Decarbonization Efforts: How Building Owners And Managers Can Step Up
Last year was a monumental year for net-zero progress. One clear winner was building performance standards, with certain states and cities leading the charge when it comes to ambitious policies aimed at slashing emissions from buildings.
In just the last year, Colorado, along with Cambridge, Massachusetts, and Seattle, Washington, joined a handful of U.S. states and municipalities that, with increasing technical and financial support from the federal government, are taking a rigorous approach to implementing stringent building performance standards and specialized stretch energy codes for both new construction and existing buildings.
Energy Codes And Building Performance Standards
Energy codes for new and renovated buildings, along with building performance standards (BPS) for existing, typically commercial facilities, play a pivotal role in decarbonization efforts—as operational, energy-related emissions from buildings account for more than a quarter of the global annual total. These policies, especially when implemented and enforced by responsive policymakers and paired with measured, compliance-enabling financial support, push building owners and operators to swiftly adopt greener practices to avoid penalties.
I think the approach undertaken by New York City makes for a convenient case study. The Big Apple’s Local Law 97, passed in 2019, is one of the country’s leading BPS regulations. Encouragingly, compliance achievement with the rule has thus far exceeded expectations. And with flexible compliance deadlines and enforcement provisions on the table, together with public-private funding made available by Local Law 96, we’re bound to see NYC remain an example.
Energy Codes And Building Performance Standards
Energy codes for new and renovated buildings, along with building performance standards (BPS) for existing, typically commercial facilities, play a pivotal role in decarbonization efforts—as operational, energy-related emissions from buildings account for more than a quarter of the global annual total. These policies, especially when implemented and enforced by responsive policymakers and paired with measured, compliance-enabling financial support, push building owners and operators to swiftly adopt greener practices to avoid penalties.
I think the approach undertaken by New York City makes for a convenient case study. The Big Apple’s Local Law 97, passed in 2019, is one of the country’s leading BPS regulations. Encouragingly, compliance achievement with the rule has thus far exceeded expectations. And with flexible compliance deadlines and enforcement provisions on the table, together with public-private funding made available by Local Law 96, we’re bound to see NYC remain an example.
Limitations And Challenges
Given the urgency of the climate crisis, though, we can’t reasonably trust that piecemeal state and municipal rules will move the needle at the necessary rate. This is largely because compliance achievement alone, the targeted outcome of regulated building owners and developers, isn’t enough.
Indeed, beyond their number, the trouble has to do with the scope and scale of planned and active building energy performance rules alike.
An inherent limitation of many municipal building energy codes is that they primarily apply to new constructions or renovations. Considering that around 80% of buildings that will exist in 2050 in the U.S. are already standing, building codes alone will not sufficiently address the vast existing building stock. To meet global climate goals, a substantial increase in the global annual rate of net zero-enabling retrofits, from about 1% today (registration required) to upwards of 2.5%—perhaps as high as 3.5%—is essential.
However, the cost factor poses a challenge. Energy-efficient retrofits can be expensive, sometimes up to $150 per square foot, which can sometimes make it more financially viable for building owners to choose fines for non-compliance instead. Shifting the perspective to see retrofits and green construction as a financial opportunity is crucial.
The Financial Opportunity For Building Owners And Developers
Often, energy-saving retrofits pay for themselves (registration required) as energy cost-savings accrue within 8-10 years. Better yet, when these retrofits are executed by service providers via performance-based contracts, project hosts can expect to incur minimal upfront costs.
Moreover, building owners and developers incorporating climate "proptech," such as AI-enabled building performance analytics and programmable building equipment and system controls, can further enhance energy efficiency, prolong the functional lives of equipment, improve tenant experiences and otherwise yield a more valuable, climate-friendly facility—"greenium" anyone?
Additionally, on adaptation to physical climate risks—the primary sustainability concern for commercial real estate leaders—improving building resilience against climate-related severe weather events, electric service outages and supply chain disruptions can not only mitigate O&M costs but also minimize the risk that a building will be taken “offline” to implement those fixes.
Expanding the focus to encompass community-wide asset planning opens up opportunities for city-wide decarbonization, including greening the grid for a more reliable, resilient and affordable electric power supply.
What Leaders Can Do
To achieve a significant impact, widespread adoption of retrofits and other decarbonization efforts is necessary. While government leaders can provide a mix of grants and technical support to incentivize and facilitate the implementation of these measures, there are things business leaders can do as well.
For owners and managers, building decarbonization demands a strategic and incremental approach. An initial audit can help identify the largest emissions culprits and sources of waste. These should become immediate priorities for efficiency upgrades, supplements and, when necessary, outright replacements. Transitioning from reactive maintenance and ad hoc interventions to data-driven, anticipatory and continuously monitored adaptations promises emissions reductions and energy cost-savings without inviting liquidity risk.
Beyond their portfolios, CRE leaders play an essential role in driving community-scale progress through partnerships with utilities and energy-efficient equipment manufacturers, vendors, installers and service providers, as well as through constructive engagement with policymakers. Collective priorities include building resilient clean energy infrastructure (e.g., virtual power plant participation), building skilled local labor pools (e.g., procuring union labor for retrofit projects), and shaping building energy performance standards and incentive programs to accelerate sector-wide decarbonization.
Ultimately, to spur decarbonization at the pace scientists urge, the organizations that genuinely endeavor to address the climate emergency will need unprecedented ambition.
In addition to managing regulated assets efficiently, corporate responsibility now warrants setting net-zero-emissions targets enterprise-wide through demand reduction (i.e., energy efficiency), renewable power and sustainable material procurement and proactive engagement with tenants and occupants (e.g., green leasing) and, if necessary, purchase of credible carbon credits.
Looking back, 2023 was a pivotal year for climate policy, technology and finance to intersect—opening the floodgates of building decarbonization. But while building codes serve well in creating energy efficiency standards and preparing buildings for electrification, the journey to decarbonize buildings extends far beyond the current scope of most codes. Going above and beyond these codes is not just cost-effective for businesses but also vital for our planet.
I recommend that building owners and developers consider ambitious action not only a financially prudent endeavor but also a personal mission and responsibility to strive toward zero emissions.