Carbon Trading + Clean Electric Grid = Good News for Co-ops and Condos

As co-op and condo boards begin to compute the costs of reducing their buildings’ carbon output enough to satisfy the Climate Mobilization Act (Local Law 97), they have received a major dose of good news. A sweeping new study suggests that the greening of the electricity grid – by powering it with renewable energy sources rather than fossil fuels – will allow most buildings to meet their carbon caps without expensive retrofits. The report has more good news about a backup option called carbon trading, which would allow buildings that fail to meet their carbon reduction goals to purchase credits from buildings that have exceeded their goals, thus avoiding fines.

The 171-page report, “Carbon Trading for New York City’s Building Sector,” was recently released by New York University’s Guarini Center on Environmental, Energy & Land Use Law. It presents the City Council with two options on carbon trading as well as a bright nugget of encouraging news for co-op and condo boards. 

The report states: “If the electricity grid is decarbonized by 2040, as outlined in the (state’s) Climate Leadership and Community Protection Act, grid decarbonization will drive most of all citywide emissions reductions necessary to comply with Local Law 97.”

Danielle Spiegel-Feld, executive director of the Guarini Center and a lead author of the report, tells Habitat: “The law should not be as expensive as people fear if carbon trading is allowed. Carbon trading offers viable flexibility to lower the cost of compliance without sacrificing environmental improvements. Most co-ops and condos will have to do something, and the numbers suggest they have the most to gain from carbon trading because they will have the highest compliance costs.”

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Spiegel-Feld points out that compliance costs will be higher for residential buildings than for commercial buildings because the former burn more fuel onsite to provide heat and domestic hot water. Even so, 88% of the total square footage of residential buildings covered by the law will not require retrofits to meet their carbon caps in 2024, provided they continue to consume energy at 2018 levels. That number decreases to 36% in 2030 and 28% in 2040. (These numbers are predicated on the successful greening of the electricity grid.)

There are more than 20 carbon trading programs in operation worldwide, though most regulate power plants and industrial facilities. Tokyo is the only major city that allows carbon trading between buildings. The Guarini Center’s report proposes that all trading take place between buildings within New York City.

“We are against using offsets from outside the city,” Spiegel-Feld says, such as allowing buildings in the five boroughs to buy credits from upstate solar farms. “That would drive investment out of the city. To export money out of the city is contrary to the city’s interests.”

Some critics claim that allowing building owners to meet carbon caps without actually reducing their carbon emissions is, in effect, meeting the letter of the law while dodging its spirit. Spiegel-Feld disagrees. “It’s very dogmatic to say you’re only complying with the law if emissions are eliminated on your property,” she says. “Buildings that buy carbon credits are not doing nothing. They’re paying someone else in the city who has exceeded their carbon goals. And the benefits stay in the city.”

The report has been submitted to the Mayor’s Office of Climate and Sustainability. Incoming members of the City Council have voiced strong support for the Climate Mobilization Act. Though the direction of the incoming administration of Mayor-elect Eric Adams is not yet known, it appears that co-op and condo boards might soon have the option of carbon trading as an added tool to reduce their building emissions.

One thing is certain. “If the grid is decarbonized, this law is not going to be that expensive for the city overall,” Spiegel-Feld says, “and carbon trading could be a way of lowering the costs.”