Purists vs. Pragmatists: The Battle Over Renewable Energy Credits

There'a a new flash point in the ongoing battle over how building owners can reduce their greenhouse gas emissions enough to comply with Local Law 97: renewable energy credits, or RECs.

Most large buildings must comply with emission caps set by the law beginning in 2024, with tightening limits in 2030 and 2050 — or face fines. Renewable energy credits can be purchased from local solar and wind projects to partially offset a building’s emissions, providing a pathway to compliance without costly retrofits.

Under draft rules issued last month, the only restriction the Department of Buildings (DOB) would place on the credits is to limit their use to emissions from electricity use. The stipulation means the credits could not be used to offset fossil fuels burned for heat and hot water.

Purists argue that RECs allow buildings to sidestep the letter of the law by buying compliance without actually reducing their carbon emissions; pragmatists argue that the credits are in keeping with the spirit of the law, and they'll be an invaluable compliance tool for buildings with modest means.

In a letter earlier this month, Crain's reports, 26 city council members called on the administration Mayor Eric Adams to develop rigid regulations on renewable energy credits. Multiple council members reiterated those concerns during a Nov. 14 public hearing. In a report released ahead of the hearing, Comptroller Brad Lander called on the DOB to limit the use of the energy credits to 30% of a building’s emissions overages. The move firmly aligns Lander with climate advocates who have been pushing for similar restrictions on RECs.

The Real Estate Board of New York counters that such a measure “substantially limits” a property owner’s ability to use the energy credits. “The effect of the proposed rule is to make compliance more difficult for building owners at a time when 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,” REBNY wrote in testimony submitted at the Nov. 14 hearing.

And there you have it: purists vs. pragmatists. This battle will rage at least until early next year, when the city is expected to release final rules on how co-op and condo boards and other building owners will be allowed to comply with Local Law 97. And then the clock begins ticking to the first round of carbon caps in 2024.