Adams Administration ‘Loophole’ Could Let All the Air Out of NYC’s Biggest Climate Bill

For New York City to come close to hitting its ambitious goal of reducing its greenhouse gas emissions by 80 percent by 2050, it needs to severely cut back on the city's number one source of pollution—its buildings. More than 70 percent of greenhouse gas emissions in the city come from residential and commercial structures. In 2019, the City Council passed Local Law 97, which required the owners of these buildings to switch to cleaner energy sources and make their buildings more efficient, or else be hit with steep fines beginning in 2025. 

But now that the Adams administration is in charge of the actual implementation of the law, a new wrinkle has emerged during proposed rule-making: a carve-out where building owners could in theory purchase unlimited renewable energy credits (RECs) instead of reducing their electricity consumption, essentially sidestepping the law's actual aim of reducing greenhouse gas emissions. RECs could be used to fund alternative energy projects elsewhere, often far away from the city—but the buildings themselves would remain inefficient and wasteful.

When the law was written in 2019, the availability of RECs was fairly limited, and the idea that a building owner would simply be able to buy their way out of compliance was somewhat far-fetched. But the speed of climate investment has finally increased after decades of inaction, and now both the state and federal government are earmarking billions of dollars for clean energy projects. Accordingly, the number of RECs is about to skyrocket. 

On Monday, Comptroller Brad Lander released a report that found that building owners would be able to use credits to cover 68 percent of their targeted emissions reductions. The report was issued as the Department of Buildings held a hearing to discuss the Adams administration's interpretation of Local Law 97.

"The unexpectedly large supply of renewable energy credits will weaken the impact of the law," Jamie Statter, the director of climate infrastructure at the comptroller's office, told the DOB this morning. The comptroller's office has proposed capping the number of RECs that can be purchased at 30 percent of a building's annual electricity overages. 

Other speakers echoed that the RECs carveout would effectively gut the law. 

"It's vital that you close the REC loophole. Disregard the real estate lobby, National Grid, and these other self-interested entities who only want to deregulate and get out of these obligations," said New York Communities for Change's Pete Sikora. (A National Grid representative at the hearing asked that the DOB reconsider its position on the use of natural gas—namely, to allow natural gas to be considered a climate-friendly alternative to oil boilers.)

Earlier this month, a majority of City Council members wrote to the Adams administration, urging the mayor to place a limit on the use of RECs. During today's hearing, officials from the DOB told speakers that they were still working on the language of the carve-out, although they were still unsure whether a limit could be placed through rule-making or with further legislation. 

This is all music to the ears of the real estate lobby, which has fought the law since its inception, and has an ally in Mayor Adams. 

Bob Friedrich, co-president of the Presidents Co-op and Condo Council, which lobbies on behalf of building and apartment owners, spoke out against the costs of following the imminent although long-gestating regulations, and the fines that building owners would be exposed to if they didn't get in compliance. 

"This is the greatest unfunded mandate and penalties ever imposed by the New York City Council on its residents," Friedrich said, complaining about the costs passed on to building owners. "This is insanity and loans will only make it more costly."

Friedrich asked the DOB to reconsider the law in its entirety. 

Still, City Hall told Hell Gate the proposed rule is just a "first step" to regulate RECs, and that more details are on the way, before the DOB finalizes its rules. The DOB, if you recall, is going through a bit of a crisis.

Beyond the actual enforcement, the heaviest lift for Local Law 97 will be to get large residential buildings to move away from boilers and embrace technologies like heat pumps, a financially burdensome transition that many building owners will be tempted to sidestep for as long as possible—if City Hall allows it. 

Final rules are expected to be put into place by the end of the year.