Building a Carbon Trading System in New York City, with Danielle Spiegel-Feld

Notable Quotes

• The buildings sector is a major opportunity to reduce emissions: “For buildings, that energy use accounts for around 30 percent—a third of total GHGs [greenhouse gases] in the United States—and in densely populated urban areas, buildings actually typically contribute a much larger share of local GHGs. In New York City, they contribute about 70 percent of total local emissions. Similar percentages in Chicago, DC, and Boston, where the number hovers around 70 percent, as well. I think—for the purposes of our conversation today—what this means is that, when cities like New York want to lessen their impact on climate, they really need to tackle the buildings sector, first and foremost.” (4:20)
• Individual buildings vary in how much they can reduce their emissions: “[Local Law 97] doesn’t affect all buildings equally. Even if the grid decarbonizes, there will be some buildings that are going to have a much harder time meeting their targets than others. There are a number of reasons for why this would be the case—factors including the type of tenants that they have in a property, the mix of energy that the building uses, and so forth. That’s really where the utility of trading could potentially come in place, because carbon trading provides a mechanism through which building owners with high compliance costs could essentially pay buildings with low compliance costs to reduce emissions for them, and the idea is that if the program is well-designed, you get the same amount of emissions reduced, but at a lower cost.” (15:20)
• A carbon trading system could reduce emissions at equitable cost: “One of the goals for the carbon trading study was actually to see if we could design a program that would help to redistribute the cost burden away from residential—and therefore EJCs [environmental justice communities]—toward the commercial sector and non-EJCs. And I think we came up with a couple of program designs that could effectively lead to these outcomes while also lowering total average cost throughout the city. While, of course, there is long-standing opposition or controversy to this idea of carbon trading from certain corners, I think our study showed that these programs could be designed in a way that would actually affirmatively advance some of the objectives of environmental justice advocates.” (26:58)

Top of the Stack

• “Carbon Trading for New York City’s Building Sector” by Danielle Spiegel-Feld and Katrina Wyman
• “Pipe Dreams” episode of the 99% Invisible podcast
• Yellow Bird: Oil, Murder, and a Woman’s Search for Justice in Indian Country by Sierra Crane Murdoch

The Full Transcript

Daniel Raimi: Hello, and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Daniel Raimi. Today, we talk with Danielle Spiegel-Feld, Executive Director of the Guarini Center on Environmental, Energy and Land Use Law at New York University. We'll talk about a recent study that Danielle led with coauthors, examining how a carbon trading system might help New York City reduce emissions from its largest source: residential and commercial buildings.

We'll talk about the interaction between electric-sector decarbonization and buildings, implications for environmental justice communities, and even those iconic steam-spewing towers that stick out from Manhattan streets. Stay with us.

Okay. Danielle Spiegel-Feld from the Guarini Center at NYU. Welcome to Resources Radio.

Danielle Spiegel-Feld: Thank you. It's a pleasure to be here.

Daniel Raimi: Danielle, we're going to talk today about a report that you have led with a variety of coauthors about carbon trading in New York City's buildings sector. It's going to be really fascinating—I can't wait to hear your comments—but before we get started, we always ask our guests how they got interested in working on environmental issues, either as a kid or as an adult: I'm just interested in whatever drew you into this line of work.

Danielle Spiegel-Feld: I think actually for me, it goes all the way back to early grade school. I remember this moment back in third grade, when my class learned about the destruction of the rainforest and the Amazon, and there was this speaker from the Rainforest Alliance who came and told us about how many acres of the rainforest were being lost each year, and the threat it posed to biodiversity. And it really shook me, thinking that all the animals that I saw in story books or the zoos could be a thing in the past.

As I went through grade school and high school, my anxiety about the fate of the natural world only grew, especially as I learned about climate change. Eventually in college, I started to think about how I could channel this anxiety toward a more productive pathway than just being worried. So, I decided to apply to law school and go into environmental law.

I have to say that I entered law school at a fairly auspicious moment for an environmental lawyer. I started in 2007, which was just after the landmark Supreme Court case, Massachusetts v. EPA, had been decided. In my first year in law school, Obama was elected, promising action on climate change, and all the ducks really seemed to be in line for the federal government to finally start to get serious about climate change.

I thought we'd make progress—either through litigation or through legislation—but then Waxman-Markey, as you might remember, failed, and the Clean Power Plan was stayed, and my enthusiasm—along with a number of other people's enthusiasm about the federal government's leadership—really started to wane, until Trump was elected. And I think it was at that point that I really started to think more seriously about what could be done at the local level, and that's how I got into this line of work on cities and climate policy that we're going to be talking about today.

Daniel Raimi: Yeah, that's so interesting. Let's get into that now, and start with some basics. As I mentioned a moment ago, we're going to be talking about greenhouse gas emissions (GHGs) from buildings in New York, and one little data point that I dug out a couple minutes ago was: If you look across the entire United States, when you include electricity that is consumed in buildings, residential and commercial buildings account for about 39 percent of total primary energy consumption in the United States. So, that has clear implications for greenhouse gas emissions.

Can you tell us a little bit about the greenhouse gas emissions associated with energy consumption in buildings in New York City, or perhaps at a national scale, or whatever data you have at your fingertips?

Danielle Spiegel-Feld: You're absolutely right about the percentage of primary energy use. For buildings, that energy use accounts for around 30 percent—a third of total GHGs in the United States—and in densely populated urban areas, buildings actually typically contribute a much larger share of local GHGs. In New York City, they contribute about 70 percent of total local emissions. Similar percentages in Chicago, DC, and Boston, where the number hovers around 70 percent, as well. I think—for the purposes of our conversation today—what this means is that, when cities like New York want to lessen their impact on climate, they really need to tackle the buildings sector, first and foremost.

There's just one other point that I just wanted to make, because when one hears that buildings account for 70 percent of emissions in a city like New York, there might be a temptation to think, "Well, our buildings might be especially bad here—especially inefficient." But it's not actually the case, right? So, the reason that buildings account for such a large percent of emissions in cities is not because our buildings are especially inefficient, but it's actually because transportation in these areas tends to be more efficient than in other areas. There are less vehicle miles traveled per capita, more mass transit. If you're in a scenario in which transportation accounts for a relatively smaller share of emissions, then buildings account for a relatively larger share. So, it still brings us back to the point that if cities want to get serious about climate, they have to tackle buildings—but hopefully, it's just a bit more context as to why.

Daniel Raimi: Yeah, that's great. And I have a sort of technical, wonky question, actually: When we think about that 70 percent of greenhouse gas emissions, does that include the emissions associated with manufacturing the steel and cement that gets used in producing those buildings? Or is that accounted for under a different ledger?

Danielle Spiegel-Feld: Yeah, that's a great question. That would be accounted for under a different ledger, because in order to account for that, you'd have to be moving toward more of a consumption-based accounting system to get all the embedded emissions, which is typically not the way that cities (for better or worse) measure their GHGs.

Daniel Raimi: That makes sense. As you said, if cities want to get serious about climate, then buildings are an obvious first place to start. So, what is New York City doing to try to reduce those emissions, and how does the recent study that you led seek to inform the implementation of the strategy that New York is going about?

Danielle Spiegel-Feld: That's a great question. So, maybe if I could, I'll provide a little bit of a historical perspective on this—sort of a walkthrough of what's happened in New York over the past 15 years, because I think that helps to explain where we are today.

Basically, New York City has been steadily trying to reign in emissions from buildings since Michael Bloomberg's second term in office. It was at this time that the city adopted a really important suite of legislation—a package of legislation known as the Greater, Greener Buildings Code.

The Greater, Greener Buildings Code included a bunch of different regulations that were all fairly light touch. So, with some exceptions, they didn't impose really strict requirements on property owners to actually change the amount of energy they used. Instead, they were more geared toward providing information about the quality and the quantity of energy used in our buildings, and where there were opportunities to make cost-effective improvements.

It was in that same era that New York City adopted the Benchmarking Law, which subsequently was copied in cities throughout the country. What this law did is that it required owners to annually report to the city how much energy they used per square foot, compared to similar properties. They also adopted a law as part of this package that required owners to periodically conduct energy audits that were geared toward identifying opportunities for low-cost retrofits. There were some other things passed in this law—I mean, there was a requirement to install more efficient light bulbs over time—but by and large, I think what's important is that the laws were geared toward providing information to building owners that they hope would lead them, voluntarily, to improve their property's efficiency. It was a very bottom-up approach.

And this approach did have some success. It's credited with leading to some improvements in efficiency, but I think, as time went on—and especially as it became evident that the federal government wasn't really going to tackle emissions upstream through the energy sector—there started to be a movement growing for the city to take stricter, more top-down action. The first step of this process was to require that building owners actually post their benchmarking scores on-site, so that they would be broadly visible to the public. And the idea here was that if you could build market awareness about properties' relative efficiency, that information could be more easily priced into decisions about where to buy or rent, and hopefully provide a stronger incentive to landlords to improve their properties.

Then, in 2019, the real big change came about. That's the year that the city passed the Climate Mobilization Act, and the centerpiece of the Climate Mobilization Act was Local Law 97. So, Local Law 97 is really a big departure from what came before, in that it entirely jettisons this informational approach. Instead, it established mandatory caps on the total amount of GHG emissions that buildings could release per square foot. With some exceptions, these caps apply to all buildings with more than 25,000 square feet—so, residential, commercial, industrial—and they also incorporate emissions from both fossil fuels that are burned on site as well as fossil fuels that are attributed to the production of electricity used in the building.

It's a pretty big change. It's certainly more top down, certainly more aggressive, and that obviously gave rise to some concerns from industry folks in particular about, What would the cost of this law be? That's where we step in—both sort of analyzing in more detail than had been done before, what are the predicted costs of the law and on whom will they be imposed, and could carbon trading be utilized as a mechanism for helping to reduce those costs or perhaps redistribute those costs in a more equitable fashion?

Daniel Raimi: Yeah, that's great. Can you tell us maybe just a little bit more about the study itself and its focus on carbon trading? And is it worth mentioning the partners that you worked with on the analysis?

Danielle Spiegel-Feld: Yeah, of course. When Local Law 97 was being drafted, there were a number of actors already who were raising the idea of adding a carbon trading program to the law. The idea here would be to allow building owners to trade credits of some sort for their total emissions, so that they could achieve a lower average cost of compliance. But there was certainly not consensus that this was the right way to go, and there was also not consensus about how such a program might be structured. What ultimately happened is that the city council wrote a provision into Local Law 97, mandating that a carbon trading study be conducted and that the city commission a study into whether a trading program should be added to the law, or what the impacts of adding a trading program to the law would be.

NYU was selected to lead that study, but we worked with a number of really critical partners throughout the process. HR&A Advisors here in New York helped us a lot with providing insight into the real estate sector and data on the real estate sector and energy use. The Brattle Group led the economic modeling. We also worked with Steven Winter Associates, which is an engineering firm that really has a lot of very particular expertise in the energy sector, as it relates to buildings in New York City. So, it was really a large team effort to produce the study.

Daniel Raimi: Yeah, that's great. And the study itself, which we, of course, will have a link to in the show notes, is called “Carbon Trading for New York City's Building Sector.” So, let's dive into some of the really important points that you draw out in your analysis.

The first that I think is worth talking about is the fact that the state as a whole—New York State—is looking to reduce emissions in the power sector to zero by 2040, and, of course, buildings use lots of electricity. What would the decarbonization of the power sector mean for buildings when they're thinking about meeting those city-specific environmental goals?

Danielle Spiegel-Feld: That's a great question, and really important. The short answer is that grid decarbonization is going to make it a lot easier for buildings to meet their targets. In fact, we estimated that, if the grid decarbonizes on pace with the state goals, and those goals are reflected in the city regulations that measure buildings emissions, a slim majority of the square footage that Local Law 97 covers won't need to make any changes until 2035 in order to meet their obligations under the local law. But of course, the situation will look quite different if the grid doesn't decarbonize on pace. And incidentally, not decarbonizing the grid is probably closer in line to the scenario that most New York City lawmakers had in mind when they passed Local Law 97, because the city law was passed first. So, when Local Law 97 was drafted, lawmakers certainly could not with any confidence have assumed that the state was going to decarbonize the grid on the ambitious timeline that they later established.

The other thing that's really important to note is that the law doesn't affect all buildings equally. Even if the grid decarbonizes, there will be some buildings that are going to have a much harder time meeting their targets than others. There are a number of reasons for why this would be the case—factors including the type of tenants that they have in a property, the mix of energy that the building uses, and so forth. That's really where the utility of trading could potentially come in place, because carbon trading provides a mechanism through which building owners with high compliance costs could essentially pay buildings with low compliance costs to reduce emissions for them, and the idea is that if the program is well-designed, you get the same amount of emissions reduced, but at a lower cost.

Daniel Raimi: Right. That makes a lot of sense. Yeah, trading credits doesn't make a lot of sense when the credits are worth zero, or close to zero.

Danielle Spiegel-Feld: Exactly.

Daniel Raimi: I have another kind of wonky question—and this might be a better question for an electricity system modeler than a legal expert—but when the city is accounting for electricity-related emissions that are coming from the grid, do you know what type of accounting system it would use? Because the Eastern Interconnection is one sort of mega grid, and then you have New York State, which is not an isolated grid, but it has its own system operator. And so, electricity—electrons—could be flowing from Florida up to New York City in some at least theoretical capacity. So, do you know how the city plans to account for emissions coming from outside of the state?

Danielle Spiegel-Feld: That's a really great question, and for the details, I would certainly have to refer you to the team at Brattle and other people at NYU who really focused on this question in more detail. But one thing that I would note is that the carbon coefficient for electricity from the grid is quite geographically limited.It's being drawn up now; the methodology hasn't been set. But I don't believe that they envision setting it based on a statewide average, but instead, based off of the more precise carbon intensity of electricity in Zone J, which is the zone of the New York State electricity system that feeds New York City, and has historically had quite a different carbon profile than the electricity upstate.

So, I guess my short and very unscientific answer for you is that I have every reason to believe that it will be quite a geographically limited approximation of the carbon intensity of electricity.

Daniel Raimi: That's really helpful. That would be a fascinating topic to explore in its own right—and just the whole topic of estimating marginal emissions factors from different grids is a whole discipline really unto itself. Another really interesting result that you talk about in the report is the differential effect that residential and commercial buildings might experience under different combinations of policies. Can you talk about some of those differences?

Danielle Spiegel-Feld: This was one of the most important findings of our initial modeling work, and I think it probably came as a surprise to some of the people that were involved in drafting Local Law 97. As you alluded to earlier in the conversation, there are two main types of energy use in buildings: First, we have electricity that is used for light bulbs, elevators, air conditioning, and basically everything we plug into the walls, from computers, to televisions, to telephones, et cetera. The other type of energy use we have in buildings is energy that's used by burning fossil fuels on site. This energy is used for heating, and for cooking, and for making hot water.

In commercial office buildings, electricity accounts for the vast majority of total energy use, because there's just not a whole lot of cooking or showering going on—and there's also a lot of stuff plugged in—in these buildings per square foot. Many of us work in open-floor-plan offices, where you just have computers stacked side by side, lots of printers, et cetera. Your typical house doesn't have such an intensive plug load. What this means is that, as the grid decarbonizes, commercial buildings are going to see their emissions fall much more dramatically than residential buildings will. And as time goes on, if we assume that the state is going to be successful in decarbonizing the grid, this means that Local Law 97 becomes pretty easy for most commercial buildings to comply with, but not so easy for many residential buildings. There's really this differential effect of the law on buildings, depending on the type of occupancy.

Daniel Raimi: That's really interesting. I'm wondering, also: When we think about heat, in particular, that's provided to buildings in New York City, I'm thinking about the iconic images of the orange-and-white towers coming out of the street with the steam coming out of the top. I think those are vents for the district heating system that transmits hot steam around the city to heat homes. Can you talk about what implications this policy might have for the continued use of that steam-heat system, which today I assume is powered by natural gas?

Danielle Spiegel-Feld: That's a great question. While those images are iconic, steam heating accounts for quite a small percentage of the total heat load (if you could use that word) in New York City. Most buildings have their own boiler systems that provide heat. But you're right that, as time goes on, Local Law 97 will make it relatively less cost-effective than it is today to continue to use steam heating. And certainly, the goal of the law is to try to provide a nudge or price signal for people to transition toward electric heating. Now, I think we found that the caps are probably not stringent enough in many cases to really incentivize electrification, but I would certainly say that that is a policy goal of New York City, to transition toward electric heating—and the hope was that Local Law 97 would help push buildings in that direction.

Daniel Raimi: Great. That's really interesting to know that that district heat network is not a dominant source. I'd always sort of assumed it was, because you just see those things all over the place. I mean, you see the steam everywhere, but that's really interesting.

Danielle Spiegel-Feld: They play prominently in movies.

Daniel Raimi: Absolutely, and I feel like on Saturday Night Live, the intro always has some pictures of the smoke coming out, or the steam.

So Danielle, just one more question, before we go to our Top of the Stack segment, which is a question about environmental justice issues. There are some really interesting findings in the report that are relevant to environmental justice communities that have historically borne a disproportionate burden of pollution in New York City. Carbon trading and cap-and trade-programs have been controversial among environmental justice communities for quite a while, especially in places like California, where such policies have been in place for a while. Can you talk about some of the findings that you drew out in this report, with regard to environmental justice communities?

Danielle Spiegel-Feld: Yeah, that's a really great and important question. I think, before we can get into some of the findings that we made about how a trading program could potentially impact environmental justice communities, it's important to level-set and identify which are the communities that might be considered environmental justice communities in New York City, and where are they located? At the time that we were conducting our modeling, the city had a parallel process underway to try to formally define the geographies that would be categorized as environmental justice communities. But we needed to come up with a working definition for our modeling purposes, so we could proceed.

So, we came up with two criteria that we would use to sort neighborhoods—one social, one health. The social criteria looked at high school graduation rates, and the health criteria looked at the rate of asthma-related hospitalizations. The map that we developed, which probably looks similar to what many people might've intuited, essentially covered the Bronx, northern Manhattan, portions of Staten Island, and then large swaths of Brooklyn and Queens. What's really important to note about these geographies, for our purposes, is that there are not a lot of commercial office buildings in these areas. Instead, the commercial office buildings are largely concentrated in Downtown and Midtown Manhattan.

What that means is that, as the grid decarbonizes, it becomes increasingly expensive for buildings that are in environmental justice communities to meet their obligations, compared to the buildings that are not environmental justice communities [EJCs], right? And so, the nature of the building or the type of occupancy—being residential, concentrated in EJCs, and then commercial office buildings concentrated outside of EJCs—is going to affect the distribution of costs that the law imposes, when you combine it with grid decarbonization.

And I think many people thought that this allocation of costs was not optimal. And so, one of the goals for the carbon trading study was actually to see if we could design a program that would help to redistribute the cost burden away from residential—and therefore EJCs—toward the commercial sector and non-EJCs. And I think that we came up with a couple of program designs that could effectively lead to these outcomes while also lowering total average cost throughout the city. While, of course, there is long-standing opposition or controversy to this idea of carbon trading from certain corners, I think our study showed that these programs could be designed in a way that would actually affirmatively advance some of the objectives of environmental justice advocates.

Daniel Raimi: We'll refer folks to the report to explore those scenarios in depth, because there's so much richness in the report that I would really encourage people to check out.

Well, Danielle Spiegel-Feld from NYU, thanks so much again for coming on the show. Such interesting work, and it's going to be fascinating to watch how the implementation of this policy plays out over the next 10 or 20 years. Or probably more quickly than that, actually—over the next few years, at least.

Let's move now to the last question that we ask all of our guests, which is what you have read, or watched, or heard recently. It can be related to the environment, even if it's just kind of tangential that you think is interesting, and that you'd recommend to our listeners.

I'm going to start with a recommendation of a book that I just finished, and it's one of my favorite energy books I've read in a really long time. It's called Yellow Bird: Oil, Murder, and a Woman's Search for Justice in Indian Country. It's about a woman who goes on a search to basically solve an unsolved murder that happened on the Fort Berthold Reservation in North Dakota during the early days of the Bakken oil boom, and it's by Sierra Crane Murdoch. It's just a wonderful portrait of a fascinating and complex woman, as well as a look at what was happening in the region on the reservation during the oil boom, which was really a kind of a wild time in North Dakota—so I'd really recommend that.

But how about you, Danielle? What's on the top of your literal or metaphorical reading stack?

Danielle Spiegel-Feld: Great. Well, I was thinking about this, because I know you do this Top of the Stack at the end, and I have to recommend something that a student of mine recommended recently to me. Some of your listeners might be familiar with the podcast 99 Percent Invisible. They have one episode called, “Pipe Dreams,” which is about how changes in toilet technology, away from the flush toilet, could have significant environmental benefits—both for climate change and also for water scarcity issues.

I just thought it was a really fascinating look at this technological innovation, or the potential for this innovation, because what the program makes clear is that, in many cases, the technologies that we need or that we could really benefit from are already available—they're just not that widespread. I thought it was an interesting take on how sometimes the technology that we all take for granted as being set in stone, like flush toilets, actually could be changed. I liked the way it raised questions about broader implications for environmental policy and what we might be able to change if we just thought a bit more creatively.

Daniel Raimi: Yeah, that's so interesting. Well, I wonder—I mean, you probably don't spend much time in men's restrooms—but I go in there sometimes, and occasionally, you see these no-flush urinals. Are those the types of technologies that they're talking about on the show?

Danielle Spiegel-Feld: I think that's among the technologies that would be preferred to what's in place today.

Daniel Raimi: Really interesting. All right. Well, next time you go in a restroom, you've got something new to think about.

Well, Danielle Spiegel-Feld from the Guarini Center at NYU, once again, thank you so much for coming on the show and sharing this fascinating work.

Danielle Spiegel-Feld: Great. Thank you so much. It was a pleasure to be here.

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Resources Radio is a podcast from Resources for the Future (RFF). RFF is an independent nonprofit research institution in Washington, DC. Our mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement.

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