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Building Sector Decarbonization Accelerates

Michael Plumb


  • In order to stay on track with nationwide GHG targets, the building sector’s emissions will need to be addressed.
  • Discusses federal, state, and local efforts to curtail building emissions.
  • Addresses the challenges and pushbacks stemming from the recent surge in state and municipal activity aimed at decreasing building sector emissions.
Building Sector Decarbonization Accelerates
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As state greenhouse gas (GHG) emission target deadlines draw near, recent efforts to curtail emissions from residential and commercial buildings are not only spurring significant investments in electrification and energy efficiency but also prompting pushback. Nationwide, residential and commercial buildings are responsible for 13% of GHG emissions, and about half of the states in the U.S. have adopted GHG emission targets that will require substantial decreases in GHG emissions over the next 20–30 years. To stay on track with those targets, emissions from the building sector will need to be addressed.

While the most interesting efforts to curtail building emissions are happening at the state and local levels, the federal government has also stepped up with the recent passage of the Inflation Reduction Act, which includes $9 billion in tax incentives aimed at increasing energy efficiency in homes. Potential rebates for households with qualifying incomes include $8,000 for household heating and cooling heat pumps, $1,750 for heat-pump water heaters, $840 for heat-pump clothes dryers or electric stoves, and $4,000 for electric panel upgrades necessary to facilitate the transition to electrification. As is evident by the rebate structure, heat pumps are central to building decarbonization by providing significant energy efficiency gains and reducing building GHG emissions by replacing gas-fired equipment with electrical equipment. Like a refrigerator, heat pumps move rather than create heat.

Regarding federal buildings, the General Services Administration has committed to a carbon-free retrofit of 50% of the federal real estate portfolio (including the Department of Defense (DOD)) by 2030. That commitment equates to retrofitting approximately 106 million square feet of building space per year, or 6% of the federal real estate portfolio (including DOD) each year between 2022 and 2030.

Meanwhile, states with aggressive GHG emission reduction goals face the difficult task of decarbonizing privately owned buildings. California and New York provide two examples of some of the mechanisms being employed to accomplish those goals.

California is required to decrease GHG emissions to 40% below 1990 emission levels by 2030. In addition, California has adopted a 2045 carbon-neutrality goal. Buildings account for 25% of California’s GHG emissions, including 10% from direct emissions (on-site combustion) and 25% of systemwide emissions (on-site combustion plus electricity generation). While California’s required statewide reductions are not sector specific, the California Energy Commission (CEC) has evaluated potential strategies to reduce GHG emissions from buildings to 40% below 1990 levels by 2030. That evaluation determined that building end-use electrification utilizing highly efficient equipment is the best strategy for building sector decarbonization. More specifically, space and water heating accounts for approximately 90% of the gas used in California’s 14 million single-family homes and multifamily units. Replacing that gas-fired equipment with more efficient electrical equipment—such as heat pumps—is the most viable strategy for reducing building emissions.

GHG building sector emission reductions were evaluated by the CEC based on both a direct emissions baseline (on-site combustion) and a systemwide emissions baseline (the emissions from on-site combustion and the generation of electricity used in buildings). Perhaps surprisingly, by using the systemwide emissions baseline, the renewable portfolio standards for 2030 nearly suffice to reach a 40% reduction. In contrast, the direct emissions baseline requires aggressive electrification to decrease emissions 40% by 2030. Aggressive electrification requires 100% electrified new construction, 90% replacement of natural gas equipment with electrical on burnout, and 70% early retirement of natural gas equipment.

While California currently does not have a statewide mechanism in place to accomplish the aggressive electrification strategy, approximately 50 California municipalities have adopted ordinances promoting or requiring gas-free new construction, including San Jose, San Francisco, Oakland, and Sacramento. Los Angeles recently passed an ordinance banning gas appliances in new homes.

Of course, GHG emissions from new homes are a small fraction of the emissions from the existing building stock. San Diego has approved a climate action plan that calls for full electrification of the existing building stock over the next 12 years. While the elements of that plan would substantially reduce building emissions in San Diego, the details for implementation have not yet been developed.

Like California, New York is also moving toward aggressive GHG emission reduction targets, including a 40% reduction from 1990 levels by 2030 and 85% reduction by 2050. The building sector is currently responsible for approximately 32% of New York’s GHG emissions. In 2020, New York’s Public Service Commission required utilities to allocate budgets totaling $454 million for heat pumps through 2025. The order emphasizes that it is an initial order and that further investments in heat pumps should be expected.

In July 2022, New York adopted a building code statute that requires updates to the building code standards to promote energy efficiency. The statute also authorizes New York’s research agency to adopt energy efficiency standards for appliances and building equipment.

New York City, with 8.8 million residents, has gone several steps further than New York State. Natural gas connections will be banned from new construction in New York City starting in 2024 for buildings under seven stories, and for all new construction starting in 2027 (subject to exceptions for building uses that require natural gas). In addition, starting in 2025, all buildings in New York City of 25,000 square feet and greater are subject to GHG emission intensity limits based on occupancy type. Owners must annually report GHG emissions for the prior year and pay fines for exceeding applicable limits. The initial limits apply from 2024–2029 and then ratchet down from 2030–2034. The goal is to reduce building GHG emissions by 40% by 2030 and 85% by 2050. Of the current ordinances addressing building emissions, this ratcheting down of permissible emissions from existing building stock appears most likely to substantially reduce building GHG emissions.

The recent surge in state and municipal activity aimed at decreasing building sector emissions has prompted some pushback. In 2020, Arizona adopted a statute preempting municipal bans on gas hook-ups or gas appliances. Since then, an additional 19 states have passed similar legislation. Those states are located primarily in the South and Midwest, but also include New Hampshire, Utah, and Wyoming. In general, states can expressly preempt municipal ordinances. Hunter v. Pittsburgh, 207 U.S. 161 (1907); Holt Civic Club v. City of Tuscaloosa, 439 U.S. 60, 71 (1978) (“[w]hile the broad statements as to state control over municipal corporations contained in Hunter have undoubtedly been qualified . . . we think that the case continues to have substantial constitutional significance in emphasizing the extraordinarily wide latitude that States have in creating various types of political subdivisions and conferring authority upon them”). While municipalities in some states potentially could raise “home rule” arguments to challenge the gas-ban preemption statutes, it does not appear that any have done so yet.

In contrast, at least one municipal ordinance banning gas hookups has been challenged. In Berkeley, one of the first California municipalities to implement a new gas connection ban, an association of restaurants challenged the ordinance as preempted by federal and state law. Cal. Rest. Ass’n v. City of Berkeley, 547 F. Supp. 3d 878 (N.D. Cal. 2021). Regarding federal preemption, the plaintiffs argued that the Energy Policy and Conservation Act (EPCA) preempts statutes and regulations concerning energy efficiency. In dismissing those preemption claims, the district court emphasized the considerable burden of overcoming the presumption that Congress does not intend to supplant state law. In this case, the court found that the Berkeley ordinance did not regulate energy efficiency but instead regulated installation of natural gas infrastructure, a subject outside the scope of the EPCA and, pursuant to the Natural Gas Act, within the scope of local control. The Natural Gas Act “specifically exempted from federal regulation the local distribution of natural gas.” With the federal claim dismissed, the district court did not exercise jurisdiction over the remaining state law claim. The restaurant association appealed the dismissal of the federal claim to the Ninth Circuit, and at the time of writing this article the appeal had been briefed and argued but not yet decided.

The dismissal of federal preemption arguments (as of now) may lead to further adoption of municipal ordinances limiting new gas hook-ups. Regardless, those states with long-term GHG emission targets that have not yet adopted a path toward those targets will soon be forced to grapple with the complexities of significantly reducing building sector GHG emissions.