Why everyone should get up to speed on The Climate Mobilization Act

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By James Nelson

While the real estate industry has had its attention largely focused on updates to rent regulation, this month I wanted to discuss something that will have resounding effects in the real estate community, but has received much less attention: The Climate Mobilization Act (CMA). YuhTyng Patka, a Partner at Duval & Stachenfeld LLP and co-chair of their task force to address the CMA, and Jeff Carleton, Managing Director/Auditor/Retro Commissioning Agent from Carleton Energy Consulting joined me in the studio. Carleton is also on the Urban Green Council and has been specializing in energy benchmarking for the last decade.

The conversation began with my asking Patka her perspective on the CMA, specifically about some of the local laws that were created.

“The CMA,” Patka begins, “was a series of bills that was passed by the New York City Council in April. The purpose of the CMA, is to reduce greenhouse gas emissions by 40% by year 2030 and 80% by year 2050…The highlight of the CMA is Local Law 97, a statutory cap on greenhouse gas emissions of large buildings, 25,000 square feet or larger in New York City.”

Patka added that the CMA addresses a requirement for green roofs. There's also a bill that's encouraging easier development of wind turbines in the city, and there's important legislation enabling Property Assessed Clean Energy (PACE) financing, which is a way of financing retrofits for the buildings to comply with Local Law 97.

According to Carleton, the city’s EPA Portfolio Manager will generate a score from one to 100 for each building over 25,000 square feet in New York City. There are two sets of goals that the city has put together:

• By 2025, buildings that currently have an energy score between one and 20 are in a position to get a fine for poor energy consumption (with a few exceptions).
• By 2030, statutory limitations on greenhouse gas emissions will be much stricter with much higher fines.

“There is this misconception that an owner can put this off for a little bit because compliance is not required until January 1 of 2024.” Patka explained. Owners need to be aware that there is a July 1, 2021 deadline for a submission of an application for an adjustment…What I've been advising building owners is to act sooner than later to first determine whether or not you currently are in compliance.”

Patka said examples of buildings exempt from statutory caps include: city-owned buildings, NYCHA buildings and notably buildings with at least one rent regulated unit. If the owners of these buildings can certify that they have done their best to create an energy-efficient building, such as weather-stripping their windows, insulating pipes and replacing thermostats, they will be exempt.

I asked Carleton to walk us through how he helps his clients assess their score.

“The first thing that an owner should do is, in our opinion, is look at your 2024 goal,” Carleton said. “Look at your energy score and see where you currently are right now.”

Carleton advised building owners to review each of their buildings and the potential cost of achieving their 2024 goals. An owner should then consider making operational changes such as light retrofitting, a lighting upgrade or potentially looking at controls.

Building owners “should implement as many common sense measures as possible to bring down their base energy consumption to as low a point as possible,” Carleton said. “Any energy score between one and 20 puts you in line for a carbon tax fine. The fine for the carbon tax is $268 per extra metric ton, in comparison to how much the city thought a building should be using. If you have an energy score of a one for example, you may have a 60,000 square foot multi-family building running extremely poorly, and would be in line for an almost $100,000 (annual) fine.”

The Durst Building at One Bryant Park, which is a LEED platinum building failed to meet the requirements of the CMA, which, to me, is alarming. Carleton did a small case study on a 30,000 square foot building. I asked him to walk us through it.

“This was a poor performing commercial building with a score of a 16, which is not a horrible building, but it's well below the requirements.” Carleton explained, “At this point in time if they do nothing, they're in line for a $10,000 annual fine come 2024. Based on the Urban Green Council study of a light retrofit operational change at 50 cents a square foot, you're looking at roughly $16,000 needed to save the $10,000 fine, in addition to saving on your operating costs.

“When you get to 2030, however, the projected fine…would be $45,000. So that's where the fine would get very, very significant. We estimated it would cost about $330,000, about $10 per square foot to fix this building. So you're looking at an ROI of about seven years, basically spending $330,000 to save $45,000. That's why it's extremely important to try and lower your baseline so you don't do a project for 2030 that's too big.”

For example, he said that if a building has inefficient lights running all the time, buildings owners are better off solving that before hiring an engineering firm to do a study on solar panels.

“The way I see it,” Carleton says, “2024 is where common sense measures will get you to hopefully avoid fines. 2030 is where the rubber hits the road and it's going to be an interesting challenge to see how owners and consultants respond to hitting what I consider very, very ambitious goals.”

“My advice to clients,” said Patka, “is to pay attention to this and act now because the CMA will affect every single person related to real estate in New York City. Whether or not you're an owner or a landlord, tenant, buyer, seller, lender, borrower, it's going to be on everybody's due diligence checklists. So it's definitely important to get up to speed on this sooner than later.”