United States: Boston Passes Ambitious Ordinance Targeting Zero Emissions For Large Buildings By 2050

Highlights

• Boston Acting Mayor Kim Janey has signed the Ordinance Amending City of Boston Code, Ordinances, Chapter VII, Sections 7-2.1 and 7-2.2, Building Energy Reporting and Disclosure (BERDO 2.0) into law, making Boston one of the first cities in the nation to impose emissions performance standards on existing buildings, with the goal of achieving zero emissions from large buildings by 2050.
• BERDO 2.0 includes several significant changes from the existing BERDO, which was until now primarily an energy reporting and disclosure ordinance.
• Many major issues are left open for further definition in the regulatory process to follow.

Boston Acting Mayor Kim Janey signed an Ordinance Amending City of Boston Code, Ordinances, Chapter VII, Sections 7-2.1 and 7-2.2, Building Energy Reporting and Disclosure (BERDO 2.0) into law on Oct. 5, 2021. The amended ordinance, which was unanimously passed by the Boston City Council on Sept. 22, 2021, makes Boston one of the first cities in the nation, alongside New York and Washington, D.C., to impose emissions performance standards on existing buildings, with the ambitious goal of decarbonizing the city's large building stock by 2050. In addition, Environmental Justice concerns and the development of local renewable energy projects are emphasized throughout BERDO 2.0.

BERDO Background

The original BERDO was enacted in 2013 in response to the Boston Climate Action Plan, which called for reducing greenhouse gas (GHG) emissions in Boston by 25 percent by 2020 and 80 percent by 2050. The Boston Air Pollution Control Commission is tasked with regulation and enforcement of BERDO, which requires covered buildings to report energy and water use annually and undertake either an energy assessment or energy reduction action every five years. Until now, BERDO has been primarily a reporting and disclosure ordinance, but BERDO 2.0 includes minimum building emissions performance standards, similar to ones recently passed in New York and Washington, D.C. The following discussion describes the new performance standards and other key changes to the existing ordinance of which Boston building owners and property managers should be aware.

Introduction of Performance Standards and New Penalties

Most significantly, BERDO 2.0 imposes enforceable performance standards, moving BERDO beyond reporting and disclosure only. Emissions standards, measured in metric tons of carbon dioxide equivalent (CO2e) per square foot, will begin to apply in 2025 for already covered buildings and in 2030 for the newly covered buildings. Buildings will be able to comply individually or as a portfolio under common ownership. Note, however, that an owner may be required to submit a portfolio emissions reduction plan that prioritizes emissions reductions in buildings located in or near Environmental Justice populations and may set further conditions on the approval of a building portfolio consistent with the forthcoming regulations. Regardless of how emissions are reported, the emissions limits will decrease over time according to thresholds set by building use type. A schedule is included in the ordinance. Notably, these standards will exclude emissions from emergency backup power and EV charging, at least until 2030, when such emissions may no longer be exempted unless otherwise amended in the regulations. Such emissions will continue to be exempted for healthcare institutions, provided that healthcare institutions are required to install and maintain emergency backup generation or backup power "to ensure reliable operations or as a condition to receiving accreditation."

There is some flexibility for compliance contemplated by BERDO 2.0. Owners may apply for an "Individual Compliance Schedule," which would still ultimately require a decline in emissions on a linear or better basis to reduce emissions 50 percent by 2030 and 100 percent by 2050. The baseline year may be any year from 2005 to 2022. Owners may alternatively apply to qualify for a "Hardship Compliance Plan" as a result of substantial compliance obstacles, which include "historic building designations, affordable housing refinancing timelines, pre-existing long-term energy contracts without reopeners, or financial hardship." Hardship Compliance Plan applications will be subject to review and approval by a new Emissions Review Board, which is discussed in further detail below.

Outlined Compliance Mechanisms

BERDO 2.0 outlines the possible compliance mechanisms for achieving the required emissions reductions, which include on-site energy efficiency or renewable energy measures, fuel switching and clean electricity purchase options. Qualifying clean electricity purchase options include Renewable Energy Portfolio Standard (RPS) Class I eligible Renewable Energy Certificates (RECs) generated by non-CO2e emitting sources and Power Purchase Agreements (PPAs) with non-CO2e emitting renewable sources. For both RECs and PPAs, the energy must be generated within the compliance period, and RECs must be retired within six months of the end of the compliance period.

BERDO 2.0 will allow the use of Alternative Compliance Payments to mitigate residual emissions, at a price of $234 per metric ton of CO2e (which will be reviewed every five years). Funds generated from these payments will be placed into an "Equitable Emissions Investment Fund" to support, implement and administer local emissions reduction projects within Boston, prioritizing Environmental Justice communities and local renewable energy development.

BERDO 2.0 also imposes corresponding changes in enforcement penalties. New fines for failure to meet the performance standard will be $1,000 per day for larger covered buildings and $300 per day for smaller covered buildings. Fines for inaccurate reporting will range between $1,000 and $5,000.

New Emissions Review Board and Working Groups

Another significant change is that BERDO 2.0 establishes a new Emissions Review Board, the nine members of which will be appointed by the Mayor, subject to the City Council's approval. Two-thirds of board members will be nominated by community-based organizations "driven by community residents." The Emissions Review Board will include individuals with expertise in " environmental justice, affordable housing, labor, and workers' rights, workforce development, building engineering and energy, real estate development and management, public health and hospitals, [and] architecture and historic preservation." The Emissions Review Board will meet four times per year at minimum and have the power to approve or disapprove Hardship Compliance Plans or other waiver applications, approve expenditures from the Equitable Emissions Investment Fund, propose new regulations and oversee enforcement action.

In addition, working groups may be convened to study or make recommendations for regulatory changes or sector-specific criteria for Hardship Compliance Plans, subject to the approval of the Emissions Review Board.

Expanded Definition of Covered Buildings

BERDO has historically applied to all city buildings, buildings 35,000 square feet or larger or containing 35 or more residential units, and multiple buildings on a single parcel that together comprise at least 50,000 square feet of residential space or 100,000 square feet of commercial space. Under BERDO 2.0, covered buildings will now include those 20,000 square feet or larger or containing 15 or more residential units, as well as multiple buildings on a single parcel together comprising 20,000 square feet or greater. Newly covered buildings will be required to report data starting in May 2022 for 2021 emissions. In 2022, building owners may apply for a one-time, six-month extension of their reporting deadline.

Additional Data Reporting and Third-Party Audits

Previously, owners of covered buildings were required to report energy and water use annually. Under BERDO 2.0, owners of covered buildings will additionally be required to report the purchase of RECs (along with proof of retirement), any energy purchased via a PPA and any CO2e emissions factors used if different from the factors to be set forth in the forthcoming regulations. Owners may authorize a utility or other third party to report on their behalf. BERDO 2.0 also suggests some new optional reporting items, which will ostensibly be further defined in the regulations.

Another important change under BERDO 2.0 is that owners will be required to not only self-certify their data every year but be newly required to provide a third-party certification of their data for the previous five years every fifth year beginning in the building's first year of reporting after the enactment of BERDO 2.0. The regulations will establish the requirements for such data verification and the professionals qualified to provide this verification. Building owners may be subject to a fine between $1,000 and $5,000 if the third-party verification process identifies a discrepancy with a building owner's self-certified reporting and such discrepancy is not reconciled pursuant to a process to be outlined in the regulations.

Expanded Disclosure

BERDO 2.0 also includes changes in the data that the city will disclose. Currently, the city publicly discloses covered building and municipal building data, publishing energy and water use information for non-city buildings by Oct. 1 of each year, after subjecting the data to a quality control review process. Building owners have the right to review the information for accuracy 30 days prior to its disclosure. BERDO 2.0 includes a commitment that the city will also report regularly on "metrics related to Environmental Justice Populations and equitable implementation."

Future Review

BERDO 2.0 provides that the Boston Air Pollution Control Commission will direct the Environment Department to review the implementation of the ordinance every five years, at which time the Environment Department will hold at least one public hearing and solicit public comments. At such time, the Commission may suspend all or part of BERDO 2.0's requirements upon a written finding from the Environment Department that a significant obstacle interferes with implementation or that implementation has a significant negative effect on energy cost burdens, equitable access to housing or other factors to be set forth in the regulations.

Conclusion and Considerations

It is clear that BERDO 2.0 will have significant implications for many of Boston's building owners – including expanding the definition of covered buildings to encompass smaller properties, imposing new performance standards and fines, and creating an entirely new regulatory body, the Emissions Review Board.

Many important topics have been left for further definition in the regulatory process, including requirements for third-party data verification, further conditions to the approval of a building portfolio, possible additional exemptions from emissions calculations, application processes and qualification criteria for Individual Compliance Schedules and Hardship Compliance Plans, potential additional compliance mechanisms, additional requirements for PPAs and compensation for Emissions Review Board members, just to name a few.