Energy and Climate Policy – Page 2 – The Real Estate Roundtable

SEC Commissioner and Key Senators Support Further Analysis of Climate Disclosure Proposal

Posted on November 9, 2023March 8, 2024 by Abigail Grenadier

One of the commissioners from the Securities and Exchange Commission (SEC) and two U.S. Senators suggested this week that further analysis may be needed for a highly anticipated SEC rule on climate reporting, which includes a proposal for sweeping disclosures on Scope 3 GHG emissions. (Bloomberg Law, Nov. 7 | SEC headquarters in Washington, DC, above)

Stakeholder Comments

Given that the SEC has received more than 16,000 stakeholder comments on the proposal, Republican SEC Commissioner Mark Uyeda said, “Before the Commission adopts any final rule that significantly deviates from the proposal, it should seriously consider re-proposing the rule with revised rule text and an updated economic analysis.” (Ayuda’s comments, Nov. 7 and The Hill, April 6)

SEC Chair Chair Gary Gensler indicated in March that the agency’s climate-related reporting rule may be scaled back. (CNBC, March 7 and Roundtable Weekly, March 10)

Senators Support Additional Feedback

Sen. Bill Hagerty (R-TN), left, and Roundtable Board Member Geordy Johnson (CEO, The Johnson Group) at The Roundtable’s 2023 Annual Meeting in June.

Sens. Bill Hagerty (R-TN) and Joe Manchin (D-WV) also expressed support this week for obtaining additional feedback about the SEC’s proposed rule. Sen. Manchin chairs the Senate Energy and Natural Resources Committee and Sen. Hagerty serves on the Senate Banking Committee. (Hagerty-Manchin letter and PoliticoPro, Nov. 9)

The lawmakers wrote to SEC Chairman Gary Gensler about recent California state laws that require companies to disclose their emissions, which beat the SEC to the punch on releasing final climate reporting rules. (Roundtable Weekly, Sept. 22 and The Real Estate Roundtable’s summary of the California legislation.)

The Senators’ letter states, “The interconnectedness of the California requirements and the SEC’s proposal is undeniable: thousands of businesses would end up being subject to both the California requirements and the SEC’s rule, if finalized. However, key differences between the two raise significant compliance questions that the SEC should thoroughly review.”

Roundtable Comments on Scope 3

Scope 3 refers to indirect emissions that are part of an organization’s value chain but not owned or controlled by the reporting company. The 2022 SEC proposal would require corporate issuers of securities to estimate and report Scope 3 emissions “if material” in 10-Ks and other filings. (SEC News Release, March 22, 2022)

Roundtable comments submitted in June 2022 emphasized that the SEC’s proposed directive, which would mandate that companies report on Scope 3 emissions “only if material,” is a “back-door mandate” that should be dropped. The comment letter added, “No registrant should be effectively required to report on indirect emissions beyond its organizational or operational boundaries.” (Roundtable Weekly, June 10, 2022),

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) plans to respond to any further developments on the SEC’s proposed climate disclosure rule or other climate-related regulatory proposals affecting CRE.

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US-DOE Lauds CRE’s Efficiency Gains and Carbon Reductions

Posted on October 27, 2023October 27, 2023 by Abigail Grenadier

Roundtable members are among the commercial real estate partners recognized in the U.S. Department of Energy’s (DOE) Better Buildings Initiative 2023 progress report released on Monday. This voluntary public-private partnership with more than 900 participating organizations has collectively saved $18.5 billion through energy efficiency improvements, and cut carbon dioxide emissions by nearly 190 million metric tons, since its launch in 2011. (DOE’s Better Buildings Initiative Report and PoliticoPro, Oct. 23)

DOE’s CRE Partners

This week’s Progress Report from DOE shows that more than 165 partners from various industry sectors who participate in its separate Better Climate Challenge have committed to reducing greenhouse gas (GHG) emissions (scope 1 and 2) by at least 50% over 10 years without the use of offsets. The report’s outstanding GHG Emissions Reduction Goal Achievers include companies led by RER members.

The Real Estate Roundtable and several of its partner real estate organizations—including the National Multifamily Housing Council (NMHC), American Hotel & Lodging Association (AHLA), Building Owners & Managers Association International (BOMA), Pension Real Estate Association (PREA), and Urban Land Institute (ULI)—are noted in the report as Industry Organization Partners.

U.S. Secretary of Energy Jennifer M. Granholm said, “To meet President Biden’s ambitious climate goals, the public and private sector need practical pathways to reduce emissions while cutting costs—and that’s exactly what they get from DOE’s Better Building Initiative.” (DOE news release and the report’s Commercial Real Estate Sector Spotlight)

Tools and Best Practices

DOE’s partners represent almost every sector of the American economy: nearly 30 of the country’s Fortune 100 companies, nearly 20 of the top 50 U.S. employers, 14% of the U.S. manufacturing energy footprint, and 13% of total commercial building space, as well as more than 90 state and local governments.

The DOE report also provides case studies for collaborations across sectors to access insights, strategies, and through the agency’s “Decarbonization Resource Hub.”

DOE’s Better Buildings Initiative website provides extensive resources on the agency’s wide-ranging effort to partner with leaders in the public and private sectors to make the nation’s commercial buildings, industrial plants, and homes more energy-efficient by accelerating investment and sharing successful best practices.

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White House Announces Federal Building Performance Standards

Posted on December 10, 2022October 27, 2023 by Trey Jackson

The White House on Wednesday released a new standard to reduce scope 1 “direct” emissions from fossil fuels combusted to heat and cool federal buildings. (CNBC |UPI | PoliticoPro, Dec. 7)

Federal Building Performance Standard (BPS)

The Federal BPS from the White House Council on Environmental Quality (CEQ) applies to the 300,000 existing buildings owned by the U.S. government. It sets a 2030 goal for each federal agency to eliminate scope 1 emissions in 30% of its facilities. (White House Fact Sheet)
The Federal BPS “prioritiz[es] energy efficiency and the elimination of on-site fossil fuel use.” It is a stepping-stone toward the Biden administration’s ultimate goal of “net zero” emissions by 2045 across all federal facilities. (Exec. Order 14057, Dec. 8, 2021)
The Federal BPS’s “performance pathway” would achieve the goal for zero scope 1 emissions “through efficient electrification of all equipment and appliances.”
The Federal BPS also offers a “prescriptive pathway” for specific replacement of gas-fired furnaces and boilers. This alternate compliance route recognizes that “full decarbonization may not be practicable today” considering a building’s size and climate zone—and is designed to account for the market availability and cost-effectiveness of electrification equipment.

Relevance to Other GHG Standards

While the Federal BPS intends to reduce on-site scope 1 emissions, it will likely increase scope 2 emissions from electricity purchased by the federal government to power electric heat pumps, hot water heaters, and similar equipment.
Furthermore, the Federal BPS—and its focus to reduce fossil fuels on-site—might set an easier standard compared to a number of emerging BPS mandates at the state and municipal level.
Some local BPS laws may effectively require buildings to reduce overall GHG emissions at their source, which depends on whether local power grids provide “clean” electricity from solar, wind, or other renewable energy. EPA data that profiles “fuel mixes” used to generate electricity, however, indicate that coal, gas and other non-renewables account for 80 percent of the fuels that power electric grids nationally.
Also, local BPS laws may not offer a “prescriptive” compliance path similar to the Federal BPS that contemplates cost effectiveness in building electrification retrofits.
Notably, the Federal BPS sets no requirements for U.S.-owned buildings to reduce their upstream and downstream “scope 3” emissions outside of an owners’ control. (EPA website)
Possible measurement and reporting of scope 3 emissions has been a controversial element of a private sector, corporate GHG disclosure rule proposed by the U.S. Securities and Exchange Commission that has not yet been finalized. (Roundtable Weekly, June 10)

Other Building Policies

The U.S. Department of Energy (DOE) also on Wednesday proposed a rule that would establish the first-ever emissions standards for new federal construction and major renovations. Like the Federal BPS for existing federal assets, DOE’s proposed rule “aims to accelerate” electrification by phasing out on-site fossil fuel usage for heating and hot water. (DOE news release)
The White House also announced this week that California has joined the National Building Performance Standards Coalition, a group of over 30 states and localities committed to adopt BPS policies by Earth Day 2024. (White House Fact Sheet)

The White House’s announcements touted DOE’s Better Climate Challenge—a voluntary “pledge” that includes Roundtable members as “partners” who have committed to reduce portfolio-wide scopes 1 and 2 emissions by at least 50% within 10 years. The Roundtable is an “ally” supporting DOE’s Challenge. (Roundtable Weekly, March 4)

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Advisory Panel Endorses SEC Proposed Disclosure Rule

Posted on September 23, 2022March 8, 2024 by Trey Jackson

A Securities and Exchange Commission (SEC) advisory panel on investor issues this week endorsed the agency’s proposed climate disclosure rule, including a requirement for registered companies to support Scope 3 indirect emissions “if material” to investors. (Bloomberg Law and advisory panel recommendation, Sept. 21)

Scope 3 & CRE

The Investor Advisory Committee’s recommendations are not binding, although the SEC could adopt final rules on corporate climate reporting requirements this fall. (BGov, Sept. 21)
The Real Estate Roundtable submitted comments on June 10 objecting to the Commission’s Scope 3 approach. The comments noted that real estate companies neither control nor have access to data regarding emissions from third parties in their “value chains.” (Roundtable Weekly, June 10 and June 24)
A joint industry letter filed on June 13 from 11 national real estate trade groups also opposed the SEC’s proposed approach, emphasizing that corporate disclosures on indirect Scope 3 emissions should be voluntary.

SEC Authority & EPA Funding

Litigation is expected to challenge any final Commission regulation—especially in light of a recent Supreme Court decision in West Virginia v. EPA that questioned whether the SEC has “clear” authority from Congress to regulate climate matters.
House Financial Services Committee Ranking Member Patrick McHenry (R-NC) and other Republican committee members wrote to SEC Chair Gary Gensler this week to request the SEC provide a list of all pending and upcoming rulemakings with the specific Congressional authority supporting each action. (Policymakers’ letter, Sept. 20)
Apart from the SEC, the Environmental Protection Agency (EPA) received a modest sum from Congress ($5 million) under the recently enacted Inflation Reduction Act (IRA) to help standardize voluntary corporate commitments to reduce greenhouse gas (GHG) emissions.
The new EPA funds are not “meant to create a parallel program … in case the SEC rule is scrubbed,” but will rather be used for climate models and software to hold companies “accountable” for the climate commitments they are already making. (BGov, Sept 21)
EPA backed the SEC’s climate disclosure proposal in a recent letter— stating the Commission has “broad authority to promulgate disclosure requirements that are ‘necessary or appropriate … for the protection of investors.’”

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will remain engaged with policy makers on climate risk disclosure rules that affect commercial real estate.

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Senators Challenge SEC Chair on Proposed Climate Rule

Posted on September 16, 2022March 8, 2024 by Trey Jackson

Senate Banking Committee members challenged Securities and Exchange Commission (SEC) Chair Gary Gensler, above, during an oversight hearing yesterday about the agency’s proposed climate disclosure rule. (CQ, Sept. 15 and Yahoo Finance, Sept. 16)

SEC Authority Questioned

Committee Ranking Member Pat Toomey (R-PA) opened the hearing by stating, “The SEC is wading into controversial public policy debates that are far outside its mission and its expertise.”
Toomey pressed Gensler about a June Supreme Court ruling that executive branch agencies “cannot use novel interpretations of existing law to pretend they have legal authority to support sweeping policy changes, including on climate change, that Congress never intended.” (Toomey Opening Statement)
Toomey asked, “In light of the EPA v. West Virginia case, have you given any consideration to rescinding that rulemaking?” Gensler replied that the Commission is “seriously” considering the high Court ruling and 14,000-plus public comments to assess its legal authorities to ensure that registered companies provide material, decision-useful information about climate risks to investors. (SEC docket with list of organizations and individual comments)

Senator Jon Tester (D-MT) explained that the SEC’s proposal would require farms and other small businesses to estimate and disclose carbon emissions because they sell products and services to public companies. Senators Mike Rounds (R-SD) and Steve Daines (R-MT) shared Tester’s concerns (CQ, Sept. 15)

A CRE Priority

The SEC’s climate proposal, if finalized, would require all SEC registrants to quantify direct GHG emissions (“Scope 1”) and emissions attributable to electricity purchases (“Scope 2”) through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)
The SEC also proposed that a company would need to report on “Scope 3” indirect emissions if they are “material” to investors. In June 10 comments, The Roundtable objected to the Commission’s proposed Scope 3 approach because real estate companies neither control nor have access to data regarding emissions from third parties in their “value chains.” (Roundtable Weekly, June 10 and June 24)
A joint letter filed on June 13 from 11 national real estate industry trade groups echoed the issues raised by The Roundtable in its earlier comments.

The SEC is expected to issue a final climate reporting disclosure rule sometime this fall. If the Commission votes to regulate Scope 3 emissions, the recent SCOTUS decision in West Virginia v. EPA is likely to spark litigation, raising questions as to whether the SEC has authority from Congress to regulate climate disclosures and emissions.

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Senate and House Pass The Inflation Reduction Act of 2022

Posted on August 12, 2022January 23, 2024 by Trey Jackson

The Inflation Reduction Act of 2022 (IRA) heads to President Joe Biden’s desk for his signature, following passage by the House today and the Senate on Sunday. After weeks of negotiations, the comprehensive economic package primarily brokered by Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) reflects Democratic priorities to combat climate change, reduce prescription drug costs, and lower the deficit by roughly $300 billion over the next decade. (Washington Post, Aug. 7; Roundtable Weekly, July 29)

Why It Matters

After Congress passed the IRA today, President Biden stated, “With the passage of the Inflation Reduction Act in the House, families will see lower prescription drug prices, lower health care costs, and lower energy costs. I look forward to signing it into law next week” (Twitter, Aug. 12 | Wall Street Journal, Aug. 12)
The $790 billion reconciliation proposal includes nearly $370 billion in climate spending that affects “clean energy” measures important to commercial real estate, the largest federal clean energy investment in U.S. history. (NPR, Aug. 7) (see story below)

CRE Impact

Real Estate Roundtable President and CEO Jeffrey DeBoer commented today, “The revised Inflation Reduction Act is a welcome step toward boosting economic growth by spurring extensive investments in clean energy and climate measures that benefit both our industry and our country. We applaud Congress for recognizing and protecting the critical role of carried interest provisions in incentivizing the risk-taking necessary for robust economic development. We look forward to working with our partners in industry and government to implement this legislation.”

Proposed changes to the taxation of carried interest were cut from the IRA last week at the request of Sen. Kyrsten Sinema (D-AZ). The Roundtable and 14 other national real estate organizations wrote to all members of Congress on Aug. 3 in strong opposition to the measure. (Coalition letter, Aug. 3 | Roundtable Weekly, Aug. 5 )
The IRA’s largest tax increase is a 15% corporate minimum tax on businesses with profits over $1 billion whose reported book income exceeds reported taxable income. The measure is estimated to raise $313 billion.
The final bill includes a 1 percent tax on what public companies spend on stock buybacks. However, it did not include any changes to the state and local tax (SALT) deduction. (CQ, Aug. 7)
The package also includes protections that would preserve the value of the low-income housing tax credit for investors (typically large banks) that use the credit to reduce their effective tax rate.

In the coming weeks, The Roundtable will continue updating summaries of the tax and energy provisions in the IRA while also analyzing the direct and indirect impact on commercial real estate. (See below for Clean Energy Tax Incentives Fact Sheet)

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Roundtable “Fact Sheet” Summarizes Inflation Reduction Act’s “Clean Energy” Tax Incentives Important to Real Estate

Posted on August 10, 2022October 27, 2023 by Trey Jackson

The Inflation Reduction Act (IRA) that passed Congress today (see story above) – “includes the largest expenditures ever made by the federal government to slow global warming.” (New York Times, Aug. 7) The bill “would spend nearly $370 billion on a raft of tax credits to help stimulate adoption of clean energy technologies.” (POLITICO, July 28)

Key CRE Credits and Deductions (RER Fact Sheet)

A number of the IRA’s revisions to the federal tax code can help the U.S. real estate sector reduce GHG emissions. The Real Estate Roundtable has prepared a fact sheet summarizing key IRA incentives, including:

A revised tax deduction at Section 179D, to encourage existing commercial building “retrofit” projects that cut energy consumption by at least 25%;

A revised tax credit at Section 45L, to encourage new energy efficient multifamily construction;

An expanded tax credit at Section 48, to support investments in solar, combined heat and power, microturbines, energy storage, dynamic glass, grid interconnection, fuel cells, geothermal heat pumps, and other clean energy technologies;

A reformed tax credit at Section 30C, for electric vehicle charging stations located in low-income or high poverty census tracts; and

A new code section to allow businesses that cannot typically benefit from tax incentives because of income limitations (such as REITs) to transfer certain credits to unrelated third parties.

The Senate Finance Committee has provided a summary of all incentives in the IRA’s “Energy Security” Subtitle D.

Roundtable Advocacy

The Roundtable has long advocated for code changes that can make clean energy incentives more usable for building owners, managers, designers, and financiers. (See Roundtable Weekly, Nov. 19 and May 28, 2021).

The IRA includes a number of The Roundtable’s recommended changes. As our analysis of Subtitle D continues, RER’s fact sheet will be updated and revised.

The Internal Revenue Service (IRS) is expected to issue multiple regulations and guidance documents in the coming months that implement the new law. The Roundtable will provide comments as new rules are proposed to help accelerate the CRE industry’s investments in tackling the climate crisis.

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Proposed Carried Interest Provisions, Opposed by Real Estate Industry, Cut From Reconciliation Bill

Posted on August 6, 2022October 27, 2023 by Trey Jackson

Proposed changes to the taxation of carried interest were cut from Senate Democrats’ broad Inflation Reduction Act (IRA) yesterday at the request of centrist Sen. Kyrsten Sinema (D-AZ). The Roundtable and 14 other national real estate organizations wrote to all members of Congress on Aug. 3 in strong opposition to the measure. (Coalition letter, Aug. 3 | Wall Street Journal, Aug. 4 |Tax Notes, Aug. 5). Photo above: Sen. Sinema at The Roundtable’s 2022 Spring Meeting.

Vote on Revised Reconciliation Bill

Sinema announced her decision in a statement released Thursday night, commenting she would “move forward” with the $790 billion reconciliation bill after removal of the carried interest provision—subject to the Senate Parliamentarian’s review of the revised bill.
Yesterday, Senate Majority Leader Chuck Schumer (D-NY) announced that the chamber will begin consideration of the bill on Aug. 6, setting up a weekend process of around-the-clock votes on hundreds of amendments to the bill.
Real Estate Roundtable President and CEO Jeffrey DeBoer commented today, “The wide-ranging climate measures in the revised bill include the most extensive clean energy investments ever considered by Congress—a positive step welcomed by the real estate industry. We are also pleased to see that carried interest provisions in the original version of the Inflation Reduction Act are out, since they would have clearly harmed the residential and commercial real estate industries, job creation and the economy.”

Real Estate’s Carried Interest Opposition

The real estate coalition urged policymakers to preserve current carried interest law and detailed major concerns with the proposed changes to carried interest that were in the original IRA, brokered last week between Sens. Schumer and Joe Manchin (D-WV). (Coalition letter, Aug. 3 and Roundtable Weekly, July 29)
The Aug. 3 coalition letter noted, “The carried interest proposal would slow housing production, discourage the capital needed to reimagine buildings to meet post-pandemic business needs, hamper job creation and create an additional unknown in an already confusing economic environment.”
The real estate coalition letter concluded, “Now is not the time to impose a tax increase on the countless Americans who use partnerships to develop, own, and operate housing and other commercial real estate. We urge you to preserve current tax law as it relates to carried interest.”

Senate Considers Changes

Senate Democrats are making additional changes to the package, including adjusting the minimum tax on corporations and adding a 1% excise tax on stock buybacks. (New York Times, Aug. 4 and Punchbowl News, Aug. 5)
Before a final Senate vote can be held, the Senate Parliamentarian must ensure the bill complies with special budget reconciliation rules, which require provisions directly relate to spending and revenue—not policy.
One hurdle before the Parliamentarian is a clean energy tax credit that proposes a bonus incentive to developers who pay prevailing wages on certain projects. If it is determined to be a policy change, it will be dropped from the bill. (POLITICO Power Switch, Aug. 3)
A number of the IRA’s proposed revisions to the federal tax code could leverage greater private sector investments in clean energy building technologies, including:
- A deduction to help make commercial and multifamily buildings more energy efficient (Section 179D),
- A credit to encourage investments in renewable energy generation and other low carbon equipment such as solar panels, energy storage, and combined heat and power systems (Section 48), and
- A credit to incentivize installations of EV charging stations (Section 30C).

The Roundtable continues to work with its policy advisory committees and national real estate organization partners to assess how details in the bill language could impact CRE. These policies will be a focus of discussion during The Roundtable’s Sept. 20-21 Fall Meeting in Washington, DC.

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Sens. Schumer and Manchin Agree on Reconciliation Bill With Carried Interest and Energy Efficiency Provisions

Posted on July 30, 2022October 27, 2023 by Trey Jackson

An unexpected agreement announced Wednesday night between Senate Majority Leader Chuck Schumer (D-NY), above right, and Sen. Joe Manchin (D-WV), left, on a $790 billion reconciliation proposal includes $14 billion in increased taxes on carried interest and a 15% corporate minimum tax—in addition to $369 billion in climate spending that affects “clean energy” measures important to commercial real estate.

Senate Democrats are hoping to pass some version of the Schumer-Manchin language on a party-line vote before the upper chamber begins its summer recess on Aug. 8. (Senate Democrats’ joint statement and one-page bill summary, July 27 | Committee for a Responsible Federal Budget, July 28)

Legislative Details

Today, The Real Estate Roundtable held an all-member virtual town hall to discuss major provisions within the 725-page Inflation Reduction Act (IRA) of 2022. The Roundtable is working with its policy advisory committees and national real estate organization partners to assess how details in the bill language could impact CRE.
Real Estate Roundtable President Jeffrey DeBoer stated, “The Roundtable is engaged with policymakers and Capitol Hill staff on the potential impact of the proposed bill on real estate capital formation, economic growth, clean energy investments, and affordable housing development. The industry is working together to mitigate any negative consequences for CRE before policymakers hold an eventual vote on a final bill.”

Taxes & Clean Energy

The IRA’s largest tax increase is a new 15% corporate minimum tax on businesses with profits over $1B whose reported book income exceeds reported taxable income. The measure is estimated to raise $313B. The package also includes protections that would preserve the value of the low-income housing tax credit for investors (typically large banks) that use the credit to reduce their effective tax rate.
The smallest tax increase would raise $14B in revenue by extending the capital gains holding period requirement for carried interest from 3 years to 5 years, although there is an exemption for real estate. Additionally, there are technical reforms to the holding period rules for measuring the 3- or 5-year holding period. (Deloitte Tax News & Views, July 29)
The carried interest holding period change includes a real estate exception for gain associated with assets used in a real property trade or business. The language in the IRA on carried interest is identical to text in the House Ways and Means Committee’s previous reconciliation bill last year—language that was dropped from the version that passed the full House. (Roundtable Weekly, Sept. 17, 2021)
The Schumer-Manchin agreement also proposes significant reforms to Section 179D—the tax code’s main provision to incentivize energy efficient commercial buildings. The 179D reforms are geared to encourage more existing building “retrofits” although maximum incentives amounts depend on compliance with heightened wage and labor standards.
Tax incentives are also included to encourage investments in solar panels, energy storage, and EV charging stations. (See Summary of the bill’s Energy Security and Climate Change Investments)

Timeline

There are several challenges to the Senate Democrats’ timeline for passage of the bill in early August.
Senate Democrats need all 50 members of their caucus present for an eventual budget reconciliation vote, along with Vice President Kamala Harris to break an anticipated tie with 50 Republicans. Yet Covid-19 infections have caused recent absences. (The Hill, July 28)
The bill was sent to Senate Parliamentarian Elizabeth MacDonough to see if it conforms with reconciliation budget rules, a process that will spill over into next week. (BGov, July 29)
Arizona Democratic Senator Kyrsten Sinema is a key centrist vote, considering she has long opposed changes to the taxation of carried interest. Sinema’s spokesperson Hannah Hurley said yesterday that the Senator is “reviewing the text and will need to review what comes out of the parliamentarian process.” (BGov, July 29)

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EPA Highlights Federal Resources to Help Standardize State, Local GHG Laws on Buildings

Posted on July 1, 2022October 27, 2023 by Trey Jackson

The U.S. Environmental Protection Agency (EPA) released a policy brief on Tuesday that provides a “formal recommendation” on metrics that states and cities should consider as they may develop GHG-related mandates on commercial and multifamily buildings.

Trends in Building Performance Standards (“BPS”)

A national BPS law does not exist (and is not on Congress’s horizon) for emissions limits or efficiency requirements on private sector buildings.
Nor do U.S. agencies have any current ability to create a general federal building energy code or enact rules that establish GHG mandates on real estate assets, as made evident by yesterday’s SCOTUS decision in West Virginia v. EPA. (SCOTUSblog, June 30)
However, a number of states and cities have developed or are considering their own climate-related building regulations according to the National BPS Coalition launched by the Biden Administration.
Local BPS laws can require CRE owners to pay for energy efficiency retrofits and building electrification projects—or else pay fines and penalties.
The White House Council on Environmental Quality (CEQ) is creating a BPS for buildings owned by the federal government. Development of the “federal BPS” is reportedly delayed because of “data shortfalls.” (Bloomberg Law, June 29)

RER Seeks Voluntary Federal Guidelines

The Real Estate Roundtable has repeatedly expressed to policymakers—including the Federal Energy Regulatory Commission (FERC)—that workable, federal-level, voluntary guidelines are needed to help standardize the “hodge-podge” of divergent local laws that can vary in their regulations on buildings.
The Roundtable’s June 10 comment letter to the SEC urged the creation of a “safe harbor” for proposed emissions disclosures that are based on the best available GHG calculation tools, standards and data offered by federal agencies. (Roundtable Weekly, June 10).
EPA branch chiefs heard from The Roundtable about the need for federal guidance to help unify local BPS laws at the June 17 meeting of the Sustainability Policy Advisory Committee, above. (Roundtable Weekly, June 17) SPAC is chaired by Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust) and vice-chaired by Ben Myers (VP, Sustainability, BXP).

EPA’s Recommended BPS Metrics

SPAC members participated in a number of EPA-sponsored “workshops” that led to the recommended federal BPS metrics.
EPA’s recommended metrics are intended to “develop consistent policies that reflect the business realities faced by building owners.” (EPA’s Policy Brief and Recommended Metrics publication, above)
Specifically, EPA recommends that any locality considering a BPS should focus on measures within a building owner’s ability to control—such as “on-site” reduction of energy usage or “direct” GHG emissions.
EPA also recommends that any energy-usage intensity requirement should not be “one size fits all.” Rather, BPS rules should be “normalized” to reflect variables such as a building’s type, hours of operation, and weather conditions.
EPA’s recommendations are preferable to other proposals that could make CRE owners responsible for how “clean” the electric grid should become—an issue beyond owners’ control. (Roundtable Weekly, April 9, 2021).

A number of localities are contemplating laws to ban natural gas and other fossil fuels within their borders. EPA’s encourages any such jurisdiction to consider long-term, published, and incremental “phase-out” schedules so building owners can “plan for costly and difficult equipment replacements.”

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