New York City landlords risk facing more than $10bn of fines per year if they fail to cut carbon emissions ahead of strict limits coming into force in 2024.
Local Law 97 requires most buildings larger than 25,000 sq ft in New York City to cut their carbon emissions by 40% by 2030, rising to 80% by 2050, or face a fine of $286 per excess metric tonne.
Analysis by Fifth Wall estimated that about 50,000 buildings totalling 1.25bn sq ft in New York City will be affected by the law. These buildings would have to cut their emissions by 36.4m metric tonnes by 2050.
If landlords did nothing, they would be liable for penalties of about $10.7bn per year – or an additional $8.54 per sq ft.
The research also estimated that retrofits to avoid these penalties would cost about $1bn per year but would play an important role in addressing climate change.
Buildings account for about 40% of global energy consumption and 30% of greenhouse gas emissions. As a result, sustainable technology – ranging from better data collection and reporting to solar panels and sustainable materials – has the potential to make a significant positive impact on the environment.
The report said: “The industry’s massive scale affords commercial real estate the opportunity to have a proportionately sizable impact on the fight against climate change. Efficient technology will be a crucial lever in tackling the issue swiftly and efficiently.”
With pressure over climate change mounting from occupiers, lawmakers and investors, Fifth Wall urged the industry to “take this threat seriously and act now to drive change”. It added that real estate owners could soon face hundreds of billions – if not trillions – of dollars in mitigation costs across their portfolios.
Although Local Law 97 has ambitious targets, it mirrors environmental legislative efforts in other parts of the world.
In the UK, the government’s target for the country to become a net-zero emitter by 2050 has spawned a number of regulations to cut emissions in the property sector.
Last week, the government announced new energy efficiency standards to cut carbon emissions in new homes by at least 75% by 2025. It also launched a consultation on meeting similar targets in commercial buildings.
Commercial property owners are already required to bring their EPC rating to at least an E before agreeing a new lease under the Minimum Energy Efficiency Standards that came into force in 2018. From 2023, landlords will be prohibited from continuing to lease space that falls below these standards.
In the EU, the Energy Performance of Buildings Directive requires countries to establish “strong long-term renovation strategies” to decarbonise building stocks by 2050. All new buildings have to be “nearly zero energy buildings” as of 31 December 2020.