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New York’s Local Law 97 Establishes Strict Limits for Carbon Emissions

In 2019, the New York City Council passed the Climate Mobilization Act (CMA) to reduce greenhouse gas emissions and improve the efficiency of commercial and residential buildings in New York. Of the 11 pieces of legislation included in the CMA, the centerpiece is Local Law 97, which details strict limits for carbon emissions among buildings greater than 25,000 square feet.

New York’s massive portfolio of commercial and residential real estate accounts for nearly 70% of the city’s emissions. This measure was enacted to target such buildings and help meet the city’s goal of reducing overall carbon emissions by 40% by 2030 and by 80% by 2050.

It’s estimated that Local Law 97 will affect approximately 50,000 buildings. Included in this are buildings greater than 25,000 square feet as well as tax lots with multiple buildings and a combined size of more than 50,000 square feet. The law does not include city-owned buildings, houses of worship, rent-regulated housing (even those with just one or two rent-regulated units) and properties owned by the New York City Housing Authority.

Beginning in 2024, and then annually through 2029, the affected buildings must meet reduced carbon emission standards and additional energy conservation requirements or face significant fines. For every metric ton of carbon over the limit, a fine of $268 (per metric ton per square foot) will be implemented on an annual basis.

Additional violations of Local Law 97 include failure to report carbon emissions, which can cause the city to levy fines of $.50 per square foot per month, and filing a false report, which can cause a one-time fine of $500,000. CANY, a New York-based architecture and engineering firm, estimates that the average building violation could reach $162,772 by 2024. The total value of fines faced by the affected buildings will reach approximately $330.4 million by 2024, and $695.6 million by 2030.

Although the compliance timeline is aggressive, it was designed to give building owners sufficient time to assess, plan and integrate projects into their capital planning and align with normal replacement or refinancing cycles. Nonetheless, the biggest concern for many property managers and owners is adapting their real estate holdings in time and how much this will ultimately cost. Since the first deadline is 2024, building owners need to take immediate action to identify the renovations and upgrades needed.

Owners of non-compliant buildings must begin planning now to resolve the issue, which could entail new HVAC equipment, new roofs, windows and, in some cases, a new façade. This process can be both time-consuming and expensive.

CANY has proposed an approach that combines compliance with Local Law 11 (Façade Inspection Safety Program, or FISP) and Local Law 97 to control costs and manage remediation in the most efficient manner.

The company is currently performing energy compliance assessments for numerous properties and has developed strategies specifically to navigate the significant challenges of the new regulations over the short and long term.

By using the upcoming FISP inspection cycle to their advantage, building owners can control costs and avoid duplicative building improvements required by Local Law 11 and Local Law 97. FISP inspections are a powerful opportunity to plan for compliance with Local Law 97.

There are additional avenues that building owners can take to meet Local Law 97’s carbon reduction requirements. These include carbon offsets, renewable energy credits, carbon trading, a hardship waiver and an emissions limit adjustment. As much as 10% of a building’s annual emissions limit can be deducted with the purchase of carbon offsets from 2024 to 2029. This carbon offset is a credit for greenhouse gas reductions achieved by one entity that can be purchased and used to offset the emissions of another entity.

New York City landlords can also buy unlimited renewable energy credits (RECs). According to the U.S. Environmental Protection Agency, RECs are a market-based instrument that represents the property rights to the environmental, social and other non-power attributes of renewable electricity generation. RECs are issued when one megawatt-hour of electricity is generated and delivered to the electricity grid from a renewable energy resource.

Carbon trading allows building owners to balance their emissions with credits purchased from other landlords that have properties with emissions that fall under the emissions threshold.

In addition, property owners with buildings facing financial issues due to the application of tax liens or property tax exemptions can apply for a hardship waiver to be exempted from Local Law 97 for a limited time. Also, landlords with building facing emissions reductions of more than 40% of its total emissions may be able to obtain an emissions limit reduction equivalent to 70% of the building’s emissions limits in the previous calendar year.

Many of the specific guidelines set by Local Law 97 are still being worked out. Although the measure includes specific guidelines from 2024 to 2029, later standards may be adjusted, and emissions limits are subject to change and lack specific guidelines for 2035 onwards. Property owners will need to remain focused on this issue as it evolves, but Local Law 11 is an ideal place to start planning for Local Law 97.

Founded in 1996, CANY is an architecture and engineering consulting firm specializing in building enclosures for new and existing properties in greater New York and nationally. CANY conducts more than 150 FISP investigations each year.

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