New York City, San Francisco, Washington D.C., Boston, and St. Louis are all preparing to fine building owners who fail to comply with new local regulations that in most cases, limit large buildings’ greenhouse gas emissions and/or curb energy usage.
The earliest of the fines will go into effect this month in San Francisco. This comes as 30 U.S. municipalities are phasing in higher standards for commercial real estate emission and energy use. The cities moving forward with stricter environmental standards are located in nearly every region of the country, including Atlanta, Denver, Chicago, Los Angeles, Miami, and Houston.
The regulations vary, but the costs of fines could be significant. Owners would receive fines, but it is still unclear if they could pass the fines as expenses on to tenants. All types of commercial properties can be affected, including data centers, offices, mixed-use, and hotels.
San Francisco, with a goal of zero GHG emissions from large buildings by 2035, will be the first of the five cities to implement fines beginning in December. Buildings that don’t comply with new requirements will be fined $100 a day for a maximum of 25 days in a 12-month period.
The fines in New York and Washington D.C. are among the most onerous, although those in Washington can be reduced if certain compliance plans are undertaken. New York passed the Climate Mobilization Act in April 2019, which placed GHG emission limits on commercial buildings larger than 25,000 square feet. Properties that exceed the limits will face fines of $268 per metric ton over the limit starting in 2024, with stricter standards starting in 2030. Washington D.C. will require privately-owned buildings larger than 50,000 square feet to meet new emission and energy consumption standards by the end of 2026 or incur a penalty of $10 per square foot, not to exceed $7.5 million. Many of the regulations will require putting in new all-electric HVAC systems, supporting the electrification of buildings, to fight climate change.
More information is available here.