Commercial Building Energy Compliance and Reporting Deadlines Approaching
A growing number of states and the District of Columbia have greenhouse gas legislation that includes a requirement for owners of certain commercial buildings to comply with state energy standards and to report building energy use annually. The due dates for compliance reports are approaching, and commercial landlords may need to update their leases to ensure that they have access to information necessary to complete the reports.
- The Maryland Climate Now Solutions Act of 2022 requires owners of “covered buildings” to comply with state-issued standards and measure and report direct emissions data to the Maryland Department of the Environment (the MDE) annually, with a June 1, 2025, due date for initial reports.
- New York City Local Law 97 of 2019 (LL97) sets annual limits on the greenhouse gas emissions of “covered buildings,” the owners of which will be required to file a report with the New York Department of Buildings annually beginning on May 1, 2025.
- D.C. Law 22-257 expands the number of buildings required to report energy use data to the District of Columbia Department of Energy and Environment (DOEE); as of April 1, 2025, more privately owned buildings will be required to track and report energy and water usage.
The Bottom Line
The Maryland Climate Now Solutions Act of 2022 requires the state to reduce state-wide greenhouse gas (GHG) emissions by 60% from 2006 levels by 2031 and attain net-zero statewide GHG emission by 2045. To meet these goals, the Act adds requirements for “covered buildings,” meaning, with certain exceptions, a commercial or multifamily residential building of 35,000 gross square feet or more, excluding the garage area. A covered building does not have to be a single building, but can include two or more buildings with a combined gross floor area of 35,000 square feet or more served by the same electric or gas meter.
The Maryland Department of the Environment (MDE) must develop emissions standards for covered buildings that achieve specified emission reductions. Specifically, privately owned covered buildings must achieve a 20% reduction (based on 2025 levels) in net GHG emissions by January 1, 2030, and net-zero GHG emissions by January 1, 2040. Certain historic properties, public and nonpublic elementary and secondary schools, manufacturing buildings, and agricultural buildings are exempt.
Covered buildings will be required to comply with two performance standards: net direct GHG emissions and site energy use intensity. There will be final compliance standards that must be achieved by covered buildings by 2040, with interim standards in 2030 – 2039. An owner of a covered building will be responsible for making improvements, as needed, to comply with interim and final compliance standards. Buildings that fail to comply with the standards will be subject to an alternative compliance fee.
To facilitate the development of these building emissions standards, MDE must require covered building owners to measure and report direct emissions to the department each year beginning in 2025. On or before June 1, 2025, owners of covered buildings must submit an Initial Benchmarking Report with the building’s total energy consumption and GHG emissions from January 1, 2024 – December 31, 2024. Reports will be due on June 1 of every year thereafter. The Baseline Benchmarking Report due on June 1, 2026, will be used to inform building compliance standards for the future.
As required by the Act, the MDE submitted a proposed plan to the Governor in June that reduces statewide emissions to the levels the Act requires and provides additional detail for building owners about GHG emissions requirements. The MDE will submit a final plan in December.
New York City Local Law 97 of 2019 (LL97), effective January 1, 2024, places limitations on carbon emissions from “covered buildings,” which include most buildings (1) 25,000 gross square feet or more, (2) two or more buildings on the same tax lot that together exceed 50,000 square feet, and (3) two or more condominium buildings governed by the same board of managers and that together exceed 50,000 square feet. LL97 establishes escalating annual GHG emissions limits for each type of building. Specifically, its objective is a 40% reduction in GHG emissions from covered buildings by calendar year 2030 and an 80% reduction in citywide emissions by calendar year 2050. Covered building owners have the flexibility to determine how to comply with the emissions requirements. To meet a building’s carbon limit, owners can lower carbon directly by making improvements that increase energy efficiency, add distributed energy resources, or switch to lower-carbon fuels. Owners can also use credits from eligible renewable energy generation (RECs) or GHG reduction projects, or install solar or battery storage onsite to help meet LL97 requirements.
Covered building owners must file annual reports with the New York Department of Buildings (DOB) beginning May 1, 2025. This report must confirm that such building is either (i) in compliance or (ii) not in compliance with the applicable building emission limit. If the building exceeds the permitted emissions level, or if the owner fails to timely file a report, the owner may be subject to civil penalties. Starting in 2024, covered building owners will face fines totaling $268 per ton of carbon dioxide emitted above their allowance.
However, pursuant to the DOB’s ongoing rulemaking, a covered building owner that has not yet complied with the emissions limitations may be eligible for a two-year extension and a mitigated penalty if it shows it has made “good faith efforts” to comply with LL97. A building owner may demonstrate “good faith effort” by, among other requirements, filing a decarbonization plan with the DOB by May 1, 2025, specifying the upgrades it will make to achieve the 2024 emission reduction requirements. The work necessary to bring the building into compliance with its 2024 requirements must be completed within 24 months of the submission of the decarbonization plan. The building owner cannot purchase RECs to demonstrate compliance.
The DOB will hold a virtual public hearing on the proposed rule on October 24, 2023. Interested parties may also submit comments on the proposed rule by October 24, 2023. You can learn more here.
District of Columbia
D.C. Law 22-257 (the Omnibus Act) became effective in 2019 and amended previously enacted legislation by increasing the District’s renewable energy portfolio standard to 100% by 2032, meaning that 100% of the energy supply must come from a renewable energy source by 2032. By 2041, at least 15% of that energy must come from solar energy generated within the District.
The Omnibus Act implemented benchmarking requirements and associated reporting obligations. All privately owned commercial and multifamily buildings over 25,000 gross square feet are required to measure and annually report energy and water benchmarking data to the DOEE. Starting with calendar year 2024, with reports due April 1, 2025, privately owned buildings over 10,0000 square feet (with some exceptions) are required to benchmark. DOEE publishes a list of buildings that are subject to the benchmarking regulations. Failure to meet the reporting requirements could result in an administrative fine per day of noncompliance.
As benchmarking requirements ratchet down in square footage over time, more buildings will be required to meet performance standards. Such standards, called the “Building Energy Performance Standards” (BEPS) were implemented in the Omnibus Act to help meet the District’s plan to reduce GHG emissions and energy consumption by 50% by 2032. The DOEE must establish property types and associated minimum thresholds for energy performance every six years, i.e., “BEPS Periods.”
BEPS Period 1 began January 1, 2021, with standards determined based upon 2019 benchmarking data (thus, the first BEPS compliance cycle ends December 31, 2026, with end-of-cycle reporting due April 1, 2027). Private buildings larger than 50,000 square feet are required to meet the BEPS Period 1 requirements. Beginning with (a) BEPS Period 2, all private buildings over 25,000 square feet, and (b) BEPS Period 3, all private buildings over 10,000 square feet, must comply.
If a building fails to meet the standard for its property type at the beginning of a BEPS Period, it enters a “Compliance Cycle,” where the building owner must select and complete the requirements of a “Compliance Pathway” by the end of the Cycle. There are two main types of Compliance Pathways – 1) performance based (where buildings must meet a numerical energy performance improvement target by the end of the Compliance Cycle) and 2) action based (where buildings must take specific actions that will improve the building’s energy performance, rather than meet a numerical target). Third-party verification is required at certain points throughout a Compliance Cycle. DOEE published a Guidebook to assist building owners with their Compliance Pathway. Building owners that fail to comply with the Compliance Pathway by the end of the Compliance Cycle must pay an alternative compliance penalty established by DOEE. This penalty amount is based on the gross square footage of the building; the maximum penalty for a building shall be no greater than $7.5 million, adjusted proportionally based to the building’s actual performance relative to its Pathway target.
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