EPA Decision Shifts Focus to States and Cities for Climate Risk Mitigation

July 26, 2022

Prospects for significant climate regulation at the Federal level have dimmed due to a recent Supreme Court case that ruled the Environmental Protection Agency (EPA) does not have the authority to regulate carbon emissions from power plants.. The Supreme Court ruling pointed to the “major questions doctrine” for the first time, setting precedent that major regulatory changes must first be expressly authorized by Congress. Any further regulatory moves to address climate risk, including implementation of the Securities and Exchange Commission’s (SEC) climate disclosure proposal, will likely be litigated at every turn.

This development exerts more pressure on states and cities to continue to move forward with climate mitigation and resiliency efforts as they did during the Trump administration. One key focus area is greenhouse gas emissions from building. While the EPA states that buildings are responsible for approximately 6% of total greenhouse gas emissions in the U.S., buildings are a much more significant source of emissions in large cities. According to a 2016 mayoral report cited by Law360, buildings accounted for more than 70% emissions in New York City. As a result, cities and states began passing significant building emissions cap laws during the Trump administration; for example:

  • Washington, D.C.: 2018 law aimed at reducing emissions by 50% by 2032;

  • New York City: 2019 Local Law 97 mandating a 40% reduction in greenhouse gas emissions for buildings over 25,000 square feet by 2030, relative to 2005 levels. Other major cities, including Los Angeles and Denver, followed suit with similar laws; and

  • Berkeley, CA: 2019 law banning new natural gas hookups in buildings. The state of New Jersey and cities like San FranciscoSeattleDenverNew York, and likely Washington, D.C. have also introduced a ban on new natural gas hookups.

Local climate laws, however, are not completely immune to difficulties that also beset legislation and regulation at the Federal level:

  • Pushback from Certain States. States can interfere in local mandates; for example, 20 states with Republican-controlled legislatures, including Texas, Louisiana, Florida, and Wyoming, have passed preemption laws that prohibit cities from banning natural gas hookups. Amy Turner, a senior fellow at the Sabin Center for Climate Change Law at Columbia Law School, told Law360 that the specifics of the state and city laws and approaches vary widely across the country. She says, “That variability explains, in part, the big differences being seen between heartland states that are limiting local control and more liberal or coastal states moving forward with strict building decarbonization plans”;

  • Cost Allocation. Lack of clarity in terms of cost burden; i.e., how will costs be allocated between renters and property owners;

  • Supply Chain and Labor Constraints. Current supply chain stresses and labor shortages are complicating owners’ efforts to make their buildings more energy efficient; and

  • Denial. Skepticism that penalties from lack of compliance will actually be imposed, especially given a lawsuit filed in New York state court by building owners against Local Law 97.

CREFC, via its Sustainability Initiative, continues to follow significant climate regulatory and legislative developments at the Federal, state, and local levels. If you would like to join this Initiative, please contact Sairah Burki.


Sairah Burki
Managing Director, Regulatory Affairs & Sustainability
According to a 2016 mayoral report cited by Law360, buildings accounted for more than 70% emissions in New York City. 
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2022 CRE Finance Council. All rights reserved.

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