NYC Releases Carbon Trading Report for Local Law 97
Passed in 2019, New York City’s Local Law 97 (LL97) limits the amount of greenhouse gas emissions that large buildings can release each year without paying a penalty. LL97 will go into effect in 2024, with restrictions becoming progressively more restrictive until 2050. Currently, there are 3 pathways for building owners to meet the LL97 requirements:
- They can avoid exceeding the emissions caps in the first place by investing in energy efficiency improvements or using distributed energy resources (DERS) to meet some of their energy needs.
- They can purchase renewable energy credits (RECs) or greenhouse gas offsets
- They can pay a penalty to cover their excess emissions.
One thing LL97 does not currently permit, however, is for building owners to buy emissions credits from other owners who emit less than they are legally obligated to do. In other words, the law does not provide for carbon trading. Rather, it requires the Mayor’s Office of Climate & Sustainability (MOC&S) to conduct a study into whether it would be feasible for New York City to develop a carbon trading program as an alternative compliance pathway. NYC has just released a report with the findings of that study. In this article, we will discuss the purpose of the study, discuss what the report covers, and what it found. We will also explore carbon trading in depth and how WatchWire can assist your organization with LL97 compliance.
The main purpose of the Study was to determine if it would be beneficial for New York City to adopt a carbon trading program. The Study was conducted by researchers at New York University, The Brattle Group, HR&A Advisors, Steven Winter Associates, and Sustainable Energy Partnerships, who worked in collaboration with MOC&S. In considering the potential impacts of a trading program, the Study focused on whether it would be feasible to design a trading program for buildings’ greenhouse gas emissions that would also promote environmental justice. Thus, the Study aimed to design a program that would promote a number of goals, including:
- Accelerating greenhouse gas reductions from buildings
- Reducing the costs of greenhouse gas emissions reductions
- Stimulating more investment in environmental justice communities (EJCs) compared with LL97 as is
In addition, the Study sought to ensure that EJCs would experience at least the same improvements in air quality under a trading program as they are expected to experience under LL97, and more if possible.
The report includes detailed background information on LL97, lists the pros and cons of carbon trading programs (see the “What Is Carbon Trading” section below), describes the goals for the trading program (see above) in more detail, states what LL97 would be like without carbon trading, and finally outlines how a carbon trading program would be instituted in New York City. Click here to read the full report.
Ultimately, the Study found that a carefully designed trading program could further New York City’s goals (as listed above).
So, What is Carbon Trading?
In a nutshell, the idea behind carbon trading is that, in any given sector, some organizations/buildings will be able to reduce their emissions more cheaply than others. Thus, to minimize the total cost of reducing emissions, environmental regulations can be designed to harvest the most reductions from sources that can cut pollution at the lowest costs. Trading makes this possible. Instead of requiring all sources to meet the same emissions standards, trading programs allow sources with higher abatement costs to pay for emissions reductions at facilities with lower abatement costs. Trading programs also provide an incentive for sources that can make low-cost reductions to reduce more than what is required and sell their surplus emission reductions to others who have only higher-cost options.
Benefits of Carbon Trading Programs (CTPs):
- They set a clear price on carbon. By creating a market for greenhouse gas emissions, a CTP puts a clear price on carbon. It means that the costs caused by GHG emissions– such as the impact on public health, damage caused by extreme weather or the extinction of certain animals and plants – are made visible and integrated into the price of goods and services.
- They put a limit on emissions. In a CTP, the government sets a clear emissions target, capping the maximum amount of emissions that are allowed in selected sectors of the economy. This ensures that the desired environmental outcome will be reached. With a steadily declining cap (like LL97), a CTP also delivers a predictable reduction pathway, which sends a long-term signal for businesses and investments.
- Companies can choose when, where, and how to reduce their emissions. A CTP provides great flexibility for individual companies to decide how to best meet their obligations. Companies can reduce their own emissions and/or buy surplus permits from other companies. Governments often allow companies to bank permits to be used at a later date. In many systems, they may also use domestic or international offset credits from emissions reduction projects in sectors not covered by the CTP. These individual choices mean that the costs of staying under the CTP cap are minimized, not only for the companies, but for society as a whole.
- Additional benefits: While the primary goal of carbon trading is to reduce emissions, a well-designed CTP can deliver substantial environmental, economic and social co-benefits. These benefits can include cleaner air, improving resource efficiency, ensuring energy security and creating jobs.
Cons of Carbon Trading Programs:
- Carbon trading programs could further burden environmental justice communities, either by increasing pollution concentrations in these communities or failing to redistribute existing pollution burdens away from these areas.
- Carbon trading programs do not effectively induce sources to control their emissions
- Carbon trading programs can be complicated and costly for governments to administer, and these administrative costs exceed the benefits that they would otherwise provide. Some also suggest that it may be costly for regulated actors to participate in trading programs and comply with their requirements.
How WatchWire Can Assist Your Organization with LL97 Compliance
WatchWire can help your organization reduce its greenhouse gas emissions. Our energy and sustainability management software can:
- Provide you with real time or interval data monitoring to determine areas of inefficiency or track your renewable generation investments
- Measure your water, GHG emissions, and energy use
- Track your scope 1, 2 and 3 emissions
- Help you measure and verify the effectiveness of your efficiency projects
- Benchmark your efforts against national averages
- Streamline sustainability reporting with integrations to all frameworks, like LEED ARC and ENERGY STAR Portfolio Manager.
In addition to the above, WatchWire makes procuring renewable energy easier by providing market expertise and ensuring supply contract decisions are optimized for future operations at your facility. WatchWire will also track your contracts to ensure their performance is meeting expectations. Maybe your company already installed solar panels last year; WatchWire helps measure and verify the efficiency of your distributed energy resources, allowing you to track how much they are saving you in terms of utility costs and emissions.
To learn more about WatchWire, check out the WatchWire Fact Sheet.