Progress of local initiatives on building decarbonization in New York City
David: Definitely. What if we start the conversation by starting with, from New York City's perspective, the progress of local initiatives on building decarbonization?
Rit: Thanks, David. Happy to do that. New York City has been at the forefront of addressing carbon emissions from buildings for 15 years. It started in the 2000s with a law requiring city-owned buildings to meet energy-efficient standards but quickly progressed to focus on existing building retrofits.
New York is an old city. We already have the vast majority of buildings we will have 50 years from now. And so, if we reduce our carbon footprint, we have to make changes to existing structures. In 2009, new laws, among other things, took local control of the energy code. New York State allows the city to take control of the energy code as long as it's more aggressive than the state energy code. We did that. We also put in place a benchmarking law. New York and Seattle were the country's first cities to require that. Now more than a dozen cities around the country require benchmarking as a responsibility of owning buildings.
That's provided a tremendous amount of data leading directly to where we are today with a law called Local Law 97. The Climate Mobilization Act of 2019 was enacted shortly before the pandemic and requires large buildings in New York City to meet carbon efficiency targets in two steps, with the first one starting next year in 2024. But then a much bigger step is required where three-quarters of the covered buildings will have to make changes for 2030. That's critical because, as is true for many cities, buildings are the majority of New York City's carbon emissions. And so if we don't address buildings, we can't make any progress.
Joan: That 2030 goal is significant.
David: A lot of it sounds a little daunting. Luke, you were going to talk about your involvement with this, too.
Luke: Absolutely, yeah. ICF has been supporting the Mayor's Office and the great work Rit outlined over the last decade. New York City had the foresight to think about making policies successful in New York. We've played a small part by building these market support programs. So anytime there was a new and aggressive policy related to building decarbonization and improvements, there was a program that ICF set up to help building owners, property managers, and the industry transform and better understand how to improve their buildings, provide free support, and get assistance with the process. That's successfully ensured these policies stick, and we have as close to 100% compliance with these laws as possible.
David: Cool. That tells us a little bit about the “what.” I'm curious about the “why.” Rit, what is New York City's role? Why did New York City take this role?
Rit: Well, the first answer is that it's a question of self-defense. New York City has 500 miles of coastline. We are already suffering the effects of climate change. We see it. Of course, 11 years ago, the city suffered through Hurricane Sandy. Two years ago, we suffered through Hurricane Ida, which killed 11 New Yorkers because of the rainfall that we experienced. We've got regular flooding in certain parts of the city when we have extreme storms, and we have the threat of drought that will require my agency, DEP, which manages New York City's water system, to make significant investments over the next 10 and 20 years.
We've got to do something, and it's common sense that if you find yourself in a hole, the first thing you do is stop digging. While we have to take a significant set of actions to make New York City resilient to climate change, it is equally important for New York City to be at the forefront of reducing carbon emissions and eventually ending climate change.
David: That makes a lot of sense when you say it, and pretty cool.
The role of data in shaping strategies and implementing programs
Joan: I was still lingering on the earlier discussion around data. I wanted to unpack that a bit—the importance of data and how that can progress into implementing programs. And there's a uniqueness around New York City with some of the buildings and the multifamily buildings, kind of the profile of New York City.
Rit: Well, certainly, Joan, New York's building profile is somewhat unique. We have much in common, for example, with Chicago, Washington, and Boston. We've got a lot of similarities to all old cities with many apartment buildings. And the reality is people don't appreciate that while most New Yorkers live in apartments, it’s still the case that most buildings in New York City are single-family homes. We have about a million buildings in New York, and more than 700,000 are 1- to 4-family homes. In that sense, we're relatively normal. What you have in some cases is, given New York's unique economy, we have a lot more television studios and more trading floors than the average American central business district would have. That affects our energy consumption to a certain extent.
But what's fantastic, in terms of data gathering, is that the EPA's portfolio manager tool does work pretty well for the whole country, and it allows us to compare our buildings against each other or their historical performance, but also to see how we stand across the country. And that's important.
One of the other things is that most real estate firms don't operate in one market anymore. Now that many cities have adopted similar requirements in terms of benchmarking, the team that manages X, Y, and Z real estate companies' portfolios in San Francisco can hear from the team in New York about how they do their benchmarking. It turns out it's pretty easy. When it first came a decade ago, people thought it would be difficult. And, of course, as with most things, it looks scary at the outset, and it turns out not to be that difficult.
Luke: And just something to add on the data front. Given the wealth of information that New York City has gathered over the last decade-plus, we can pinpoint where the progression of buildings' decarbonization and energy reduction efforts is, and use that data to help target buildings with the best opportunities for reductions and the actual conservation measures. This helps us implement programs like the NYC Accelerator, which helps support buildings with building-specific recommendations. And it helps us to capture from an impact assessment case how they will meet some of these aggressive building decarbonization laws. As Rit mentioned, with the national perspective, building portfolio owners and managers—whether it's cities looking at laws similar to Local Law 97 or doing this voluntarily—have started the march toward net-zero and decarbonization of portfolios, and it's well on its way.
David: Data is central to understanding where you are and gaining insights as to the types of things, at least at a building-by-building level, you need to tackle. How has that shaped your strategy as you've developed Local Law 97? Was the data and what you saw fundamental to developing it?
Rit: Well, completely. If you don't have the benchmarking data, you're flying blind with no idea once you start imposing targets on buildings, and you don't know what the baseline should be. You don't know which buildings are your outliers. You don't know how heavy a lift this is. Are all buildings going to have to do this? You can't even bucket them based on building type, multifamily commercial, or what fuel they use for heating. Is it an electric heat, gas heat, oil heat, or steam-heat building? Because we have central steam in New York City as well. With the data that these buildings have been filing for several years now, we can also identify—down to the individual building level—who is at risk of paying significant fines.
That's why the NYC Accelerator is so important to us. It will allow us to target buildings with a heavy lift ahead of them and get them engaged so that it isn't an after-the-fact surprise. As we all know, especially in a large-building retrofit project, that's not something you do in a couple of months. It needs to be in a capital budget. There's going to be design work and contracting work. It takes a couple of years to get a big project like this done, especially when many buildings will go fully electric to meet their 2030 targets. That's a big piece of work. They need to know in advance. It can't be the kind of thing where they get a notice in the mail saying, "Oops, based on your tax return, it looks like you're over budget." It can't be that way. People need to be alerted well in advance.
NYC Accelerator’s support for building owners and operators
David: Can you discuss the NYC Accelerator for those unfamiliar?
Luke: Since the inception of the program in 2021, which is the program's third iteration, it has supported the rollout of New York City's building laws over the past decade. Since about 2021, we've activated over 13,000 buildings across New York City. About half of those have already completed decarbonization projects, and we support decision-makers with project implementation and decarbonization planning. And, of course, with Local Law 97 or building performance standard planning, we engage and meet with participants where they are. We help folks understand where they stand with Local Law 97. Are they facing fines? If so, how much? What can they do? Et cetera. Based on the thousands of data points we have ingested on every building, we have specific recommendations for building projects and opportunities.
We recommend that service providers or vendors take the participant to the next step, usually to participate in an energy efficiency incentive program through our local partners like the utilities or state programs. Or to consider project financing to fill gaps on top of incentives that might be available.
Our role is to activate the project by finding the lead, planting the seed about projects and laws that should be considered, helping folks plan ways to comply with the increasingly stringent laws, and guiding them through implementing the retrofits and plans. For buildings that must comply with Local Law 97, that becomes a major driver. We also help other buildings, smaller ones, or those not concerned about it. And reducing energy waste, improving comfort, and increasing property values are major drivers, especially as the law begins to highlight the inefficiencies in many of our buildings, which many buyers are catching on to.
David: Cool. And, this is the support mechanism to help the building owner and operators figure out how to reach the next step.
Luke: Yes, as other cities consider similar building performance standards, the New York City experience here has shown you need the three things we've been talking about here: a data-driven approach and a data foundation—also, implementing the policy through a stakeholder-driven process and having a strong department of buildings. A strong department of buildings helps us enforce the law, and then a separate entity, like the NYC Accelerator, supports the market. It's nice to have that separation and the support structure to make these policies successful.
Exciting developments on the horizon, including federal funding opportunities
Joan: Looking ahead, what's something exciting you're both seeing on your radars that you might like to talk about or share?
Rit: The deadline getting closer has focused people's attention. For the first couple of years, the pandemic distracted everybody, and there was awareness of this law only among a certain sub-segment of the building industry: the folks with professional managers, the people managing class-A portfolios, and the well-managed portfolios of multifamily. But let's face it, the average condo and co-op weren't paying much attention. That's beginning to change. We're seeing co-op and condo space and management companies be more proactive in getting boards to focus on this. We're seeing much more widespread awareness among the smaller portfolios, which is great. The other super important thing is what's happening with the federal government.
Joan: Right. Yeah.
Rit: The Inflation Reduction Act has huge pots of money to help building owners do this kind of work, whether it's around putting solar on rooftops, changing appliances from gas to electric, and getting rid of the stoves that create terrible indoor air pollution from gas stoves that we've all used for such a long time. Getting the state-of-the-art induction cooktops that everybody should have just as a public health measure, let alone as a climate change measure. There's a lot of money in the IRA for building owners. One of the critical things we're going to be doing is working with the Accelerator on those things that buildings can go ahead and apply directly for because they're in the form of a refundable tax credit or something like that.
We’re also going to be seeking to work with New York State because there are large pots of money through the IRA that the state governments are going to program, and we'd like to make sure that New York State designs a program that's directly helpful to buildings that have to comply with Local Law 97. I think that will be a huge game-changer.
Joan: That's wonderful.
David: Before Luke answers, I was curious, as some of those smaller entities become aware of the law and the need to change, do you see pushback at all? And if so, how do you address that?
Luke: What's been encouraging is that we've been seeing a lot more building owners and a lot more decision-makers at the building level—not just their property managers who are professionally responsible for the compliance—become engaged in working with the NYC Accelerator and understanding the critical need to move forward and to reduce the impacts of climate change in New York. Many folks have experienced it firsthand, but there certainly will be some pushback. As with other policies, there is certainly a healthy amount of pushback. We have these programs to support the market, address the pushback, provide a helpful hand to those thinking about these things for the first time, and bring together all the resources available across the entire market. And many more opportunities, like Rit mentioned with IRA and federal funding, are on their way. We're excited about that.
Joan: Everyone talks so much about the importance of local participants, and it seems clear how important the role of cities is in this conversation. And it's nice to know that models are set for other cities to follow and that the initiative is like a wave. It feels that way in this discussion and certainly in some of the initiatives we're seeing nationwide.
Rit: Cities play such an important role, but not in everything. As we know, the energy grid is primarily managed at either the state or the ISO level. Some things need to be done only at the federal level. At the end of the day, real estate is a local industry. It's one of the reasons that city action on energy efficiency and buildings is so important because the real estate industry in any given city talks to each other, and they'll move together. They're going to be much more attuned to what their mayor or city government is saying, frankly, than what their state or the federal government is saying, just because the local policy is what makes real estate. That's why it's so important for cities to play an aggressive leading role in energy efficiency in buildings.
Joan: David, did you have any other questions, or do our guests have any questions before we get to our final one?
David: I've learned a lot, but it's time for your wrap-up question.
Impacting climate change if there were no limits
Joan: It feels like we barely scratched the surface, but I'd love to present this question to each of you. What would you do if you could do one thing to impact change without limits?
Rit: Well, on the topic of buildings, I'd certainly love to find a way to make retrofits faster and less disruptive. The advent of plug-and-play, one-stop-shop solutions in the world of technology and consumer goods—things like that—allows people to make fast changes. Think about how quickly almost everybody on earth got a smartphone over the last 10 or 15 years. We will be lucky to retrofit New York City's buildings on that timetable. It has to do with figuring out an easy way to get to scale and build an infrastructure. We desperately need to see innovation in the actual logistics of delivering change within buildings.
David: Couldn't agree more. Luke, what's yours?
Luke: I'll continue on the same wavelength but with a slightly different perspective. If I had a magic wand, I would help move things along faster on the valuation side. And the realization I mentioned earlier, with the local government push across the country and the government understanding their important role in climate change and the real estate industry. It's clear that the most impactful and biggest companies have already started, whether because of those signals or other altruistic reasons, and are committed to decarbonizing their entire portfolios.
Again, sometimes it's voluntary, and sometimes because the writing is on the wall when you look across the biggest cities and the policies we've been discussing today. The faster building owners and portfolio managers understand decarbonization and cost-effective efficiency gains can be met with what we know today—traditional energy efficiency, distributed energy, and so forth—the quicker they will see asset value increases. And again, the faster we can get to net-zero across these portfolios, buildings, cities, and states, the faster we will get to this clean energy and cleaner world and a future we all hope for.
David: Well, this has been an interesting conversation and very eye-opening to see the role that cities can play in climate change and the importance of that local connection. I love the formula you guys have put together in New York City. Rit, with benchmarking to understand where you are—putting laws in place to require people to change, but then giving them support through the Accelerator, so you have both the carrot and the stick. And then tying in, as you mentioned, the state and federal incentives that can help people accomplish the goals you've put in front of them. So a very winning strategy and I’ll be excited to see how things progress as you get closer to your first deadline coming up here in 2024.
And if you've enjoyed this conversation, we appreciate you liking, sharing, and even subscribing to our podcast.
Joan: And we were so honored to have both of our guests on today, and we hope those that are listening stay tuned for our next episode as we've invited ChatGPT as our guest, as well as Nick Lange, who is an ICF innovation strategy and services lead, to talk about artificial intelligence. Hey, that could speed up some of this building electrification. You never know. And just what a role that AI will have in our field. Thanks to all of you for listening, and here's to our next Energy in 30.