Real Estate Board of New York to the NYC Department of Buildings Regarding Proposed Rules on Greenhouse Gas Emissions Limits

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REBNY thanks the Department of Buildings for the opportunity to comment on proposed rules establishing procedures for reporting on and complying with annual greenhouse gas emissions for certain buildings.

The proposed rules are a necessary step to providing building owners with clarity about how to meet their obligations under Local Law 97 of 2019 and REBNY welcomes their publication. Many of these provisions add substantial clarity that has previously been lacking, such as carbon coefficients for the 2030-2034 compliance period and the creation of a metric to use to calculate time of use carbon emissions.

At the same time, the proposed rules include several changes from the underlying statute that make compliance more difficult without adequate explanation or justification. Specifically, the proposed rule significantly reduces the allowable emissions from the limits set in statute for the 2030-2034 compliance period, for instance by 18% for multifamily, 18% for financial office, 27% for hotels, and 41% for offices. For several space typologies, these newly proposed limits will be incredibly challenging to meet. At the same time, the proposed rule substantially limits an owner’s ability to use certain renewable energy credits – which are uncapped in the statute – to electricity emissions only while also failing to provide clarity on what offsets may be used in the 2024-2029 compliance period or what good faith efforts may qualify an owner for an adjustment. As such, the effect of the proposed rule is to make compliance more difficult for building owners at a time when the inflation is raising the costs of projects, interest rate hikes are making securing financing more challenging, and the city’s economy has yet to fully rebound from the COVID-19 pandemic.

With that context, REBNY offers the following specific comments on the proposed rule.

Space Categorization

The proposed rule requires building owners to categorize their gross floor area into one of sixty different space typologies. Each space typology is also assigned a specific emissions factor in each separate compliance period that building owners are required to use when calculating the emissions limit for the building. In the case that a building has multiple space types, the sum of each space type’s square footage and emissions factor is used to determine the building’s overall limit.

REBNY appreciates the Department’s significant efforts to create a more nuanced understand of space typology and uses beyond those listed in the statute. Further, aligning the space typologies with Energy Star will help promote consistency across the building stock and aligns with compliance obligations under other local laws.

The purpose of creating more granular space typology limits was to better allocate emissions across the building stock and provide flexibility to diverse types of economic activity that occurs in that space. This is necessary to ensure that, for example, a data center is not treated the same as a car dealership given the vastly different energy consumption and emissions profiles of the activity that occurs in those spaces.

While the proposed rule tries to reflect that realty, the proposed emissions factors in certain categories are too low and do not accomplish the intent of the statute. This is particularly true for data centers and financial offices as these use groups generally require significantly more energy to conduct their operations, which results in emissions from these spaces that will exceed the proposed caps. This is the case even in buildings where energy is used very efficiently. As such, the Department should reconsider the proposed emissions factors for each space typology to more closely align with typical energy uses of each typology, which would result in a more equitable result.

The proposed rule appears to recognize this reality as it would allow a building owner to utilize “a building emissions intensity limit for an occupancy group set forth in section 28-320.3.1 of the Administrative Code, provided such building emissions intensity limit is greater than the emissions factor assigned pursuant to subparagraph (i) for the ESPM property type.” However, the proposed rule would only allow an owner to utilize this alternative emissions factor in 2024 and 2025. It is unclear why this methodology could only be used for two years rather than the length of the first compliance period. The Department should better articulate the intent of this provision and, if designed to address some of the challenges posed by the newly set space typologies and limits, allow it to be used for the entire 2024-2029 compliance period.

Carbon Coefficients

REBNY commends the Department for carefully assessing the greenhouse gas (GHG) coefficients for the various energy sources used by buildings. The proposed rule provides clarity needed to facilitate capital planning and project execution. The proposed rule could provide greater clarity in several ways:

• For both utility provided electricity and district steam, the proposed rule establishes GHG coefficients in 2030-2034 that are below the 2024-2029 level. These reduced coefficients appropriately reflect the fact that significant efforts are underway to reduce the carbon intensity of electricity and district steam generation. For electricity, these efforts include significant investments in the form of State contracts to procure hydro, onshore wind, offshore wind, and solar generation along with the necessary transmission to deliver those renewable resources directly into New York City’s grid. For district steam, Con Edison is undertaking several decarbonization pilots and is expected to announce greater efforts in this space soon.

  • The impact of these significant changes means that the GHG coefficients for both electricity and district steam will be on a downward trajectory until they reach the levels required by the New York State’s Climate Leadership and Community Protection Act (CLCPA). This shift will not take place all at once, but rather will happen gradually over several years as projects are deployed. As such, the proposed rule should be explicitly clear that the Department will further lower the GHG coefficients for utility provided electricity and district steam, on an annual basis, if they drop below the levels established by the proposed rule. A failure to do so could result in building owners calculating higher emissions, which is inconsistent with the law.

  • Similarly, the Department should provide greater clarity on the GHG coefficients for the 2035 and later compliance periods. For utility provided electricity, the levels should reflect the CLCPA requirement that there be 100% zero emissions electricity in 2040.

• The proposed rule establishes a carbon coefficient for district steam for the 2030-2034 compliance period that is 4 percent below the 2024-2029 coefficient. This differs from Con Edison’s most recent estimates of the carbon intensity of steam generation in 2030 by overstating the projected emissions from district steam. The Department should revise the proposed rule to reflect Con Edison’s plans as Con Edison is better placed that the Department to assess the future carbon coefficient of the system it controls.

• The proposed rule allows a building owner utilizing a fuel source not explicitly listed in the proposed rule to propose a carbon coefficient for that fuel source the “serves the public interest.” Based on the owner’s submission the Department will then evaluate and either approve or modify the proposed carbon coefficient. The Department should clarify what it means to “serve the public interest” by describing the factors that an owner should evaluate when determining the carbon coefficient. Further, the Department should clarify the methodology by which one proposes and gains approval for use of alternative carbon coefficients.

• The proposed rule does not provide a methodology to calculate a carbon coefficient for thermal energy storage systems. These systems are used to help reduce emissions and shift load within a building but are not clearly defined in the proposed rule. The proposed rule should articulate a method for calculating the carbon coefficient for these systems.

• The proposed rule stipulates that energy consumption used to calculate building GHG emissions includes “fuels used for normal testing of emergency or stand-by power generators.” Building owners should not be held accountable for the emissions from testing and operation of these systems that are required by code until such a time as there is a zero-emissions energy source approved by the Department for use in these systems.

• The proposed rule provides owners with the ability to calculate their carbon emissions on a time of use basis and provides a complex formula that should be used should an owner choose to use time of use carbon emissions. REBNY appreciates the Department’s efforts to adopt a time of use carbon scheme and supports its inclusion in the proposed rule. At the same time, the proposed calculation is incredibly complex and makes utilizing this tool difficult for all but the most sophisticated owners. As such, the Department should either create such a tool that could be used by all owners or more clearly indicate the entities that it believes could be approved sources for such information.

  • In addition, the following clarifications are needed:

    • For the purposes of the time of use calculation, NYISO LBMP data is updated in 5-minute intervals. How should this data be appropriately rolled up into an hourly value for the purposes of these proposed rules?

    • The proposed rules indicate Hourly Marginal Fuel Spot Price (MSPn) should be used for the hourly implied heat rate calculation (Equation 103-14.4). Page 6 states MSPn should be determined utilizing spot prices published by the United States Energy Information Administration. EIA’s website only publishes marginal fuel spot prices on a daily, weekly, monthly, and annual cadence. Please advise on the source for the hourly MSPn from EIA.

    • Please clarify the equation for RAMn as it may be missing parentheses around HMn and HLFn. Please confirm the following revision is the correct interpretation of the equation: RAMn=n-8759n(HMn× HLFn)/ n-8759nHLFn.

Measuring Gross Floor Area

The proposed rule requires owners to calculate the size of their building based on gross floor area. For buildings with multiple occupancy types, the gross floor area is required to equal the sum of the floor area of each occupancy type. Of note, the proposed rule does not rely on New York City Department of Finance square footage.

To ensure owners accurately calculate gross floor area additional clarity is needed in several ways:

In some cases, there could be different space typologies on a single floor. For instance, a commercial floor could have a cafeteria located on the same floor as an office. In this instance, would the owner be allowed to calculate the square footage of the cafeteria (ESPM Property Type Food Service) separately from the square footage of the office (ESPM Property Type Office). If this is allowed, how would the Department intend to review such space categorization?

The sixty proposed ESPM Property Types do not clearly indicate how ancillary spaces like stairwells and corridors or mechanical spaces are to be categorized. The Department must clarify how these spaces should be treated to ensure that a building owner can accurately calculate gross floor area.

The proposed rules state that gross floor area includes interior parking. Energy Star Portfolio Manager (ESPM) requires owners to classify parking area into one of the three categories: Partially Enclosed, Completely Enclosed Parking Garages and Open Parking Lot. Our assumption is that completely enclosed area would be included in the gross floor area calculation and open parking area would not. How should design professionals treat Partially Enclosed parking area in the Gross Floor Area calculation?

The proposed rule requires new buildings that receive temporary certificates of occupancy after January 1, 2023, to report emissions for the first full calendar year following the year that the temporary certificate of occupancy is issued. In some cases, however, a building owner may not have received a temporary certificate of occupancy for the entire building within a year. As such, the proposed rule should clarify that reportable gross floor area only includes space that has a valid temporary certificate of occupancy.

Issues Not Addressed in the Proposed Rule

While the proposed rule is extensive, numerous issues that are necessary to provide owners with clarity about their obligations are missing and must be clarified as soon as possible given that the first compliance period begins in about thirteen months. Issues that require additional clarity include:

• Administrative Code §28-320.8 provides owners with the ability to seek an adjustment to the annual building emissions limit for 2024-2029 in certain circumstances and required the owner to apply for the adjustment by July 1, 2021. It is not clear how the proposed rule will impact owners who have applied for this adjustment. For instance, will owners be required to re-apply for the adjustment based on a revised calculation of the building’s emissions limit? Alternatively, have the adjustments to the space typologies and emissions factors resulted in any buildings becoming eligible for this adjustment that previously were not? The Department should explain how the impact of the proposed rule on these owners.

• The proposed rule indicates that “owner’s demonstration of good faith efforts or other mitigating factors will be considered when determining the penalty.” However, the proposed rule provides no guidance to owners on how to demonstrate a good faith effort or other mitigating factor. The Department should promptly clarify this process.

• The statute (Administrative Code §28-320.3.6.2authorizes owners to use greenhouse gas offsets for up to 10 percent of the annual building emissions limit for the 2024-2029 compliance period. The Department should articulate how owners can demonstrate compliance with this provision.

• The proposed rule would limit an owner’s ability to use renewable energy credits (REC) only to the “emissions attributed to consumption of utility supplied electricity.” However, additional guidance is necessary to clarify the statutory language that “the renewable energy resource that is the source of the renewable energy credits is considered by the New York independent system operator to be a capacity resource located in, or whose output directly sinks into, the zone J load zone for the reporting calendar year.” Specifically, the Department should clarify how an owner would demonstrate that the REC meets the provisions of the statute, particularly given that New York’s existing REC tracking system (NYGATS) does not indicate whether the generation directly sinks into New York City.

Other Comments

Finally, REBNY encourages the Department to carefully consider how the proposed rule could impact owner’s compliance with other energy-related local laws including annual benchmarking requirements (Local Law 84) and energy grades (Local Law 95). For instance, the ability for owners to use sixty different space typologies and account for each individual space no matter how large, may result in inconsistencies with benchmarking requirements and could result in owner’s losing the ability to receive an energy star grade. Going forward, the Department should work to streamline and align these obligations to promote clarity and consistency.