In the past two decades, cities and states in the U.S. have significantly expanded sustainable building ordinances that focus on benchmarking, audits and retro-commissioning, and building performance standards (BPS).
BPS are a more recent development, requiring building owners to meet strict greenhouse gas (GHG) emissions or energy intensity targets, or else pay significant penalties. New York City, Boston, and Denver have standards with interim target deadlines for owners between 2024 and 2025.
By establishing a carbon price via penalties for non-compliance, BPS present climate transition risk for building owners. Mitigating transition risk from BPS is complex because buildings vary significantly in their costs for compliance.
Each jurisdiction offers a variety of resources to aid owners in complying with BPS, including technical guidance, trainings, flexibility measures, and options to adjust emissions or energy intensity limits.
Introduction
In response to the growing imperative to address climate change, the U.S. has witnessed a significant rise in sustainable building ordinances over the past two decades, focusing on energy and GHG emissions benchmarking, energy audits and retro-commissioning, and energy and GHG emissions BPS.
This transformation began voluntarily within the commercial real estate sector in the early 2000s, driven by initiatives such as the EPA’s ENERGY STAR® Certification, which initially helped property managers enhance building energy performance. These practices gradually evolved into mandated regulations at municipal, county, and state levels to help jurisdictions monitor building-related emissions and achieve their own climate goals. Since 2008, when Washington, D.C., and Austin, Texas, became the first U.S. cities to mandate energy benchmarking, at least 54 other cities, counties, and states have adopted similar ordinances.1
Benchmarking laws require commercial, multifamily, and industrial building owners to track and report on energy and, in some jurisdictions, water consumption. Although benchmarking laws make up most of these ordinances, there is also increasing emphasis on building audits and retro-commissioning, along with BPS. Building audits entail formal evaluations of a building’s energy usage, while BPS mandate that buildings meet energy or GHG emissions targets aligned with their jurisdiction’s climate objectives.
BPS are profoundly transforming the real estate industry by demanding more than just transparency in building operations. Functioning like an energy code for existing buildings, BPS require property owners to meet strict emissions or energy efficiency targets, often necessitating significant facility updates, such as retrofitting HVAC systems or adding insulation. By implementing both energy codes for new buildings and BPS for existing ones, jurisdictions can ensure that all buildings contribute to environmental goals.
With approaching deadlines and the potential of substantial penalties for non-compliance, these standards are creating a heightened sense of urgency among real estate owners. Many are now keenly focused on determining which of their assets may be subject to these laws, understanding how compliance deadlines vary across jurisdictions, and identifying the necessary steps to ensure compliance.
This article will examine how benchmarking, auditing, and BPS are enforced in three key jurisdictions — New York City, Boston, and Denver. These areas face some of the most immediate deadlines and significant implications for property owners.
Building Ordinances: New York City, Boston, and Denver
New York City — Local Laws 33, 84, 87, and 97
In 2019, New York City launched its Green New Deal and passed the Climate Mobilization Act, committing to net-zero carbon emissions and carbon-free electricity by 2050.2 To support these goals, Local Law 97 (2019), a key component of the Green New Deal, establishes strict GHG emissions performance standards for commercial buildings that become more stringent every five years. Additionally, prior regulations such as Local Law 84 (2009), which mandates energy benchmarking, and Local Law 87 (2009), which requires buildings to undergo regular energy audits and retro-commissioning, continue to support the city’s climate mitigation efforts. Under Local Law 33 (2018), owners are also required to display a letter grade showing the building’s energy efficiency score.
Boston — BERDO
Originally adopted in 2013 under the name Building Energy Reporting and Disclosure Ordinance (BERDO) as part of Boston’s climate strategy, this ordinance required buildings to annually report energy and water usage.3 To further the city’s 2019 commitment to carbon neutrality by 2050, BERDO was amended in 2021 to introduce GHG emissions performance standards.4 Reflecting this change, the ordinance is now known as BERDO 2.0 (i.e., Boston Emissions Reduction and Disclosure Ordinance).5
Denver — Energize Denver
After establishing their 80×50 Climate Goal in 2015 (i.e., 80% GHG emissions reduction by 2050), Denver passed a benchmarking law in 2016, the Energize Denver Ordinance, to monitor building energy use.6 In alignment with Denver’s updated 2021 commitment to reduce 100% GHG emissions by 2040, the Energize Denver Ordinance was updated in 2021 to introduce mandatory energy performance targets designed to achieve net-zero energy in existing buildings by 2040.7 8 9
BPS and transition risk: A case study of the New York City real estate market
As more U.S. cities align with global climate targets, building owners face growing transition risks — potential financial and operational impacts of the shift to a low-carbon economy. These risks are difficult to quantify without a distinct carbon price. However, BPS in cities like New York City, Boston, and Denver establish a carbon price through penalties, incentivizing owners and operators to implement decarbonization measures.
Looking at the New York City real estate market and Local Law 97, the penalty (carbon cost) for exceeding GHG emissions limits is USD268 per ton of CO2 equivalent per year, making the financial implications range from a net benefit to a considerable cost for property owners, depending on the extent of operational measures and retrofits required to meet targets.
According to the September 2023 report, “Getting 97 Done,” issued by Mayor Eric Adams, approximately 25% of buildings predicted to exceed their 2030 limits only need relatively low-cost measures such as weatherization and lighting control upgrades and are expected to save money through energy savings. Meanwhile, 35% will require a mix of low- and high-cost improvements, which remain cost-effective in the long term. Finally, about 40% of buildings are not projected to meet the 2030 targets without comprehensive retrofits; for these buildings, compliance costs vary significantly, ranging from $600 million to $ 2.8 billion, depending on the building type.31
The 60% of buildings that can meet their 2030 targets through only relatively low-cost measures and/or a mix of low-cost and high-cost improvements are best suited to make improvements as soon as feasible to capitalize on potential savings in the short-, mid- and long-term. However, the remaining 40% of buildings need to weigh a mixture of financial, market, and reputational risk to decide the amount of retrofitting appropriate to reduce (not necessarily eliminate) penalties.
For some sectors like office buildings, the financial pressures are exacerbated by high operating expenses — averaging USD28.67 per square foot, the highest of any U.S. metro area.32 These costs, combined with post-pandemic revenue challenges due to reduced occupancy rates, make the decision to implement decarbonization measures or pay penalties even more complex.33
The complexities of mitigating transition risks in New York City play out in Boston and Denver in similar ways and will continue to show up in U.S. markets as more performance standards are enacted. The approach of each building owner (and building) will be unique and require collaboration between tenants, owners, consultants, incentive programs, and city departments to transform carbon reduction goals and requirements into actions which effectively reduce global carbon emissions.
Options to adjust emissions/energy limits & resources for BPS compliance
New York City, Boston, and Denver provide various resources and recommendations to support building owners in complying.
NYC Retrofit Accelerator: Offers complimentary expert guidance and trainings on energy-efficiency improvements.
Local Law 97 Advisory Board Report: Combines stakeholder inputs to provide recommendations for implementation, aiming for a 40% reduction in aggregate building emissions by 2030, relative to 2005 levels.
Options to adjust emissions limits: Per § 28-320.8 of Local Law 97, owners may qualify for adjustments to increase emission limits in 2024–2029 if a covered building is subject to a special circumstance, such as 24-hour operations, high density occupancy, or operations critical to human health and safety. According to the Adjustments Application Filing Guide, the deadline to apply for these adjustments is January 1, 2025.24 As noted in § 28-320.7, adjustments to emissions limits are also possible for a limited period of 1–3 years in a variety of cases where compliance is not possible, such as financial constraints or if carbon offsets are not available at a reasonable price.
In December 2023, the law was amended to specify that “good faith efforts” taken to comply with Local Law 97 will be considered when determining non-compliance penalties. To be eligible for a reduced penalty during the first compliance period (i.e., 2024–2029), owners that have not made sufficient updates to comply with emissions limits must submit a decarbonization plan by May 1, 2025, that details a path to compliance.34
Options to adjust emissions limits: To adjust a building’s emissions limits and pathway to net-zero emissions, BERDO offers flexibility measures in cases where a building has more than one primary use, an owner has multiple buildings (i.e., portfolio), or if the building is eligible for an Individual Compliance Schedule or Hardship Compliance Plan.
Denver: Energize Denver
Energize Denver Hub: Offers detailed information to help building owners understand their performance requirements.
Options to adjust EUI targets: On the Flexibility in Compliance page, owners can find information on adjusting EUI performance targets and timelines, electrification incentives, alternative compliance options, renewable energy credits, and compliance assistance for equity priority buildings. To be eligible for a 2024 interim target adjustment before performance evaluation in 2025, owners must apply by December 31, 2024.35
Conclusion
The rise of sustainable building ordinances in major urban centers like New York City, Boston, and Denver represents a critical shift towards aligning the U.S. real estate sector with international climate goals. These ordinances, encompassing benchmarking, audits and retro-commissioning, and BPS, not only mandate a reduction in GHG emissions but also push for greater transparency and efficiency in building operations.
As the deadlines for compliance with these ordinances approach, the decisions made by property owners today will determine their ability to meet stringent emissions targets, avoid significant penalties, and contribute to the broader goals of municipal and global climate initiatives. This strategic approach not only aligns with legal mandates but also positions these leaders at the forefront of sustainable management in the face of climate change.
This article was written by Carli Schoenleber, Senior Communications Manager & Content and Engagement Specialist; Dana Weiss, Senior Director of ESG & Head of Resilience; Kelsey Ceccarelli, Director of Engineering; Sydney Armitage, Associate Engineering Manager; and Rimzhim Mazumdar, Engineering Manager at Verdani.
References:
1 Institute for Market Transformation (2024, July). Comparison of U.S. Commercial Building Energy Benchmarking and Transparency Policies. Retrieved from https://imt.org/wp-content/uploads/2023/07/IMT-Benchmarking-Matrix-July-2024.pdf
2 City of New York. (2019). Action on global warming: NYC’s Green New Deal. Retrieved from https://www.nyc.gov/office-of-the-mayor/news/209-19/action-global-warming-nyc-s-green-new-deal#/0
3 City of Boston. (2013). An ordinance amending the Air Pollution Control Commission Ordinance in relation to reporting and disclosure the energy and water efficiency of buildings. Retrieved from https://www.cityofboston.gov/images_documents/Signed%20Ordinance_tcm3-38217.pdf
4 City of Boston. (2022). Reducing emissions. Retrieved from https://www.boston.gov/environment-and-energy/reducing-emissions#_019-climate-action-plan
5 City of Boston. (2024). Building emissions reduction and disclosure. Retrieved from https://www.boston.gov/departments/environment/building-emissions-reduction-and-disclosure
6 City and County of Denver. (2018). Denver 80×50 Climate Action Plan. Retrieved from https://www.denvergov.org/files/assets/public/v/1/climate-action/documents/ddphe_80x50_climateactionplan.pdf
7 City and County of Denver. (n.d.) Climate action. Retrieved from https://denvergov.org/Government/Agencies-Departments-Offices/Agencies-Departments-Offices-Directory/Climate-Action-Sustainability-Resiliency/Cutting-Denvers-Carbon-Pollution/Climate-Action
8 City and County of Denver. (n.d.) Energize Denver policy timeline. Retrieved from https://denvergov.org/Government/Agencies-Departments-Offices/Agencies-Departments-Offices-Directory/Climate-Action-Sustainability-Resiliency/Cutting-Denvers-Carbon-Pollution/High-Performance-Buildings-and-Homes/Energize-Denver-Hub/Energize-Denver-Policy-Timeline
9 City and County of Denver. (2023). Energize Denver benchmarking and energy performance requirements, buildings 25,000 square feet and larger, technical guidance, version 2.0. Retrieved from https://denvergov.org/files/assets/public/v/1/climate-action/documents/energize-denver-hub/ed-technical-guidance-buildings-25000-sq-ft-and-larger-v2_june-2023_clean.pdf
10 City of New York. (2009). Local Law 84. Retrieved from https://www.nyc.gov/html/planyc2030/downloads/pdf/ll84of2009_benchmarking.pdf
11 City of New York. (2016). Local Law 133. Retrieved from https://www.nyc.gov/assets/buildings/local_laws/ll133of2016.pdf
12 City of New York. (n.d.). Benchmarking and energy efficiency rating. Retrieved from https://www.nyc.gov/site/buildings/codes/benchmarking.page
13 City of Boston. (2021). ORDINANCE AMENDING CITY OF BOSTON CODE, ORDINANCES, CHAPTER VII, SECTIONS 7-2.1 AND 7-2.2, BUILDING ENERGY REPORTING AND DISCLOSURE (BERDO). Retrieved from https://www.boston.gov/sites/default/files/file/2021/12/Final%20Amended%20Docket%200775%20BERDO%202_0.pdf
14 City of Boston. (2024). BERDO reporting how-to guide. Retrieved from https://docs.google.com/document/d/1bTCjWuJzL-kfmM_nA_sIo9fm5BU5vwihdtbaq8OB3iU/edit
15 City of Boston. (2024). Building emissions reduction and disclosure. Retrieved from https://www.boston.gov/departments/environment/building-emissions-reduction-and-disclosure#:~:text=BERDO%20applies%20to%20the%20following%20buildings%3A
16 City and County of Denver. (2021). Rules and regulations governing energy efficiency in commercial and multifamily buildings. Retrieved from https://denvergov.org/files/assets/public/v/1/climate-action/documents/hpbh/energize-denver/benchmarking/energize-denver-rules-2021_signed.pdf
17 City and County of Denver. (2023). City and County of Denver Energize Denver benchmarking and energy performance requirements, buildings 25,000 square feet and larger, technical guidance, version 2.0. Retrieved from https://denvergov.org/files/assets/public/v/1/climate-action/documents/energize-denver-hub/ed-technical-guidance-buildings-25000-sq-ft-and-larger-v2_june-2023_clean.pdf
18 City and County of Denver. (n.d.). Manufacturing, agricultural, and industrial (MAI) buildings. Retrieved from https://www.denvergov.org/Government/Agencies-Departments-Offices/Agencies-Departments-Offices-Directory/Climate-Action-Sustainability-Resiliency/Cutting-Denvers-Carbon-Pollution/High-Performance-Buildings-and-Homes/Energize-Denver-Hub/Buildings-25000-sq-ft-or-Larger/Performance-Requirements/Manufacturing-Agricultural-and-Industrial-MAI-Buildings
19 City of New York. (n.d.). Energy audits and retro commissioning. Retrieved from https://www.nyc.gov/site/buildings/codes/energy-audits-retro-commissioning.page
20 City of New York. (2009). Local Law 87. Retrieved from https://www.nyc.gov/html/planyc2030/downloads/pdf/ll87of2009_audits_and_retro-commissioning.pdf
21 City of New York. (2020). LL87 of 2009 compliance guide. Retrieved from https://www.nyc.gov/assets/buildings/pdf/how_to_file_energy_efficenicy_report.pdf
22 City of New York. (2019). Local Law 97. Retrieved from https://www.nyc.gov/assets/buildings/local_laws/ll97of2019.pdf
23 City of New York. (n.d.). [LL97] Compliance. Retrieved from https://home.nyc.gov/site/sustainablebuildings/requirements/compliance.page
24 City of New York. (n.d.). Greenhouse gas emissions reporting. Retrieved from https://www.nyc.gov/site/buildings/codes/greenhouse-gas-emission-reporting.page
25 City of New York. (n.d.). Local Law 97 covered buildings. Retrieved from https://home.nyc.gov/site/sustainablebuildings/requirements/covered-buildings.page
26 New York City Department of Buildings. (n.d.). Requirements for reporting annual greenhouse gas (GHG) emissions for covered buildings (1 RCNY §103-14). https://www.nyc.gov/assets/buildings/rules/1_RCNY_103-14.pdf
27 Boston Air Pollution Commission. (2024). Building emissions reduction and disclosure ordinance, City of Boston code, ordinances, Chapter VII-II.II. Retrieved from https://www.boston.gov/sites/default/files/file/2024/04/Regulations_1.pdf
28 Boston Air Pollution Control Commission. (2023). BERDO policies and procedures, version 2.5. Retrieved from https://www.boston.gov/sites/default/files/file/2024/02/12.20.23%20Full%20Policies%20-%20Clean%20Version_0.pdf
29 Denver City Council. (2021). A bill for an ordinance amending the Revised Municipal Code of the City and County of Denver to require energy performance and greenhouse gas emissions reductions in existing commercial and multifamily buildings and future electrification requirements for existing buildings. Retrieved from https://denver.legistar.com/LegislationDetail.aspx?ID=5196421&GUID=641EBED8-31C9-4CA0-A8F9-946569B7C293&Options=ID%7CText%7CAttachments%7C&Search=21-1310
30 Denver Office of Climate Action, Sustainability and Resilience. (2021). Climate protection fund five-year plan. Retrieved from https://denvergov.org/files/assets/public/v/2/climate-action/cpf_fiveyearplan_final.pdf
31 The City of New York Mayor Eric Adams. (2023). Getting 97 done: A plan to mobilize New York City’s large buildings to fight climate change. Retrieved from https://climate.cityofnewyork.us/wp-content/uploads/2023/09/Getting-_LL97Done.pdf
32 Business Research Division, Leeds School of Business, University of Colorado Boulder. (2022). BOMA 2022 office market study: The impact of U.S. building operations on the economy. BOMA International. Retrieved from https://www.bomadet.org/resources/Documents/ADVOCACY/BOMA%202022%20Office%20Market%20Study.pdf
33 New York City Comptroller Brad Lander. (2023). Spotlight: What risks does the office market pose for the city’s finances? Retrieved from https://comptroller.nyc.gov/reports/spotlight-what-risks-does-the-office-market-pose-for-the-citys-finances/
34 New York City Department of Buildings. (2023, December 12). Notice of adoption of rule. Retrieved from https://www.nyc.gov/assets/buildings/pdf/LL88_LL97.pdf
35 City of Denver. (2024). Flexibility in compliance. Retrieved from https://denvergov.org/Government/Agencies-Departments-Offices/Agencies-Departments-Offices-Directory/Climate-Action-Sustainability-Resiliency/Cutting-Denvers-Carbon-Pollution/High-Performance-Buildings-and-Homes/Energize-Denver-Hub/Buildings-25000-sq-ft-or-Larger/Performance-Requirements/Flexibility-in-Compliance
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