What’s Your Carbon Budget and Why You Should Care

For the first time in the history of co-op and condo operations in New York, the city is establishing budgets that you will have to comply with. Carbon budgets, that is.

Since this isn’t something that has been previously tracked, the numbers, methodology and compliance deadlines that have to be understood in order to comply are important. Chis Halfnight, Associate Director of Policy at Urban Green Council sat down with Habitat to provide an overview.

Habitat: In order to reduce greenhouse gas emissions, which is what Local Law 97 aims to do, the city has established carbon budgets and tools to measure how much carbon each building emits. Can you help us understand what these are and how they work?

Halfnight: Sure. First, I'll note that buildings account for nearly 70% of New York City's carbon emissions. So they are an enormous part of our climate solution. Local Law 97, which is where these carbon caps come from, is a new law to address those emissions. It's intended to increase the efficiency and improve the carbon footprint of about 50,000 of the city's large buildings. The law sets annual limits, or caps, on the carbon emissions that are allowed for buildings over 25,000 square feet. These caps start in 2024 and apply to all the energy used in a building over the course of a year. If a building is over the carbon limit for the year, it will need to take some kind of action to comply.

Habitat: Is the carbon limit the same as the carbon budget?

Halfnight: Yes. The carbon budget, which most buildings over 25,000 square feet will have, is derived from a formula that multiplies square footage by a defined intensity metric that is specific to a building’s use or occupancy type. For the first compliance period, which starts in 2024, the carbon intensity metric for residential buildings is 6.75 kilograms of carbon dioxide per square foot. So for a residential building that is 100,000 square feet you would multiply the square footage by its intensity limit of 6.75 kilograms. This results in an annual carbon budget of 675,000 kilograms of carbon dioxide.

Habitat: But buildings use energy, not carbon.

Halfnight: Right, buildings don't use carbon directly, they use energy. To get to the annual carbon emissions of a particular building you need to do a second calculation, which is to multiply each type of energy used by what's called a carbon coefficient, or a carbon multiplier. There's a carbon coefficient for natural gas, for utility electricity, for fuel oil, etc., and these are set in the law.

Habitat: So there are two calculations needed?

Halfnight: Yes. The first is to calculate your building's carbon budget (residential building square footage times 6.75), and the second is to calculate how much carbon your building is actually emitting over the course of that year. For the second calculation, you have to take each type of energy your building uses, multiply it by the prescribed carbon coefficient for that energy type, and then add up the total to get your building’s annual carbon emissions. You would then compare this sum to your building’s annual carbon budget.

Habitat: Let’s say I heat my building with natural gas. Can you walk me through the second calculation?

Halfnight: Sure. You gather all your building’s gas bills, add up the BTU’s (British Thermal Units) used, and then multiply that number by the carbon coefficient for natural gas. The result is the amount of carbon associated with the amount of energy used.

Habitat: Is the data used in these two formulas the same data buildings over 50,000 square feet have been using in annual benchmarking reports?

Halfnight: Yes, the inputs are the same: energy use and square footage. Co-ops and condos over 50,000 square feet have been filing benchmarking reports through Portfolio Manager for a number of years now (those between 25,000 and 50,000 square feet started recently). That’s the same basic data required by Local Law 97, and a good place to start to assess where your building stands today.

To reiterate, the initial carbon caps start in 2024 (for the energy used in the year 2024) and these caps stay constant through 2029. They get significantly more stringent from 2030 through 2034 and then more so in future compliance periods. The first report is due by May 1st 2025, which reports on the energy used in 2024.

Habitat: Given these deadlines, what should a board be doing now?

Halfnight: First, get a general sense of where your building sits today. You can look at the benchmarking data in Portfolio Manager (http://bit.ly/PortManager), and several online tools that are based on this data. Urban Green has created Metered New York (https://metered.urbangreencouncil.org/), and the city, in conjunction with NYU, has created the NYC Energy & Water Performance Map (https://energy.cusp.nyu.edu/#/). Both of those tools allow you to look up a property, search by address or map location, and see a building’s energy use and greenhouse gas intensity as reported in that building’s benchmarking data. You can compare this to the 2024 target to get a snapshot of where your building stands today.

There are some caveats, though. If a building is mixed use, has rent-regulated units, uses Con Edison steam, or the square footage isn’t accurate, then you’ll need to consult with a professional to work through some additional details.

Habitat: What are the fines for non-compliance?

Halfnight: The law sets a maximum fine of $268 per ton of greenhouse gas emissions over your carbon budget cap. This is an annual fine, so you would have to pay it each year that you go over budget.

Habitat: Can you walk me through a scenario where a building would be fined?

Halfnight: Sure. So, take our 100,000 square foot residential building with a total annual carbon budget of 675,000 kg of carbon dioxide. If that building emits 700,000 kg of carbon in one year, it’s 25,000 kg over budget. One metric ton is equal to 1,000 kilograms, so the building’s penalty would be a maximum of $268 multiplied by 25 tons (25,000 kg), for a total of $6,700.

Habitat: How does the energy-efficiency letter grade that each building will have to post this fall relate to Local Law 97?

Halfnight: That’s a good question. They are two different policies. One is focused on energy, the other is focused on carbon. They're complimentary to the extent that improving your energy efficiency will also reduce your carbon emissions. The letter grade assesses how efficient your building is compared to similar buildings. It's really about bringing energy efficiency out of the boiler room and into the public eye, just like restaurant grades did for food safety.

Habitat: With all the compliance items a board has to deal with now, can’t it put off dealing with Local Law 97 for a few years?

Halfnight: It would be better to start now. We're seeing increasing policy development at the city and state levels to drive down carbon emissions in buildings, and we expect more to come. So the earlier a building can get started on energy efficiency, the better. Buildings between 25,000 and 50,000 square feet haven't been required to do energy audits, so for this group getting one now is a great place to start to get information about how your building uses energy and what measures might be taken to help reduce that energy and realize efficiencies.

Habitat: Can you offer some organizational or operational suggestions to implement?

Halfnight: Sure. For starters, form a green team. There's so much business to be taken care of in a building that the environmental focus can fall through the cracks. Having a dedicated team that's focused on green issues can really help move things forward. As for building operations, staff training can be critical. People tend to think of large equipment replacements when they think of energy efficiency, but there's actually a lot of low-hanging fruit that can be realized by improving operations. Lastly, contact the city's Retrofit Accelerator (https://retrofitaccelerator.cityofnewyork.us/). That is a one-stop shop to help building owners address energy efficiency, to find support, including utility incentives, to understand who to retain to do an audit, and to start the process of capital planning associated with meeting carbon budgets over time.

Habitat: How are buildings going to pay for what is required to lower their emissions?

Halfnight: There are lots of resources out there to help buildings with this now, and of course the great thing about energy efficiency is that it pays for itself over time. So in many ways this is about finding upfront money and sufficiently low interest rates to carry those costs until they pay back. Local Law 97 requires the Department of Buildings to establish a program to help owners comply with their carbon budget, and also to expand existing programs. The city's Retrofit Accelerator is relaunching with a much larger budget. The Public Service Commission recently approved a significant increase in energy-efficiency support through utility programs, and the city launched the PACE program, which provides low-interest loans with small or sometimes no upfront costs to the building owner. There's a lot of support to help finance improvements now, and we anticipate the law to drive new sources of city and state support.