Failure to Comply with New NYC Building Emission Standard Could Lead to Hefty Fines

What Buildings Are Impacted?

The Emission Ceiling Provisions apply to existing and newly constructed buildings that meet the following criteria (the "Covered Buildings"):

1. single buildings larger than 25,000 gsf;
2. multiple buildings on a single tax lot that, in the aggregate, exceed 50,000 gsf; and
3. multiple buildings held in condominium ownership that are governed by the same board of managers and exceed 50,000 gsf.

Generally excluded from the Emission Ceiling Provisions are dwellings of three stories or less for which no HVAC system serving more than two dwelling units, rent regulated buildings, city-owned buildings,¹ industrial facilities primarily used for the generation of electric or steam power, property owned by a housing development fund company organized under the Business Corporation Law and the Private Housing Finance Law, and houses of worship owned by a religious institution.

What Are the Emission Ceiling Provisions?

The Emission Ceiling Provisions provide the maximum building emissions, expressed in metric tons of carbon dioxide equivalent per square foot, permitted for each Office of Buildings ("DOB") occupancy group. If a Covered Building contains multiple occupancy groups, the total emission limit is calculated as the sum of each applicable occupancy group's emission limits (based on square footage in the building). The 2024 through 2029 limits are set forth in Table 1.

To calculate the total tons of carbon dioxide generated, a coefficient of energy consumption is applied to each type of greenhouse gas generated by a building. The coefficient is multiplied by the Covered Building's utilization of that energy source. For a covered building to comply, the sum of greenhouse gas emissions must be under the annual building emission limit for that occupancy class. The 2024 through 2029 coefficients are set forth in Table 2.

The formula for building emissions and corresponding greenhouse gas coefficients changes every five years, beginning in 2030. While formulas for 2030 through 2034 have been established, the formulas for 2035 through 2050 have yet to be published and will be promulgated by the Office in conjunction with the Mayor's Office of Sustainability.

What Are the Reporting Requirements and Penalties for Failure to Comply?

The owner of a Covered Building must file a report with the Office by May 1, 2025 and every year thereafter, certifying compliance with the Emission Ceiling Provisions or, if not in compliance, indicating the amount by which the Covered Building exceeds the limits.

Failure to file an emissions report subjects Covered Building owners to a maximum penalty amount equal to the total gross square footage of the building multiplied by $0.50 times the number of months late in filing ((building gsf * $0.50) * # months late).

If the owner of a Covered Building files a report and indicates that the building emissions are over the permitted limits, the penalty is calculated as the difference in permitted versus actual emissions multiplied by $268 ((actual emissions less permitted emissions) * $268). For example, if a 25,000 gsf business, subject to maximum building emissions of 211.5 tCO₂e (.00846 tCO₂e/sf * 25,000 gsf), had actual emissions of 250 tCO₂e, the penalty would be $10,318 ((250 tCO₂e – 211.5 tCO₂e) * $268).

An administrative law judge may reduce the penalty upon the owner's good faith effort to comply with the requirements, showing the non-compliance was related to unexpected and unforeseeable events, access to financial resources, and whether payment of a penalty would impact operations of facilities critical to human life or safety.

Potential Relief: Deductions from Building Emissions

A Covered Building's total yearly emissions may receive a deduction if the Covered Building owner demonstrates purchase of either (i) renewable energy credits (the "Credits"), (ii) greenhouse gas offsets (the "Offsets"), or (iii) the use of clean distributed energy resources (the "Clean Energy").²

• Credits: A deduction from building emission limits shall be granted for the purchase of Credits equal to the number of Credits purchased on or behalf of a building owner, provided that (i) the source of the Credits is considered by the New York independent system operator to be a capacity resource deliverable in the Zone J load zone, (ii) the Credits are solely owned and retired on behalf of the Covered Building owner, (iii) the Credits are from the same year as the Covered Building reporting year, and (iv) the Covered Building does not also receive a deduction for Clean Energy.
• Offsets: A deduction from building emission limits shall be granted for the purchase of Offsets, where Offsets equivalent to the size of the deduction and generated within the reporting year have been (i) purchased on behalf of the Covered Building owner in accordance with the standards promulgated by the Office, (ii) publicly registered, or (iii) retired or designated to the Office for retirement. The Offset deduction is available only for 2024-2029, and additional rules will be promulgated by the Office. Until promulgation of such rules, the Office will grant Offset deductions in consultation with the Advisory Board on Environmental Justice.
• Clean Energy: A deduction from annual building emissions shall be authorized based upon the calculated output of a Clean Energy resource located at, on, in, or directly connected to the Covered Building. These Clean Energy deductions are available only from 2024 to 2029, and the rules for compliance have yet to be promulgated by the Office.

Potential Relief: Adjustments to Building Emission Ceiling for Existing Buildings

Four types of adjustments may be granted for existing Covered Buildings: (i) an adjustment in effect for not more than 3 calendar years (a "Three Calendar Year Adjustment"), (ii) an adjustment in effect for one (1) calendar year (a "One Calendar Year Adjustment"), (iii) an adjustment for calendar years 2024-2029 (a "2024-2029 Adjustment"), and (iv) an adjustment for Not-for-Profit Hospitals and Healthcare Facilities (the "Hospital Adjustment").

Three Calendar Year Adjustment: A Covered Building owner may (not shall) receive an Emissions Ceiling Regulation adjustment for a period of not more than three years if the Covered Building existed or obtained building permits as of the effective date of the Emission Ceiling Provisions, the owner is complying to the maximum extent possible, and the owner can show the following:

• Capital improvements aren't possible, because of a (i) constraint posed by another provision of law (such as a landmark designation), (ii) lack of energy infrastructure or space constraints within the Covered Building, or (iii) lack of access to a space within a Covered Building due to a lease in existence as of the effective date;
• The owner has made good faith efforts to purchase Offsets but a sufficient quantity isn't available at a reasonable cost; and
• The owner has availed itself of city, state, federal, private, and utility incentive programs.

The Office, in conjunction with the Mayor's Office of Sustainability, may grant the Three Calendar Year Adjustment.

One Calendar Year Adjustment: Alternatively, a Covered Building owner may (not shall) receive an Emissions Ceiling Regulation adjustment for a period of not more than one year if the Covered Building existed or obtained building permits as of the effective date of the Emission Ceiling Provisions and can show the following:

• The cost of financing capital improvements would prevent the owner from earning a reasonable financial return or the Covered Building is subject to a financial hardship (defined as any of the following: (i) for the two years prior to the application for an adjustment, the Covered Building is included on the New York City tax lien sale list, or (ii) is exempt from real property taxes pursuant to 420-a or b (nonprofit organization exemption), 466 (volunteer firefighter exemption), or 462 (parsonage exemption) of the real property tax law, and (iii) and has negative revenue less expenses as certified by a CPA or affidavit under penalty of perjury);
• The Covered Building owner is not eligible for any program that provides financing for energy reduction or sustainability measures;
• The Covered Building owner has made a good faith effort to purchase Offsets or Credits, but a sufficient quantity is not available at a reasonable cost; and
• The owner has availed itself of all available city, state, federal, private, and utility incentives.

The Office, in conjunction with the Mayor's Office of Sustainability, may grant the One Calendar Year Adjustment.

2024-2029 Adjustment: A Covered Building owner may (not shall) receive an Emissions Ceiling Regulation adjustment for 2024-2019 if an existing Covered Building (A) had 2018 building emissions that exceed the 2024 building emissions limit by more than 40 percent and (B) has not amended the Covered Building's Certificate of Occupancy since December 31, 2018. If threshold matters (A) and (B) and the below criteria are met, the adjustment results in an emission limit that is 70 percent of the calendar year 2018 building emission. For example, if the 2024 Emission Ceiling is 100 tCO₂e/sf and the Covered Building currently operates at 150 tCO₂e/sf, the Covered Building's 2024-2029 Emission Ceiling would be 105 tCO₂e/sf rather than 100 tCO₂e/sf, calculated as (150 tCO₂e/sf *.70 = 105 tCO₂e/sf).³

The Office (without consultation with any other agency) may grant a 2024-2029 Adjustment if, in addition to the threshold matters (A) and (B) above, the Covered Building owner can show the following:

• The building emissions are attributable to special circumstances, such as 24-hour operations, operations critical to human health and safety, high-density occupancy, energy-intensive communications technologies or operations, or an energy-intensive industrial process;
• The Covered Building is in compliance with the NYC energy conservation code in effect on January 1, 2015, and
• The Covered Building submits a plan to the Office setting forth a schedule of alterations sufficient to ensure compliance from 2030 to 2034.

The 2024-2029 Adjustment may be extended through 2035 if the Covered Building owner can show a hardship under the One Year or Three Year Adjustment criteria. An application for the 2024-2029 Adjustment must be made before July 1, 2021.

The Hospital Adjustment: Certain healthcare facilities are eligible for a non-discretionary adjustment for calendar years 2024-2029 and 2030-2034 if the Covered Building is classified as a not-for-profit hospital, not-for-profit health center, or not-for-profit HIP center⁴ and existed as of the effective date of the Emission Ceiling Provisions. If the Hospital Adjustment is granted, the emission limits for 2024 through 2020 are 85% of the building's 2018 emissions, and for 2030 through 2034, 70% of the 2018 emissions. An application for the Hospital Adjustment must be made before July 1, 2021.

Under any of the Adjustments, a Covered Building must ultimately comply with the Building Emissions Regulation but is granted additional latitude in the timing or extent of compliance. The Emission Ceiling Provisions will evolve as additional rules are promulgated by the Office.

Table 1: Annual Building Emission Limits, 2024-2029

Table 2: Greenhouse Gas Coefficients, 2024-2029

1. City buildings are subject to separate standards.
2. A distributed energy resource is a resource comprising one or multiple units capable of generating or storing electricity at a single location that is directly or indirectly connected to an electric utility distribution system. It may serve the location, and may simultaneously or alternatively transmit all or part of the electricity it generates to the electric distribution system for sale or use by other locations.
3. tCO₂e, metric tons of carbon dioxide.
4. The Office has not specified if these are based on New York State Department of Health classifications, zoning use groups, or Department of Buildings occupancy groups.