New York City’s Local Law 97: Energy Conservation Requirements That Open Opportunities

On April 20, Duane Morris LLP hosted a webinar on New York City’s Local Law 97, featuring:

  • Brad A. Molotsky, Partner, Duane Morris LLP, speaking about the legal and policy landscape;
  • Robert Politzer, President and Founder, GREENSTREETNYC, speaking about turning liability into opportunity with Local Law 97 compliance;
  • Crystal Smith, New York Market Director, Greenworks Lending at Nuveen, speaking about C-PACE financing;
  • Dan Egan, Senior Vice President of Energy and Sustainability, Vornado Realty Trust, speaking about the large New York property owner’s perspective; and
  • David Amerikaner, Special Counsel, Duane Morris LLP, moderating.

Local Law 97 was adopted in 2019 as part of New York City’s Climate Mobilization Act (CMA), a package of legislation designed to reduce greenhouse gas emissions from the City’s buildings by 40% by 2030 and by 80% by 2050, using 2005 as the baseline. The CMA includes bills aimed at encouraging the use of solar panels and green roofs, amending building energy efficiency grades, and authorizing the use of Commercial Property-Assessed Clean Energy (C-PACE) Financing to fund energy efficiency upgrades and building retrofits as well green energy installations.

But the centerpiece of the CMA is Local Law 97, which applies, generally, to buildings over 25,000 square feet in the City, with some exceptions, and establishes carbon emission intensity caps that begin to take effect in 2024 and become more stringent over time. The law will require covered buildings to understand their carbon footprints and to reduce their emissions through several mechanisms, including by implementing efficiency improvements and generating green energy, among others. It is estimated that over 50,000 buildings in New York will fall within the ambit of the CMA (over 60% of the buildings within the City), which results in over 3.15 billion square feet of coverage.

The April 20 webinar produced a lively discussion. Below are some of the takeaways from the discussion:

  • Timing. The CMA was passed in 2018 but in order to give building owners time to game plan, evaluate and then execute on carbon reduction plans, will become operative in 2024 with required reporting starting in May, 2025.
  • Failure to comply will be expensive. A covered building must pay $268 for every metric ton that that its carbon emissions exceed the cap established for its building type, beginning with the first compliance period in 2025. There are also fines for filing false emissions reports and failure to file a report.
  • But compliance can reduce operating expenses and modernize a building at minimal cost. A building energy audit is likely to reveal “low-hanging fruit,” such as efficiency upgrades that can be financed at low cost and can reduce energy operating expenses for the property. In addition, clean energy generation can be incorporated into a building with little or no upfront cost and affordable financing, and on-site generation will improve a building’s bottom line over time.
  • C-PACE financing is helpful to making improvements pencil out. C-PACE financing, authorized in New York and soon to be launched in NYC, allows building energy efficiency upgrades to be financed at low rates and paid back through an additional assessment on the property tax bill over a 20 to 25 year period. Note that the CMA also allows renewable energy credits and other offsets to count towards a building compliance targets.
  • New York’s efforts to decarbonize its electric grid will help. The state’s goal is to create all its electricity from carbon-free sources by 2040. As the renewable energy needed to meet this goal continues to be more readily available, NYC buildings will be powered by electrons that were generated using less and less carbon, easing the path to compliance with Local Law 97 over time.
  • The right thing to do for the planet is increasingly converging with the right thing to do for the bottom line. Vornado Realty Trust, for example, set a goal years ago to decarbonize its buildings by 2030. Vornado is just one of many examples of companies that have continued to embrace sustainability, energy efficiency and carbon reduction as smart business, that just happens to help the rest of society in reducing their tenants’ carbon emissions and helping to fight climate change.

A recording of the conversation is available here.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discussion your proposed project with you. Contact your Duane Morris attorney for more information. We will continue to track New York’s carbon reduction mandates and are available to advise you and your colleagues on compliance with Local Law 97 and other regulations as they are rolled out.

If you have any questions about this post, please contact David Amerikaner, Brad A. Molotsky, Christiane Schuman Campbell, Darrick Mix, Dominica Anderson, Nanette Heide or the attorney in the firm with whom you are regularly in contact.

ESG: Carbon Footprint Labels – Helpful or Green Washing?

Major Fortune 100 and 500 companies and others continue to focus on their ESG efforts in various forms and arenas, including the continued evolution of carbon emissions disclosures on various products.

As noted by Saabira Chaudhuri in her Wall Street Journal column, consumers, investors, Boards and regulators are becoming more and more interested in emission levels in the context of growing concerns over climate change and its impact. 

Unilever PLC – intends to introduce carbon footprint details on 70,000 of its products, given that sales of sustainable products are growing faster than their lines of non-sustainable products.  They are currently working on obtaining direct information about their carbon footprint for each ingredient supplier that provides products that are used in Unilever products.

Colgate- Palmolive – continues to work with their supply chain providers of various ingredients that are inputting into their products in an effort to avoid allowing estimates of amounts of impact in favor or real numbers.  Colgate continues to work on ways to measure and verify their footprint, and to require that their supply chain actually measure and verify these impacts.

Quorn/Monde Nissin Corp – began displaying carbon-dioxide/kilogram on-package carbon footprint details in 2020 for certain of their meatless products.

Oatly AB, Upfield Holdings BV and Just Salad brands have also started listing carbon emissions figures on both their packaging and menus.

Logitech International began listing carbon emissions figures on their computer keyboard products.

Having labelled and provided on line environmental impact numbers for its Garnier hair products already, L’Oréal SA announced it will be adding carbon labels for all of its “rinse off” products, including shampoos, in 2022.

To date, there is no market based, agreed upon, uniform way to report or measure these various GhG impacts but, each of the above mentioned companies, have attempted to outline their methodologies and have given their rationales on how they measure and report – an excellent first step.  As others either desire to join them or feel the pressure from consumers, their Board and/or stakeholders to measure and report as well, one can only hope that a quasi uniform methodology for monitoring, measuring and reporting is agreed upon and utilized so that consumers can measure apples to apples rather than apples to oranges or kilograms to pounds.

The Triple Bottom Line: While personally I am a big fan of labeling (whether this be nutrition or calories on a menu or ingredients in a chemical mixture to enable the consumer to review the information and make an informed decision), and, in my view, the growing use of “carbon labeling” represents a good step in the right direction to enable better, more informed consumer choices, I am just not so sure that everyone’s motivation and nomenclature is the same when using phrases like “net-zero”, “carbon emissions” and “greenhouse gas impact”.  As such, the reported results will not be comparable as between products, at least not yet.  Again, I am very much in favor of solid attempts by various organizations to self report their impacts, I just look forward to the day when everyone is measuring outcome in a similar fashion so that real comparisons by brand and product will be possible, rather than merely smart marketing by some with a lack of a verifiable real methodology for measuring and reporting.  As such, I will put “carbon labeling” in the “growing in interest” category, likely to become more and more real and relevant as time and measurement systems are put in place during 2021 and 2022 and, very likely that regulators like the EU, the SEC or trade associations like the SASB continue to push for more required and verifiable disclosure. As such, an area to continue to pay attention to and keep attuned to the market dynamics that continue to push for more and better information.

Duane Morris has an active ESG and Sustainability Team to help organizations and individuals plan, respond to, and execute on Sustainability and ESG planning and initiatives within their own space. We would be happy to discussion your proposed project with you. Contact your Duane Morris attorney for more information.

If you have any questions about this post, please contact Brad A. Molotsky (bamolotsky@duanemorris.com), Christiane Schuman Campbell, Darrick Mix, Dominica Anderson, Nanette Heide, David Amerikaner or the attorney in the firm with whom you are regularly in contact.