Dive brief:
- State and local governments are turning to building performance standards, or BPS, as a key measure to reduce emissions and meet climate goals. according to a JLL report premiered last week.
- Thirteen US cities have BPS in place, representing about 25% of all US buildings by early 2024, and more than 30 additional US cities have committed to adopting BPS by 2026 or earlier, according to the report. While default rates are relatively lower in the first round of caps for New York City and Boston, those costs “are rising rapidly [for] the second round and will increase steadily thereafter,” the report said.
- By 2026, at least 40 U.S. cities will have BPS in place, and many set net zero goals by 2050 or earlier, the report says. Landlords should act proactively to understand, manage and improve the energy and emissions performance of their buildings through data collection and measurement and compliance documentation to avoid future fines or challenges to complying with these requirements, he said a JLL spokesman said in an email.
Diving knowledge:
American cities have historically favored prescriptive building codes that require explicit actions around energy efficiency in design and construction, such as LED lighting systems, but these mandates have not sufficiently improved the energy performance, the report says.
The Biden administration launched BPS National Coalition in January 2022 to make it easier for cities to move from prescriptive codes to performance-based codes that directly require reductions in emissions and energy use, giving homeowners leeway to decide how they can meet those goals.
The National BPS Coalition comprises a national group of state and local governments committed to inclusively designing and implementing performance policies and programs in their jurisdictions. The coalition aims to align emissions, electrification and equity goals with modernization requirements by identifying and acting on BPS prerequisites, with a target of BPS adoption by Earth Day 2024 for the first cohort and 2026 for the second, according to a website of the Institute for Market Transformation program.
Municipalities that have approved BPS so far include Seattle; Chula Vista, California; Denver; St. Louis, Missouri; Montgomery County, Maryland; Washington, DC, New York; Cambridge, Massachusetts; and Boston, according to the JLL report.
Meanwhile, many of the 30 cities that have pledged to pass BPS by 2026 or earlier are still defining what their parameters are, so questions arise about how those standards will be enforced, Jaime Del said. Álamo, head of ESG & Risk Americas at JLL and one of the authors of the report.
While New York Local Law 97 entered its first compliance period in January, Boston’s Building Emissions Reduction and Disclosure Ordinance, or BERDO, will go into effect in 2025. Seattle’s Building Emissions Performance Standard, or BEPS, was adopted in last December and will enter into force in 2031, says JLL, noting that the approach of these rules. and related penalties vary greatly between the three cities.
Buildings that do not meet New York’s LL97 emission limits, for example, will was fined $268 per tonne of carbon dioxide equivalent emissions that exceed the specified limit in a given year.
Under Boston’s BERDO, buildings larger than 35,000 square feet that fail to meet emissions standards will face a penalty of $1,000 per day starting in 2025, and smaller buildings between 20,000 square feet and less than 35,000 square feet will have to pay $300 per day for non-compliance. in 2030.
Under Seattle’s BEPS, non-residential buildings that fail to meet annual building emissions targets will face a penalty of $10 per square foot.
In these three leading BPS municipalities, the total fines faced by buildings will increase by an average of 82% between their respective first and second cap shifts, taking into account current emissions performance estimates, JLL says.
Under New York’s LL97, the penalty structure is based on the amount by which a building’s carbon dioxide equivalent exceeds the established annual limit, Del Poplar said. “Then you’re seeing other cities where they’re actually putting a fine per square foot. And then you’re seeing other cities where [there’s] a kind of binary fine,” he noted. “In my opinion, New York seems to achieve this theoretical goal the most, because at the end of the day, square footage is important, but so is the use of the building.”
While conducting a cost-benefit analysis to retrofit a building, owners must consider a “broader ecosystem of factors,” as relying solely on penalty avoidance to justify capital expenditure is not always viable, says the report. These additional factors include energy cost savings, net property operating income, impact on property value, market demand for low carbon workspaces, attraction and tenant retention, the risk of value erosion due to default, investor attractiveness and the potential to sell the property or maintain its value over time.
JLL cites an example of a cost-benefit analysis it did on a 500,000-square-foot Class A office building in New York, powered by natural gas and electricity. The company says the team determined that a maximum net zero carbon renovation would cost the owner nearly $15 million, but would reduce energy costs by 35 percent and allow the owner to avoid more than $2.5 million in sanctions
