The Real Estate Board of New York to The Committees on Environmental Protection and Housing and Buildings on the Oversight on Local Law 97 of 2019

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REBNY thanks the Committees for the opportunity to testify as part of the oversight of Local Law 97 of 2019 (LL97).

REBNY supports LL97’s goal of decarbonizing the built environment and is eager to continue serving as the City’s partner in achieving our shared climate goal – a carbon-free NYC on the timetable adopted in the law. Since New York City’s buildings collectively account for the majority of the city’s carbon emissions, the built environment needs to make meaningful carbon reductions if we are to achieve a more sustainable and equitable city.

If we are to achieve these goals, the regulatory structure must adequately recognize that New York is comprised of 1.1 million buildings of varying construction, size, use, and occupancy, each with varying energy composition and economic realities. To effectively reduce emissions from buildings, policymakers will need to account for the unique circumstances of each property and ensure that buildings have viable tools to support their decarbonization in a timely manner.

By design, LL97 is a framework meant to be built out through a collaborative process, which is an opportunity for the City Council and Adams Administration to enact practicable solutions ensure our carbon reduction targets are met. Those solutions should include the following components:

An appropriate metric that better accounts for buildings’ different realities

Unless changed by regulation, LL97 measures buildings based on a raw carbon per square foot for the 2024 compliance period and later years. It is a metric based on generalized occupancy type. It ascribes the same carbon coefficient to all buildings in the same broad typology, irrespective of the particular use of the building spaces. In consequence, two commercial buildings, for example, could have similarly efficient systems but can perform wildly different against their LL97 goals because one building is occupied by tenants who are using the building 18 hours per day while another is in use only 8 hours a day.

An improved metric would ensure more owners are actually making enhancements to their properties rather than relying on low tenants and safeguard against fines for owners who are trying to achieve decarbonization through energy efficiency.

To that end, we encourage the City to move toward a metric that addresses the varying energy needs of different occupancies and establish the appropriately tailored requirements for each building. Doing so would require that the metric account for and normalizes factors including density, hours of operations, and the specific type of use of the building. Further, the metric should appropriately balance the need to incentivize onsite energy reductions and the use of lower carbon energy inputs and building electrification.

Provide financial support to buildings to secure emissions reductions

The improvements that building owners will need to make to properties to come into compliance with LL97’s carbon caps can come with a significant price tag. Unfortunately, the cost of substantial efficiency improvements or building electrification is out of reach for many owners, particularly residential buildings including middle income cooperatives and condominiums.

For this reason, the City will need to develop a suite of programs to support capital improvements to existing buildings, particularly residential. The work required to decarbonize these buildings is substantial and will impose substantial costs on residents whether they are renters, owners, or shareholders. A wide range of programs – beyond what is offered by existing programs – will be needed to help these buildings make such investments.

Support emissions reduction from electricity and district steam generation

Achieving the goals of LL97 requires the aggressive decarbonization of electricity used in the five boroughs. With this goal in mind, the City of New York has been a strong supporter of New York State efforts to bring more renewable power directly into the city from upstate renewables, Canadian hydropower, and offshore wind. Continued City support for these investments, and more, will be critical to securing building emissions reductions.

At the same time, the City should continue to incentivize building owners to invest in these programs by allowing the use of local renewable energy credits (RECs) for LL97 compliance. Ensuring that buildings get credit for purchasing and retiring these RECs will enable owners to manage their emissions exposure that stems from electricity generation they do not control and will enable the investment needed to ensure these projects operate at lowest cost to all ratepayers.

In addition, the City should prioritize support for the decarbonization of district steam, an issue which has largely been missing in the public conversation. District steam is an important source of energy in many commercial and City buildings in New York City but is currently generated from fossil fuels. While New York State has established clear directives to decarbonize electricity generation and begun implementing policies to do so, no verifiable plan exists to reduce emissions from the district steam system. Greater attention to the role of district steam and strategies to decarbonize this system is needed as a decarbonized district steam system may be able to play an important role in helping convert existing buildings to less carbon intensive energy sources (including on-site combustion) over time.

Drive investment in buildings, not penalties

Penalties resulting from LL97 are currently scheduled to be paid to the City’s general fund with no obligation for the funds to be used to support building decarbonization. This is a missed opportunity to drive further investment into buildings and should be corrected.

Several proposals have been put forward to do so, including earmarking those penalty funds for specific purposes or allowing owners to make alternative compliance payments that would be used to improve the performance of buildings with below market rate units. These options should be carefully explored to determine how best to ensure that the law results in emission reductions not penalties.

Thank you for the consideration of these points.