A simple tweak to an existing law could help the city reach its goal of reducing greenhouse gas emissions by 80 percent by 2050 and create a template for the rest of the country to follow. Local Law 84, enacted in 2009, obligates the city’s largest buildings to report how much energy they consume each year. Participating buildings then receive scores indicating how efficient (or inefficient) they are compared to similar buildings.
But almost no one sees the data. The ratings are posted on a government website that few people know about and are charted on a 100-point scale that is difficult to interpret. Seven years into the program, even many experienced real estate brokers are unaware the data exists.
That would change under legislation awaiting action in City Council. The measure would require buildings to publish their energy efficiency ratings more effectively, a step that has improved energy efficiency elsewhere. Unfortunately, the bill has been languishing in the Council for months, even though energy disclosure laws like Local Law 84 rely on transparency to work.
If buyers and renters value energy efficiency, or at least the savings on utility bills that come with it, improving the disclosure of energy-performance information should help increase demand for high scoring properties and encourage investments and upgrades in others. But this approach breaks down when the information is not effectively disseminated.
How can New York City do a better job of communicating the energy benchmarking scores?
A policy in place throughout the European Union offers a guide. New York should translate the current numerical scores into a more intuitive letter grading system and require that the grades be included in real estate advertisements. Building owners should also be required to post their grades on site, just as restaurants must post their health grades.
New York would be the first American city to require such broad publication.
Under this approach, buildings with modern heating systems, tightly sealed windows, and lights that dim as the sun peaks would receive an A, and would display the grade in plain sight. Buildings that have resisted energy upgrades would receive a failing mark and would also have to display their poor grades for all prospective buyers and renters to see.
The European experience suggests that this approach could lead to efficiency improvements. In 2010, the European Union amended its building energy disclosure law to require that all advertisements offering properties for sale or rent include an energy performance grade. The amendments also increased the number of buildings required to display their efficiency grades on-site.
Since that law was enacted, studies of various property markets in the union have found that buildings with higher energy grades command price premiums. In Denmark, for instance, properties with high grades have sold for an average of 10.1 percent more than low-rated properties. For Danish consumers, viewing energy grades early in their search for a new home seems to have made a big difference.
The idea that a building or advertisement for a building should be required to display energy information is far from revolutionary. The federal government requires that advertisements for appliances include Energy Star ratings, and cars in showrooms display stickers with their miles-per-gallon performance. And New York City, of course, obliges restaurants to display their health grades in a window even though it also posts the information online. Why should something as important as the energy benchmarking data be treated differently?
Some landlords in the city have fought broader publication of those scores in the past. Building owners leasing space to certain energy-intensive tenants like data centers and trading floors have been especially vocal, complaining that they should not be penalized for the type of tenant they house. But this concern should not impede progress, because the city can exclude buildings with certain energy-intensive tenants or create a specially tailored grading system for them.
After the City Council passed Local Law 84 eight years ago, other cities followed its example. At least a dozen, from Boston to San Francisco to Kansas City, have enacted energy benchmarking ordinances since. Now New York City can again lead the country in developing innovative climate policy by requiring owners of big buildings to disclose their energy efficiency ratings in meaningful ways.