered on the state level to offer property owners financing for energy efficiency and resiliency upgrades. New York’s legislation, signed into law in 2019, is being revised to better accommodate building owners’ needs, Aggarwala added.
“We are working on the financing, the funding and the critical technical assistance for these buildings. PACE financing is a useful tool, but it is by no means a panacea. It will be useful for a subset of buildings. Additionally, the J-51 property tax credit is being reinstated for low- to middle-income residential buildings – they will get a tax credit for 15 years for [significant compliance] with the law.”
Aggarwala noted retrofitting existing buildings is critical because these properties make up so much of the existing market. “Where we really need financing and innovation is for the retrofit projects,” he added.
Looking ahead, the city is working to figure out what the needed energy efficiency investments will be in New York between 2026 and 2030.
“Going forward, what owners and investors will have to realize is that you can’t ask what the value of decarbonization is any more than you can ask what the value of safety is. It is a fundamental responsibility.”