by Richard Hayes, Executive Director of Revenue, GSH Group
Very quietly, in April of 2019, NYC passed the most sweeping global legislation aimed at reducing carbon emissions from the City’s “large” buildings; greater than 25k sq. ft. The regulation sets increasingly stringent standards on a building’s carbon footprint in 2024 then again in 2030. Of course, a new regulatory agency was created within the Department of Buildings for the enforcement of these new regulations; Office of Building Energy and Emissions Performance (OBEEP). Buildings are currently responsible for two-thirds of the City’s annual carbon emissions. The intent of this sweeping legislation is to reduce the City’s carbon emissions by 40% in 2030 based on the 2005 baseline. With a significant number of buildings in jeopardy of meeting these aggressive standards, comprehensive capital investments will need to be made to reduce emissions to acceptable levels or expensive offsets and/or renewable energy will have to be considered. With the City still reeling from the financial effects of the COVID pandemic, property owners have been more than distracted from addressing this looming deadline. The question looms, are there revisions that can be made to this legislation that will both reduce carbon emissions while renewing the City’s economic engine in a post COVID environment?
As good citizens, property owners in NYC have a history of being proponents of Environmental and Social Governance (ESG) programs that make positive contributions to the communities where they own. Many owners voluntarily elect to add “greenspaces” to provide their occupants and the surrounding community enjoyment. These open public spaces have a positive effect on both the community and the environment. Similarly, ownership often contributes and volunteers towards causes that serve the local community and make positive contributions that impact the health, vibrance and welfare of the neighborhood.
Corporate owners of NY City’s real estate often have goals and objectives that directly contribute and positively impact the community. Corporate Social Responsibility initiatives such as employee volunteer days, educational outreach events and charitable donations are tracked and measured for benchmarking and shareholder reporting. Their common space is often used pro bono by the community to promote outreach programs that benefit and enrich the community. If located in one of the City’s Business Improvement Districts (BIDs) they may even contribute to the health, welfare, and cleanliness of the surrounding area. Compounding the positive effect on the community, the tenants that occupy these buildings act as multipliers in fostering good will and positively impacting the neighborhoods where they operate. In addition, occupants of these buildings act as the catalyst to support the local businesses that dot the landscape. Small business, restauranteurs, barbershops and salons, dry cleaners, etc., all rely on the occupants of these large buildings to sustain their community economic ecosystems.
Clearly, the benefit to the community of having “large buildings” is evident in NYC. But how can these building owners who cannot meet these new stringent emission guidelines avoid the harsh penalties that await them in 2025? Local Law 97 states that the OBEEP will be “Reviewing applications for alternative methods of compliance with building emissions limits, including adjustments of emissions limits, deductions for the purchase of greenhouse gas offsets or renewable energy credits, deductions for the use of distributed energy resources, and adjustments for special categories of buildings or for special use and occupancies.” Perhaps, in addition to demonstrable and actionable evidence that ownership is on a path to reduce carbon emissions, building owners capture their contribution to the local community for review of the OBEEP. The aggregate of volunteer hours, greenspace investment, charitable contributions and community outreach programs can be “quantified” as an “offset” to carbon emissions. The economic impact of the recent pandemic will likely linger in our City for the next decade. Progressive leadership should be urged to adjust and adapt regulatory restrictions to foster economic growth and recovery. Although the merits of Local Law 97 are noble, it is my belief that accommodations should be made to help promote, accelerate and foster the revival of NY City’s economic engine; supporting the communities and small businesses in the communities where they reside.