Where the Rubber Meets the Road

Climate policies are only as good as their enforcement

Over the past few months, as the WattCarbon team has been gearing up for the launch of the world’s first energy transition market, I’ve been on the road chatting with folks on the front lines of the building decarbonization movement. Despite the daily deluge of devastating climate news, they remain optimistic. The forty percent reduction in GHG emissions that we need to achieve by 2030 can be met just by decarbonizing buildings (granted, we’ll need to do more than decarbonize buildings to get to this early milestone, but the lever here is huge). Starting right now we can deploy new clean energy systems, electrify our heating, cooking, and transportation, and make sure that our buildings operate efficiently. And the technology is just getting better and cheaper.

One massive beacon of hope comes from New York City. A few years ago, the mayor signed into law one of the most ambitious building decarbonization efforts in history. Called Local Law 97 (or LL97), the city would require all buildings over 25,000 square feet to reduce their carbon emissions through electrification and clean energy purchases by as much as 80% by 2050. While the initial emissions limits are fairly permissive (I’ve been told that only around 20% of existing buildings are actually above the initial cap), the penalties of $268/ton are enough that for those buildings above the cap, it will generally be cheaper to decarbonize than it will be to pay the fine. This means billions of dollars are on the table for the clean energy economy in New York and likely billions more in public health benefits from removing fossil fuel furnaces and polluting power plants.

But the American political system is designed to protect special interests, and there is no question that the New York City real estate lobby would prefer to avoid retrofitting its buildings or paying fines. In some cases, and in particular given the collapse in the commercial real estate market since the pandemic, it might make sense for some owners to simply turn in their keys and hand over their properties. Smart investors like Galvanize Real Estate will likely snap these properties up, as they realize that decarbonizing buildings creates positive cash flows and adds to real estate values, but most of the political pressure in NYC right now is focused on weakening the enforcement of LL97.

Why do we care about LL97?

All other major cities are doing less than NYC right now to try to accelerate building decarbonization. Every non-catastrophic climate scenario assumes that all major cities will be doing more than NYC to decarbonize their buildings. If New York fails to enforce LL97, the world will have lost one of its best hopes for bending the emissions curve in time to avoid catastrophic warming. It’s the equivalent of the Chicago Bulls losing Michael Jordan in his prime.

On the ground, companies like BlocPower are hiring thousands of skilled workers to help make buildings safer, healthier, and more efficient. Their work will be amplified by orders of magnitude if LL97 is enforced. Hundreds of other companies will expand to supply needed materials, expertise, and support for massive building decarbonization efforts.

Even now, clean energy developers are lining up to connect solar panels and batteries to the grid so that the city’s buildings no longer have to rely on fossil fuels. Fleets of Teslas, Rivians, Bolts, and e-bikes are bringing relative quiet to the bustling corners of the five boroughs. Air pollution, temporarily abated during the pandemic, will continue to improve as the city rids itself of all of its fossil fuel infrastructure.

Where things might go wrong

As students of American politics know, passing a law is only a small part of the process. The real work comes in what is generally known as “rulemaking.” It’s where agencies figure out how to turn the words of the law into substantive policy. In the case of LL97, this responsibility falls to the Mayor’s office. And in the next couple of weeks, we’re likely to see the next set of draft rules emerge. These will be pivotal to the effectiveness of LL97 and to the future of climate policy. Strong enforcement of LL97 will mean that NYC continues to stake a claim to climate leadership. Weak enforcement or watered down requirements means not just that NYC is ceding its role, but that the likelihood of cities becoming laboratories of climate innovation is extremely diminished.

Right now there are two delaying strategies being pursued behind the scenes by the commercial real estate lobby. The first is simply to kick the can down the road. They would propose to allow non-compliant buildings to create “plans” in order to avoid paying fines. Never mind that they’ve had plenty of time to prepare for LL97 to take effect. The reason why LL97 matters is that it couples non-compliance with an enforcement mechanism that makes taking action cheaper than not taking action. If that’s taken off the table, the law might as well not exist.

The second delaying tactic is to offset onsite combustion (what we would call Scope 1 emissions) by purchasing renewable energy certificates (RECs). This is a familiar form of greenwashing and should be rejected out of hand. Scope 2 emissions (electricity purchased from the grid) are mitigated through RECs. Scope 1 emissions should only be mitigated by either directly reducing carbon emissions in a building or reducing carbon emissions in a building not subject to the law (such as a smaller than 25,000 sq ft building).

Don’t Stand on the Sidelines

As NYC officials prepare to release draft rules, they hear on a daily basis from real estate owners opposed to LL97. Aside from local climate activists, the other side is conspicuously absent. Despite hundreds of billions of dollars invested in “climate tech” in the past few years, much of which is counting on policies like LL97, the climate tech community doesn’t tend to engage at the grassroots level. We don’t do retail politics very well.

But in NYC, the stakes are high enough that we need to be heard. We need LL97 strengthened by rulemaking, not watered down. We need the beacon of climate hope that is New York to shine brighter than ever before. To that end, a few of us in the climate tech industry are putting together an open letter that we hope you will sign. We are asking the NYC Mayor’s office to come down on the side of the climate as it weighs its LL97 enforcement options. We understand that retrofitting NYCs tens of thousands of buildings will come at a cost, but the cost will be far less than abandoning our commitment to future generations to leave them a habitable planet.

I hope you’ll join us by signing on here: https://www.supportlocallaw97.org/