Tag: Energy Policy

2023 Annual Report – Sustained Strength, Sustained Solutions

Posted on by Trey Jackson

View Full Report – 2023 Annual Report – Sustained Strength, Sustained Solutions

    Roundtable, Nareit Critique Proposed International Standard for Building Emissions

    Posted on by Trey Jackson
    Greenhouse gas emissions

    As the buildings sector makes progress on reducing greenhouse gas emissions to meet global climate goals, The Roundtable and Nareit submitted comments today about proposed guidance that would create “unworkable and unattainable” standards. (RER-Nareit joint comments)

    Science-Based Targets

    • A number of real estate companies use science-based protocols to establish portfolio-wide emissions reductions targets. The Roundtable convened a working group of its Sustainability Policy Committee (SPAC) to review and assess SBTi’s draft guidance. Nareit conducted a similar process with its members. These efforts resulted in the organizations’ unified position.

    RER-Nareit Position

    • The Roundtable and Nareit seek a constructive dialogue with SBTi, as their letter explains. However, the real estate groups expressed concern that SBTi’s proposal would require building stakeholders to set emissions targets for sources and operations they do not control, based too heavily on estimates and speculation as opposed to actual and verifiable data.

    • Key points raised in the joint comments include:

      Nareit and Real Estate Roundtable logos
      • Building owners must have options to purchase off-site renewable energy when they set science-based targets. Real estate in dense urban areas faces major barriers to deploy solar panels and similar measures on-site, so owners should be encouraged to increase overall clean energy supplies for broader market availability.

      • There should be no categorical, across-the-board mandate to set emissions targets based on tenants’ energy use because building owners do not control operations in leased spaces. Nor do owners have general access to meter data showing how much energy a tenant uses.

      • Emissions goals should not require, in all circumstances, reporting on “embodied carbon” in materials. Manufacturers do not uniformly provide such embodied emissions data for the concrete, steel, and other products they produce—so building stakeholders should not be required to guess this information in their climate reports.

      • Full-blown building electrification is not practicable, feasible, or even desirable for occupants’ safety and comfort in all cases. SBTi should abandon its proposed ban on all new fossil fuel building installations starting in 2025.    

    Why It Matters

    SBTi logo
    • There is no mandate in the U.S. at the federal level for real estate companies to set science-based emissions targets. However, anticipated rules from the U.S. Securities and Exchange Commission are expected to require registered companies to report to investors on material climate-related financial risks. Those disclosures could include corporate efforts to reduce emissions following SBTi’s and similar standards. (Roundtable Weekly, March 17, March 6 and June 10, 2022).
       
    • In addition, key aspects of SBTi’s proposal counter voluntary efforts underway at the U.S. Environmental Protection Agency and the U.S. Department of Energy that recognize advances in low-carbon buildings and portfolios. (Roundtable Weekly, March 3 and March 4, 2022)

    • Moreover, varying and often conflicting climate mandates on buildings are proliferating at the local level. (Roundtable Weekly, Dec. 9, 2022). SBTi’s proposed approach should not gain traction in regulatory building performance standards imposed by cities and states. 

    A final version of SBTi’s buildings sector guidance is expected this fall. The Roundtable will continue to track the issue, coordinate with Nareit and other allied groups, and educate policy makers as this matter develops. 

    #   #   #

    Roundtable Comments on Clean Energy Tax Credits for Low-Income Communities, Housing

    Posted on by Trey Jackson
    Low-income housing development in New Jersey

    The Real Estate Roundtable submitted comments today on a proposed rule from the IRS and Treasury Department regarding “bonus” tax credits for renewable energy investments in low-income communities, passed by Congress as part of the Inflation Reduction Act (IRA). (Roundtable Comment Letter, June 30) 

    Solar, Wind Bonus Credits 

    • IRA Section 48(e) establishes a Low-Income Communities Bonus Credit Program to address climate, affordable housing, and environmental justice challenges. (Treasury news release, Feb. 13, 2023)

    • Taxpayers must apply to the IRS through a competitive process to receive any bonus credits under the Program.

    • The bonus can provide extra tax credits to help cover the costs of solar, wind, and storage facilities. See The Roundtable’s chart, “Base” and “Bonus Rate” Amounts Relevant to Commercial and Multifamily Buildings (May 25, 2023).

    • Taxpayers who qualify can layer an extra 10% bonus—above “base rate” credit amounts—for renewable projects in low-income communities defined in the IRA as census tracts that qualify for new markets tax credits.

    • The bonus can increase to an extra 20% for clean energy investments that are part of low-income rental housing—such as housing supported by LIHTCs or Section 8 “housing choice” vouchers. 

    Roundtable Comments 

    RER chart on Section 48(e)
    • Treasury and IRS proposed a rule on June 1 to implement the low-income bonus program. Today’s comments from The Roundtable seek greater clarity and certainty for building owners that may access the bonus credits, raising the following points:

      • The bonuses are available only for solar or wind projects that generate under 5 megawatts of electrical output. The Roundtable requested a more straightforward rule for what constitutes a “single project” for purposes of this output threshold.

      • The IRA’s text requires that multifamily building owners must share “financial benefits” of renewable energy produced on-site with tenants. The Roundtable’s comments stressed that any such benefits should not depend on utility bill savings that accrue directly to tenants—because owners cannot measure, track or control energy consumption in sub-metered leased units.

      • Low-income housing supported by non-federal programs through state- and local-level housing finance agencies or public housing authorities should also be eligible for the IRA’s low-income bonuses.

      • The proposed rule would offer a preference, not based in the statute, for non-profit owners to receive bonus credit allocations. The Roundtable’s comments urge there should be no bias against business taxpayers to receive the bonus to further the Biden administration’s climate policy goals for rapid deployment of renewable energy investments in low-income communities.  

    • Future Roundtable comments on IRA topics are in the works. Feedback on a proposed rule to buy-and-sell certain clean energy credits is due August 14. In addition, proposed rules to implement the 179D tax deduction for energy efficient retrofits of commercial buildings are expected this summer. 

    Prior comments, information and summaries on The Roundtable’s advocacy efforts regarding clean energy tax incentives are available on our Inflation Reduction Act resources page and in Roundtable Weekly (Dec. 2, 2022 and Nov. 4, 2022).  

    #  #  # 

    House Republicans Advance Tax Package, Biden Administration Proposes Rules for Energy Tax Credits

    Posted on by Trey Jackson

    Republican members of the House Ways and Means Committee approved their proposed tax legislative package along party lines this week, including measures on business interest deductibility, bonus depreciation, and opportunity zones. (Tax Notes, June 14 | Ways and Means Committee, June 13 and Roundtable Weekly, June 9)

    Tax Measures and CRE

    Roundtable Chair John Fish with Jeffrey DeBoer and House Ways and Means Committee Chairman Jason Smith (R-MO)

    • On Wednesday, Ways and Means Committee Chairman Jason Smith (R-MO), Committee Member Brad Schneider (D-IL), and Ways and Means staff spoke with Roundtable Members about the tax measures and other issues at The Roundtable’s all-member Annual Meeting in Washington, DC during the Tax Policy Advisory Committee (TPAC) session. [Photo left to right: Roundtable Chair John Fish (Chairman and CEO, SUFFOLK), Roundtable President and CEO Jeffrey DeBoer, and Committee Chairman Jason Smith]
    • The three tax bills sent to the House floor for a potential vote next week contain $237 billion in business and individual tax cuts, financed by the repeal or modification of several energy tax incentives enacted in last year’s Inflation Reduction Act (IRA). However, differences in the GOP caucus and requests from some Republicans to include a boost in the $10,000 deduction cap on state and local taxes (SALT) could push a vote until after the congressional July 4 recess. Any Republican tax package passing the House would face significant opposition in the Democrat-controlled Senate and the White House. (Tax Notes, June 16)
    • The committee’s proposals relevant to real estate include:

    House Ways and Means Committee

      • Business interest deduction. The Build It in America Act would provide a 4-year extension (through 2025) of certain, taxpayer-favorable business interest deductibility rules that applied from 2018-2021. The proposal would allow more real estate businesses to operate under the general rules of section 163(j) and its preferable cost recovery schedules. (H.R. 3938 and summary)
      • Bonus depreciation.  H.R. 3938 also includes a 3-year extension (through 2025) of 100% bonus depreciation for qualifying capital investments, including equipment, machinery, and interior improvements to nonresidential property (“qualified improvement property”).  Bonus depreciation is 80% in 2023 and gradually phasing down. 
      • Opportunity Zones. The Small Business Jobs Act would establish special, favorable rules for investments in rural opportunity zones. It would also create a new and detailed information-reporting regime for all opportunity funds. (H.R. 3937 and summary)

    Energy Tax Credits Transferability

    Chicago evening

    • The Biden administration this week proposed rules on transferring clean-energy tax credits under the IRA. Treasury’s proposed guidance released on June 14 seeks to clarify numerous issues, including which entities would be eligible for each credit monetization mechanism, laying out the process and timeline to claim and receive an elective payment, and transferring a credit. (Tax Notes, June 15 |The Wall Street Journal, June 14 | IRS news release)
    • Secretary of the Treasury Janet Yellen stated, “The Inflation Reduction Act’s new tools to access clean energy tax credits are a catalyst for meeting President Biden’s historic economic and climate goals. They will act as a force multiplier, bringing governments and nonprofits to the table.” (CNBC and Treasury news release, June 14)
    • The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Tax Policy Committee (SPAC) will analyze the impact of the transferability rules on commercial real estate for potential comments on the proposed rulemaking. SPAC’s meeting on Wednesday during The Roundtable’s Annual Meeting included a presentation about an online marketplace for exchanging such tax credits.

    Climate Disclosure RegsSEC logo - image

    • Separately, the Securities and Exchange Commission (SEC) expects to issue new climate disclosure rules by October, a year later than the original target date. The new date was included in a SEC rule-making agenda and schedule released on Tuesday.
    • Legislation to constrain future SEC disclosure requirements was reintroduced this week by Sen. Mike Rounds (R-SD) and nine of his Senate colleagues. The bill includes language stating that an “issuer is only required to disclose information in response to disclosure obligation adopted by the Commission to the extent the issuer has determined that such information is important with respect to a voting or investment decision regarding such issuer.” Rep. Bill Huizenga (R-MI) is sponsoring a version of the bill in the House. (Sen. Rounds news release and Politico Pro, June 15)

    The Roundtable’s SPAC will continue to track any developments related to the SEC’s forthcoming rule on climate reporting, including its proposal for sweeping disclosures on Scope 3 GHG emissions affecting CRE. (Roundtable Weekly, March 10) 

    #  #  # 

    Federal Appeals Court Strikes Local Natural Gas Ban on New Construction

    Posted on by Trey Jackson

    San Diego G&E natgas pipeline

    A federal appeals court on Monday struck a local law that banned natural gas hook-ups to new buildings. (Wall Street Journal, April 17 and AP News, April 18)

    State and Local Gas Bans

    • In California Restaurant Ass’n v. City of Berkeley, the Ninth Circuit Court of Appeals ruled that a Berkeley, California ordinance was illegal because federal law “preempts” local building codes that try to prohibit stoves, furnaces and other appliances that use natural gas. (Politico E&E News, April 18).
    • Dozens of cities including New York, Washington, D.C, Los Angeles, and Chicago—and the states of California, Colorado, Maryland, and Washington—have passed building electrification mandates requiring new construction to install expensive heat pumps and other electric equipment for heating, cooling, and cooking.
    • New York Governor Kathy Hochul (D) has proposed a similar statewide ban on natural gas furnaces as a way to fight climate change. (Bloomberg, Jan. 23)

    Impact of Court Ruling

    Ninth Circuit Court of Appeals

    • The Ninth Circuit’s reasoning will likely prompt federal preemption challenges and may pose a “chilling effect” to similar state and local building decarbonization laws. (E&E News, April 18). Yet, environmental advocates maintain that the ruling is limited in scope and will not call into question other gas bans. (POLITICO, April 18)
    • Meanwhile, about 20 states have gone the other way with “bans on bans.” These laws would prohibit their cities and municipalities from stopping natural gas distribution and requiring all-electric new buildings.
    • “States and localities can’t skirt the text of broad preemption provisions” in a law passed by Congress to address the 1970s energy crisis, Judge Patrick Bumatay wrote for the Ninth Circuit’s unanimous opinion.

    As its next litigation option, the City of Berkeley might ask for a fuller panel of Ninth Circuit judges to uphold its ordinance. The Roundtable will continue to monitor how local natural gas bans and related building performance standards impact federal-level policies that address real estate’s role to help tackle climate change. (Roundtable Weekly, March 3 and Jan. 20)

    #  #  #

    Roundtable Comments on EPA’s Proposed Voluntary Label for Low-Carbon Buildings

    Posted on by Trey Jackson

    EPA NextGen logo

    The Real Estate Roundtable submitted comments to the U.S. Environmental Protection Agency (EPA) yesterday on the agency’s proposed voluntary label for low-carbon buildings. (Roundtable letter, March 2)

    Voluntary Building Label

    • EPA’s NextGen building label would expand upon the agency’s successful ENERGY STAR program for assets that attain high levels of energy efficiency.
    • The NextGen label would allow companies to highlight buildings that go beyond top efficiency performance—and further rely on renewable energy use and reduce their greenhouse gas (GHG) emissions. (EPA’s proposal and Roundtable Weekly, Jan. 27)
    • NextGen recognition has great potential for widespread market acceptance, The Roundtable stated in its comments.
    • EPA’s proposed program could create a uniform, voluntary federal guideline to simplify the confusing patchwork of city and state climate-related building mandates that exists across the country. (EPA Policy Brief, Jan. 19; Roundtable Weekly, Jan. 20)
    • EPA staff discussed its NextGen proposal with The Roundtable’s Sustainability Policy Advisory Committee (SPAC) at the “State of the Industry” meeting in January. (SPAC slide presentation)

    Roundtable Recommendations

    SPAC Chair Tony Malkin and Vice Chair Ben Myers

    • The Roundtable’s SPAC, chaired by Tony Malkin, above left, (Empire State Realty Trust Chairman President and CEO) and vice-chaired by Ben Myers, right, (BXP Senior Vice President, Sustainability), convened a working group to develop the comments submitted to EPA.
    • The Roundtable stated that NextGen recognition criteria “must be grounded in financial performance that offer building owners reasonable returns on their investments.”
    • The Roundtable’s comments suggested refinements to improve EPA’s proposed components, including:
        

      • Efficiency:
        Significant and demonstrated reductions in a building’s energy use should be eligible for the NextGen label (as an alternate, additional criterion to EPA’s proposal that only ENERGY STAR certified buildings could qualify).
      • Renewable Energy:
        The NextGen proposal would require that 30% of a building’s energy use must derive from renewables. The Roundtable recommends that the level should start at 20% and adjust over time to reflect the changing status of the electric grid as it decarbonizes through increased reliance on solar, wind, and other clean power sources.
      • GHG Reductions: 
        The Roundtable supports EPA’s proposal for a GHG “intensity target” that reflects a building’s unique weather conditions by a factor known as heating degree days (HDD). The Roundtable worked closely with EPA in the pre-pandemic era to consider HDD as a key variable in the underlying ENERGY STAR building score process. (Roundtable Weekly, July 19, 2019)
      • Renewable Energy Certificates (RECs):
        The Roundtable explained that voluntary NextGen recognition can provide much-needed guidance on corporate accounting for REC purchases and enhance credible claims on the environmental benefits from offsite clean power procurement.  

    The Roundtable further advised EPA that it should conduct a pilot of the low-carbon label with private and public building owners before broad release to U.S. real estate markets. EPA intends to make the NextGen label available in 2024.

    #  #  #

    EPA Invites Comments on Proposed Label for Low-Carbon Buildings

    Posted on by Trey Jackson

    EPA NextGen Certified Building logo

    The Environmental Protection Agency (EPA) opened a comment period this week on its proposed ENERGY STAR NextGen certification, a voluntary public-private partnership program that would recognize low-carbon buildings. (EPA’s NextGen webpage)

    NextGen Criteria

    EPA's NextGen criteria slide

    1.)   Demonstrate High Energy Efficiency
    Building is ENERGY STAR certified and has a score of “75” or higher on EPA’s rating scale. 

    2.)   Renewable Energy Use
    Building must obtain at least 30% of the total energy it consumes from renewable sources through any combination of (a) onsite renewable generation, (b) renewable energy certificates (not “offsets”), (c) biofuels or other renewable fuels, or (d) renewable thermal certificates. 

    3.)   Onsite Emissions Target
    Building must meet a greenhouse gas emissions target unique for its asset class that is also “normalized” by regional weather conditions through a metric known as “heating degree days.” 

    Next Steps

    EPA NextGen slide - next

    • Comments are due to EPA by March 2. (Comments Submission Form).
    • SPAC has formed a working group to develop The Roundtable’s comment letter. 

    EPA aims to make ENERGY STAR NextGen certification available in early 2024.

    #  #  # 

    White House Announces Federal Building Performance Standards

    Posted on by Trey Jackson
    The White House

    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

    Energy.gov map of BPS
    • 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  

    Department of Energy sign

    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)

    #   #   # 

    Treasury Issues Labor Guidance on Clean Energy Incentives; Roundtable Comments on EV Charging Station Credit

    Posted on by Trey Jackson

    The Treasury Department on Wednesday released initial guidance on labor standards for companies to qualify for increased incentives in the Inflation Reduction Act (IRA), passed by Congress in August. (Federal Register, Nov. 30 | CNBC, Nov. 29 | Roundtable Weekly, Aug. 12)

    Wage, Apprenticeship Guidance

    • The IRA allows certain clean energy projects to qualify for “bonus” tax incentives (five-times “base” rates) if they meet prevailing wage and apprenticeship requirements.
    • This “bonus” rate structure applies to commercial installations of solar panels and other clean energy technologies (Section 48 credit), EV charging stations (Section 30C credit), and energy efficient building equipment (Section 179D deduction).
    • Treasury’s guidance directs taxpayers and their contractors to the federal government’s sam.gov website to search for geographically-appropriate wage determinations for construction jobs relevant to the IRA’s clean energy projects. If no labor classification for the planned work is available, a prevailing wage determination can be requested from IRAprevailingwage@dol.gov.
    • The guidance also explains that certain percentages of “labor hours” on a qualifying clean energy project must generally be performed by apprentices from registered programs. (Treasury FAQs on prevailing wage and apprenticeships, Nov. 29)
    • The guidance takes effect for qualifying projects that start construction on or after January 29, 2023.  See Treasury Notice and news release.
    • The Real Estate Roundtable addressed labor and other IRA issues in comments submitted Nov. 4 to Treasury and the Internal Revenue Service (IRS). [Roundtable Weekly, Nov. 4 and Oct. 7 | Roundtable IRA Fact Sheet, Sept. 20].

    EV Charging Stations 

    • The Real Estate Roundtable submitted separate comments today to Treasury and IRS on the Section 30C tax credit for EV charging stations—or “Alternative Fuel Vehicle Refueling Property” as amended by the Inflation Reduction Act (IRA).
    • The Roundtable comments urge the IRS to issue guidance to clarify the components of EV charging property that qualify for the credit, the geographic areas that are 30C-eligible, and depreciation matters.
    • According to the Wall Street Journal, “Budget estimators expect around $1.7 billion in tax credits for chargers or other alternative-fuel equipment to be claimed over a 10-year period.” (WSJ, Nov. 29)

    Treasury’s guidance on the IRA’s clean energy tax incentives and will be among the issues discussed during The Roundtable’s Jan. 24-25, 2023 State of the Industry and Policy Advisory Committee meetings in Washington, DC. 

    #  #  #

    Roundtable Submits Comments to IRS on New Clean Energy Tax Incentives

    Posted on by Trey Jackson

    The Real Estate Roundtable submitted extensive comments to Treasury and the Internal Revenue Service (IRS) today that address various clean energy tax incentives in the Inflation Reduction Act (IRA) passed by Congress in August. [Nov. 4 letter and Roundtable Weekly, Aug. 12]

    Need for Clarifications

    • The Roundtable’s comments are in response to recent IRS notices on a host of issues affecting CRE. [Roundtable Weekly, Oct. 7 and Roundtable Fact Sheet, Sept. 20]. The letter requests further guidance and clarifications that would:
      • Allow businesses to “layer” multiple credits and deductions on the same buildings;
      • Support building retrofits that contemplate an asset’s “conversion,” such as from multifamily to office, within the revised building efficiency incentive under Section 179D;
      • Maximize installations of solar, wind, and other technologies to feed renewable power to buildings onsite—while also allowing property owners to “sell” excess generation back to the grid;
      • Optimize clean power deployment in low-income housing and economically distressed areas;
      • Offer a “safe harbor” for employers seeking the IRA’s credit boosts when they pay prevailing wages to laborers and mechanics involved in energy project construction and installation; and
      • Capitalize on changes to the tax code that would allow REITs, partnerships, and other businesses to “transfer” certain clean energy credits to third parties.

    Roundtable Advocacy

    • Roundtable President and CEO Jeffrey DeBoer stated, “The Roundtable’s comments to policymakers will help ensure that the Inflation Reduction Act spurs new investments in clean energy and climate-saving measures that benefit our industry and our country.”
    • The Roundtable letter was developed with input from its Sustainability and Tax Policy Advisory Committees. Treasury and the IRS are expected to start issuing implementing guidance before the end of the year.
    • Roundtable Board Member and Sustainability Policy Advisory Committee Chair Tony Malkin, center in photo above, (Chairman, President, and CEO, Empire State Realty Trust, Inc.) led a panel discussion in September with Roundtable staff on how the IRA’s “clean energy” tax incentives impact CRE. [Watch the discussion].

    IRA incentives were discussed this week during a Blackstone ESG Summit panel featuring former Vice Chair of The Roundtable’s Sustainability Committee, Dan Egan (BX’s Americas Head of Real Estate ESG) and Duane Desiderio, Roundtable Senior Vice President and Counsel.

    #  #  #