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Climate Mobilization Act: As Emission Caps Loom, Owners Wait And Plan

A set of aggressive climate benchmarks is looming over New York City’s real estate industry, requiring that buildings over 25K SF slash their carbon emissions by as much as 80% by 2050. 

Yet, even with those goals hanging over their heads, most owners and developers are taking a wait-and-see approach.


“The sector is taking its time,” said Nathalie Gilet, manager of sustainability services at Mazars. “For all but the very worst performers, the first real target is 2030, so most companies right now are waiting to see how everything develops.”

The Climate Mobilization Act, which the New York City Council passed in April, laid out ambitious goals to curb the city’s emissions. The law places a special focus on buildings, which are responsible for about 70% of the city’s greenhouse gases.

Most commercial buildings will be required to meet benchmarks for emissions, which will be more or less stringent according to their size and use — multifamily buildings have different goals than storage facilities, for instance. The benchmarks have been defined so that, collectively, large buildings will have to cut their emissions by 40% by 2030, 60% by 2040 and 80% by 2050, calculated from a 2005 emissions baseline. 

If they fail to meet their benchmarks, building owners will be fined $268 for every ton of carbon they emit above their limits. For the worst offenders, those fines could reach into the hundreds of thousands — or even millions — every year.

However, the law’s limits were chosen so that 80% of current buildings already meet the first benchmark. Only the worst-performing 20% of commercial buildings — the true energy hogs — will face fines if they do nothing by 2025. Most of the rest have until 2030 to make changes. The city’s greenest buildings may not have to make changes until 2040, if ever.

With a few years before the first benchmark, landlords are taking stock of their assets and exploring strategies to cut their emissions. Courtney Sandifer, senior director of tax at Mazars, said that clients have been reaching out to him to identify the best path forward.

“We can help them make sense of the law and show them how much noncompliance would cost,” Sandifer said. “We can then model and plan the necessary investments and identify the incentives, grants, programs and tax credits that would help them offset those costs.”


By working with sustainability and tax consultants, building owners can sketch out a plan for the coming decades. However, a few of the details surrounding how the program will be implemented remain up in the air.

First, the Climate Mobilization Act created a new Office of Emissions and Energy Performance, which, among other responsibilities, plans to receive appeals from building owners seeking clemency from emissions fines. If landlords can prove that their buildings underwent financial hardships, they may be immune from fines. However, the office has not yet been set up. Gilet said some owners are waiting to get clarification on exactly what constitutes a financial hardship and to gauge how lenient city officials will be.

There is also the matter of a proposed market for building emissions credits. New York City is collaborating with cities including Hong Kong, London, Singapore and Toronto to create a building climate efficiency trading scheme, where building owners will be able to trade carbon emission permits and energy-efficiency credits.

How such a market will work, and whether it would give additional incentives, for example, to support low-income neighborhoods, remains to be seen. Gilet said that dynamism in the market will depend on how fast landlords can retrofit their buildings, whether more cities join in and what role energy companies take.

“It is difficult to predict so far out, since many elements are still under consideration,” she said. “There hasn’t been much reaction from the NYC market so far, because the CMA is still very new.”

Landlords who have already made green updates are struggling to find new ways to cut emissions. Carlos Martins, partner at Mazars, said that owners with LEED-certified buildings are unsure what else they can invest in to hit the upcoming benchmarks. 


But Gilet listed a few techniques that buildings might consider. Updating single-pane glazing to double-pane or even smart glass can help cut energy consumption, as can upgrading the materials used for building insulation. Global trends, such as the European passive house movement, are also inspiring new design concepts in urban building, Martins said.

The big question is how landlords are going to pay for these green updates. The CMA created a program for Property Assessed Clean Energy financing, known as PACE, which offers loans to finance the installation of renewable energy systems and energy-efficiency improvements. 

PACE loans are repaid as a charge on a building’s tax bill — the annual energy cost savings covers the cost of the payments. Repaying PACE loans, though, can be thorny.

“It’s complicated in terms of mortgage priority,” Sandifer said. “PACE is a loan that gets tacked on to property taxes, so the question arises of who gets paid and when.”

While many utility companies and organizations in the New York City area offer financing and free advice for energy-efficiency efforts, Sandifer said he would not be surprised if New York State began providing some form of financial assistance, such as tax credits, to defray the cost of renovations.

Martins pointed out that, as much as the CMA places a financial and logistical burden on New York’s CRE community, landlords should think of it as an opportunity. Landlords have the chance to improve their standing on the GRESB, an index that measures the environmental, social and governance impact of real estate portfolios. Institutional investors have increasingly been looking to the GRESB as a risk management tool, he said. 

Plus, owners who retrofit their buildings may see a bump in net operating income. Better insulation and air circulation mean lower energy bills and greater comfort for tenants. Asset owners can hope for what Gilet called a “greenium” — a higher asset value thanks to environmentally friendly features.

“Tenants are much more demanding as far as what is in the buildings that they’re occupying,” Martins said. “Companies are looking to be more conscious with sustainability efforts.”

Though New York City landlords may feel as though they have been targeted or singled out by the CMA, Gilet said they will not be alone for long.

“It’s a really impressive law, the kind that we need if we want to get serious about reversing the effects of climate change,” she said. “We should expect other cities to follow suit, but New York will get to lead the way.”

This feature was produced in collaboration between Bisnow Branded Content and Mazars USA. Bisnow news staff was not involved in the production of this content.