Big Buildings Get a Pass for Pollution if Eric Adams Doesn’t Close His New Corporate Loophole

By liberally allowing landlords to purchase renewable energy credits, the new Adams rule would defang Local Law 97.

Pete Sikora   ·   December 23, 2022
Mayor Eric Adams unveils his Rebuild, Renew, Reinvent blueprint for economic recovery on March 10, 2022. | New York City Mayors Office

This article is published in our Perspectives section. Pete Sikora is the climate and inequality campaigns director at New York Communities for Change.

THE WORLD’S MOST important city-level climate and jobs law, New York City Local Law 97, has two potential fates at the hands of Eric Adams. New York City’s mayor could fully implement and enforce it, creating tens of thousands of jobs and slashing the city’s enormous production of climate heating pollution. Or, if he follows the wishes of the city’s powerful building owners and their lobby groups, he could derail it.

On Tuesday, the Adams administration finalized a rule that would let about two-thirds of large office buildings and one-quarter of multi-family buildings off the hook from cutting their pollution through 2035. About half of the pollution cuts the law is currently on track to achieve wouldn’t happen. Owners would not need to upgrade their polluting properties to high energy efficiency for over a decade. Tens of thousands of jobs would never materialize and millions of tons of pollution yearly wouldn’t be reduced.

The new rule allows building owners to purchase Renewable Energy Credits, or RECs, to buy their way out of the law’s pollution-slashing requirements. The law already allowed use of these credits, and it directs the administration to properly regulate them — including, crucially, by imposing limits on their use. Yet the new Adams rule’s limits are too generous to landlords for the compliance mechanism to be effective. Coupled with a bet on future shoddy enforcement, they offer the real estate lobby — the city’s largest climate polluter — an easy way to avoid change.

Thankfully, the administration has made clear that further limits on RECs are forthcoming. Taking inquiries from the media, its representatives have repeatedly promised that this loose REC limit will be followed by a tighter one in the new year. That’s an absolute must: Without it, New York City would lose enormous numbers of promised jobs and millions of tons of yearly pollution reductions. The city wouldn’t come close to achieving its climate action goals. The law would be gutted.

Without new restrictions, the city won’t come close to achieving its climate action goals.

The administration knows that experts, industry practitioners, advocacy groups, and a majority of the City Council agree on the right approach to regulating RECs. The loose new rule limits REC purchases as a compliance mechanism that covers only pollution generated by electricity use, not fossil fuels burned on site. But that’s far too big a proportion of buildings’ pollution, so the rule must be supplemented. An expert consensus has emerged: Restrict RECs to cover only up to 30 percent of the pollution by which a building goes over its cap in addition to the electric-only limit. That would ensure that every energy-wasting building does its part to cut pollution, not letting building owners simply buy some credits and call it a day.

If it can’t get what it wants on RECs and Adams properly limits their use, the real estate lobby has another path to gut the law: delaying and weakening penalties and creating paperwork systems that allow building owners to game the system. Landlords are already too familiar with the many housing laws on the books that they can take about as seriously as a jaywalking prohibition.

In the coming months, the mayor and his administrators will decide if Local Law 97 will join those laws ranks — or remain on track to creating tens of thousands of jobs by slashing the city’s massive pollution from large buildings.

With about 70 percent of the city’s pollution coming from energy use in buildings — and most of that from large buildings covered by the law — the worldwide impact is big.

Local Law 97 Isn’t Just Reasonable — It’s Necessary

Consider the notorious old New York City apartment, where it’s so hot in the winter that you have to crack a window to cool it down. Like such apartments, huge swathes of the city’s buildings are extremely wasteful of energy. While problematic right now, their reality is promising: It means there are abundant opportunities to stop waste.

Doing so is economically viable, too: Curbing pollution through higher energy efficiency saves money on utility bills and maintenance, so in the long run, Local Law 97’s requirements are much more affordable than the status quo. However, transforming a wasteful, polluting building into a model of high-efficiency can be costly up front.

Some improvements are cheap and pay off in one or two years. LEDs and insulation on exposed heating pipes earn their keep immediately. System-optimizing sensors and controls save money by improving operations. Pricier upgrades, such as replacing leaky windows, improving roofing and insulation, and upgrading HVAC systems take longer to pay off.

Under the current plan, building-by-building pollution caps, based on building type and use, take hold in 2024 and last through 2029. These initial limits are pretty easy to get under: 80 percent of the city’s large buildings already comply. And it’s not just fancy Manhattan skyscrapers coming into compliance: Working class co-op owners whose buildings are covered by the law are also beginning to upgrade their properties.

In 2030, the rules get stricter: About 75 percent of the city’s large buildings will require at least some operational modifications or capital improvements to be in compliance eight years from now. As a result, the city would cut pollution from its top source — large buildings — by over 40 percent by 2030. Tighter pollution caps in future years, which will be set in future rule-making, would cut emissions almost entirely by 2050. 

In the long run, Local Law 97 is much more affordable than the status quo.

This process will create tens of thousands of jobs this decade. The front end of a substantial increase in jobs has already started, and it will boom mid- and later-decade as building owners execute renovation and construction plans they’re forming right now.

But none of this will happen if the real estate lobby gets its way. If the lobbyists can effectively substitute pollution reductions for REC purchases, big building owners could and would avoid undertaking many of these necessary upgrades. 

Recently, 26 councilmembers, a majority of the City Council, wrote to Mayor Adams to urge him to limit RECs to only up to 30 percent of a building’s pollution over its cap (in addition to the too-slack limit the administration has proposed so far). Experts and advocacy groups — like New York Communities for Change, where I work — also support such a limit. More than 400 New Yorkers joined a Department of Buildings hearing on this issue, enough to crash the department’s audio systems. Over 100 people testified to urge the mayor to fully implement and enforce the law.

Right now, the city is consulting with the state government, which regulates the grid, and studying the issue. In those discussions, the state’s staff ought to urge the city to tightly limit RECs in order to maximize job creation, cut utility bills, and further the state government’s climate goals. New York state can’t meet its own pollution reduction targets without Local Law 97’s full implementation and enforcement.

Enforcement Is Critical

Even if Local Law 97 does end up having strong rules, landlords could take advantage of lax enforcement as another way to avoid it. Among the 50,000 large buildings the law covers, some unusual cases are difficult to categorize. For example, a paper mill on Staten Island is big enough to qualify for compliance, but as an outlier with unusual energy patterns, it doesn’t fall neatly into the law’s scheme.

Anticipating these situations, Local Law 97 grants the Department of Buildings the discretion to adjust pollution limits according to real-world circumstances. If a building remains above its pollution cap, enforcement should consider its “good faith” efforts to comply when determining penalties.

In virtually any case, a real good faith effort will lead to compliance. Typically, it will save money, too. But the administration must set its enforcement standards carefully — and avoid too wide a definition of “good faith.” Otherwise, it will create loopholes big enough to sneak a building through.

The law could create tens of thousands of jobs this decade. But that won’t happen if the real estate lobby gets its way.

The mayoral staff charged with implementing the law are already handling complex technical challenges with aplomb. The rule adopted this week includes about 26 pages of important technical guidance. They refine initially broad pollution limits into tighter, better categories. The caps, while challenging, are now closely tailored to building type and use, making them fair and achievable.

Only in a true outlier case should the department use its discretion to lower a building’s pollution limit or grant an extension. Systems for doing so should be clear, precise, and easy to verify — not subject to manipulation by lawyers, fixers, and lobbyists overwhelming overworked governmental staffers. Enough audits should be conducted, as the law directs, to ensure that corporate fraud would be caught and punished appropriately — and therefore deterred.

In this week’s adopted rule, the department again stressed that owners can count on the administration considering “good faith” effort in penalty determination. And in many other circumstances, administrators fervently assert that the last thing they want is to fine or penalize anyone.

But weak enforcement, like a lax REC limit, would let developers comply with the law on paper, but not with its purpose.

Mayor Adams Must Get This Right

It’s up to us to build the political pressure and the substantive case to convince Mayor Adams and his administrators to protect working New Yorkers’ interests, not the landlord lobby. At the end of the day, it’s the mayor’s decision.

Eric Adams is quick to tell the NYPD to enforce laws that criminalize poverty, while letting corporate criminals harass the city’s residents for profit.

Perhaps it’s far-fetched to put some faith in Mayor Adams, but in the end, I do not think he will make his appointees gut or severely weaken Local Law 97. I don’t think the administration’s staff or the Mayor want to end up destroying the world’s most important city-level climate and jobs law. It’s not too much to ask that buildings get to high levels of energy efficiency. Indeed, it’s in the owners’ and tenants’ interests.

More to the point, the politics are clear: The Council passed Local Law 97 because a strong, multi-racial grassroots movement pushed. That hasn’t gone away. Job creation and climate action are extremely popular. In the end, the mayor — like all politicians — is vulnerable to pressure from the people.

Mayor Adams has a real opportunity to put his stamp on a brighter future. He should make his mark by fully implementing and enforcing Local Law 97, delivering jobs, reducing pollution, and lowering bills for working people.

Pete Sikora is the Climate & Inequality Campaigns Director at New York Communities for Change.
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