United States: City Of Boston Releases Draft Emissions Performance Standard Policy

The City of Boston has taken the next step in its ongoing efforts to amend and strengthen its Building Energy Reporting and Disclosure Ordinance, or BERDO, by releasing a draft Summary of policy elements on Jan. 27, 2021, for public comment. The draft summarizes several proposed amendments to BERDO, the most significant of which include the introduction of a building emissions performance standard. In addition, environmental justice concerns and the development of local renewable energy projects are emphasized throughout the Summary. The City will host a virtual open house on Tuesday, Feb. 23, 2021, from 6-7:30 p.m. to discuss the proposed amendments to BERDO.

BERDO Background

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. BERDO requires covered buildings to report energy and water use annually and undertake either an energy assessment or energy reduction action every five years. At this time, BERDO is a reporting and disclosure ordinance, but the City's proposed changes to the ordinance include establishing minimum building emissions performance standards, similarly to ones recently passed in New York City and Washington, D.C. The following discussion describes the new performance standards and other key proposed changes to the existing ordinance.

Expanded Definition of Covered Buildings

BERDO is currently applicable 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. The proposal would broaden this definition to include buildings 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 would be required to report data starting in May 2022 for 2021 emissions.

Additional Data Reporting and Third-Party Audits

Currently, owners of covered buildings report energy and water use annually. Under the City's proposal, owners would also be required to report the purchase of Renewable Energy Certificates (RECs) (along with proof of retirement), any energy purchased via a Power Purchase Agreement (PPA) and any CO2e emissions factors used if different from the factors in ENERGY STAR Portfolio Manager. New optional reporting items would include solid waste, occupancy, density, operational hours, net lessees, indoor air quality and tenant surveys. Owners may authorize a utility or other third party to report on their behalf.

Another important change under the proposal is that owners would not only be required to self-certify their data every year, but would be newly required to provide a third-party certification of their data for the previous five years every fifth year beginning in 2026.

Expanded Disclosure

The proposal notes that there will be changes in the data the City discloses. 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. The proposal includes a commitment that the City would also report regularly on "metrics related to environmental justice and equitable implementation, such as energy cost burden and air quality."

Introduction of Performance Standards and New Penalties

Most significantly, the proposal imposes enforceable performance standards, moving BERDO beyond reporting and disclosure only. Emissions standards, measured in metric tons of CO2e per square foot, would begin to apply in 2025 for already covered buildings, and in 2030 for the newly covered buildings. Buildings would be able to comply individually or as a portfolio under common ownership. Regardless of how emissions are reported, emissions limits will decrease over time according to thresholds set by building-use type. A schedule is included in the draft Summary. Notably, these standards will exclude emissions from emergency backup power and electric vehicle (EV) charging.

There is some flexibility for compliance contemplated by the proposal. 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 could alternatively apply to qualify for a "Hardship Compliance Plan" as a result of substantial compliance obstacles, which include "historic designation, deed restricted affordable housing financing constraints, pre-existing long-term energy contracts without reopeners, uniquely difficult building uses to decarbonize, or financial hardship." Hardship Compliance Plan applications would be subject to review and approval by a new Emissions Review Board, which is discussed in further detail below.

Outlined Compliance Mechanisms

The proposal outlines the possible compliance mechanisms for achieving 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 1) RPS Class I eligible RECs generated by non-CO2e emitting sources and 2) 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.

The Summary proposes to 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). The funds generated from these payments will be placed into a "Building Carbon Equitable Investment Fund" to "support, implement, and administer local emissions reduction projects within Boston," prioritizing environmental justice communities and local renewable energy development.

The Summary also proposes corresponding changes in enforcement penalties. New fines for failure to meet the performance standard would be $1,000/day for larger covered buildings and $300/day for smaller covered buildings. Fines for inaccurate reporting would range between $1,000 and $5,000.

New Emissions Review Board

Finally, the Summary proposes to establish a new Emissions Review Board, the members of which would be appointed by the mayor after seeking nominations from local organizations with "expertise in environmental justice, affordable housing, labor and workforce development, building engineering and energy, public health, environmental protection, real estate development and management, and historic preservation." As currently drafted, two-thirds of board members would be nominated by community-based organizations, prioritizing environmental justice communities. The Emissions Review Board would have the power to approve or disapprove Hardship Compliance Plans or other waiver applications, approve expenditures from the Emissions Reductions Fund, propose new regulations and oversee enforcement action.

Conclusion

While the draft policy is only an initial step in the eventual formal regulatory process, it is likely that the amended BERDO will include some major changes – with significant implications for Boston's building owners – from expanding the definition of covered buildings to encompass smaller properties to imposing new performance standards and fines. The addition of an entirely new body, the Emissions Review Board, would also mark a significant change.

Massachusetts-based members of Holland & Knight's Energy and Environment practices will continue to monitor these developments and their implications for different types of property owners and building uses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.