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.