Potential Loophole to NYC’s Green Buildings Law Activates This Summer, Climate Advocates Warn

In the coming weeks, renewable energy credits will go on sale for the first time since Local Law 97—which requires most large property owners to cut their buildings’ emissions—was enacted. Climate experts worry it could set back the city’s decarbonization goals.

Beginning this summer, building owners will be able to offset some of their carbon emissions in accordance with Local Law 97, the city’s framework for reducing pollution from buildings, by purchasing credits associated with a new renewable energy project.

The Champlain Hudson Power Express (CHPE) reached commercial operation in mid-May and is projected to meet up to 20 percent of New York City’s energy needs, according to a press release from Gov. Kathy Hochul. The project transmits hydropower from Quebec to Astoria, Queens, where it connects to the city’s electrical grid.

“[CHPE] brings increased reliability to our grid by delivering enough electricity to power over 1 million homes, reducing pollution and improving air quality in our most vulnerable communities,” said Doreen M. Harris, president and chief executive officer of the New York State Energy Research and Development Authority (NYSERDA), in a press release.

While CHPE will generate a greater percentage of New York City’s electricity usage from renewables, it also brings a slew of renewable energy certificates (RECs) to the market, which NYSERDA purchased via contract and will resell to building owners beginning in July. RECs each represent one megawatt-hour of renewable energy and are used to finance green energy projects, or track compliance with clean energy standards.

By purchasing RECs, building owners can offset some of their emissions from electricity usage, thereby avoiding penalties for noncompliance with Local Law 97. Advocates believe this could disincentivize them from implementing the long-term renovations necessary to cut their properties’ emissions and meet the law’s decarbonization targets.

Pete Sikora, senior advisor at New York Communities for Change, says that the current arrangement allows “effectively unlimited use of RECs,” which undermines the spirit of Local Law 97. The law, passed in 2019, requires properties larger than 25,000 square feet to make energy efficiency upgrades to meet increasingly stricter emissions standards over time.

“The city gets jobs, it gets lower utility bills, it gets more valuable properties, it gets lower pollution. All of those things are huge positives for the city from Local Law 97,” said Sikora. “Those positives evaporate when developers and building owners choose to buy RECs instead of investing in their properties.”

Unlike upstate New York, which derives around half of its electricity from renewable sources, New York City sources the vast majority of its electricity from oil and natural gas due to grid transmission constraints. For this reason, New Yorkers’ use of air conditioners or even eco-friendly heat pumps still burn fossil fuels, and building operations compose the majority of the city’s greenhouse gas emissions.

RECs can only be purchased to offset emissions from electricity, meaning that buildings with gas boilers or other fossil fuel-reliant utilities will still be on the hook for penalties for noncompliance with Local Law 97 (unless they make changes to lower those emissions).

Proponents of the REC policy argue that buildings that have already invested in electric heat pumps and stoves cannot control how much of their electricity use is still derived from fossil fuels, since the city’s energy grid composition varies depending on demand. For example, “peaker” plants, which run on natural gas and oil, come online when there is high demand, like during a heat wave or extreme cold spell.

“It’s not helping anyone in the long term avoid doing the real work, which is cleaning up their own buildings’ emissions and getting rid of the burning of gas in their own buildings,” said Dan Zarrilli, who was chief climate policy adviser for former Mayor Bill de Blasio. “The status of the grid is well outside of any individual building owner’s control.”

On the other hand, even the owners of electrified buildings can pursue additional reforms that lower emissions, such as weatherization improvements that better insulate buildings and maximize energy efficiency, Sikora says. 

Analysis from the Urban Green Council estimated that 50 percent of city building emissions that exceed Local Law 97’s 2030 limits—which will be more stringent than those established during the initial 2024-2029 period—could be offset using RECs. For office properties, this number rises to 85 percent.

In response to the potential widespread use of RECs to delay important building upgrades, Councilmember Carmen de la Rosa introduced a bill in the City Council that would cap the number of credits a property owner could buy, allowing them to use RECs to offset no more than 10 percent of their building’s electricity emissions in excess of the legal limit. The Council failed to pass a similar bill last year.

RECs are the primary mechanism by which the CHPE contract was financed, and NYSERDA will resell them to voluntary buyers starting in July or August, at which point they’ll publish the quantity being sold and a presale price. 

Climate advocates worry that a low REC price and no limitations on quantity may incentivize building owners to offset all of their emissions using RECs, rather than investing in the eco-friendly building upgrades Local Law 97 was meant to spur.

When asked, a spokesperson for Mayor Zohran Mamdani said City Hall is “committed” to making sure owners follow through on reducing pollution from their properties. 

“The Mamdani Administration remains committed to helping property owners reinvest in their own buildings and reduce carbon emissions through energy efficiency retrofits,” said Jeremy Edwards, deputy press secretary for Mayor Mamdani.

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