Decarbonisation and climate resiliency step into the spotlight for the US buildings sector – ING Think

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Policy plays a dominating role in driving changes. At the federal level, while there are currently no mandatory building performance standards, the government has established a voluntary Energy Star efficiency certification system for companies to demonstrate their sustainability credibility. Moreover, the Biden administration announced the US’s first Federal Building Performance Standard, aiming to boost energy efficiency and reduce emissions in 30% of federal building spaces by 2030.

The US clean energy and climate policy is heavy on carrots as opposed to sticks, and this is no exception in the buildings sector. The Biden administration has set up numerous incentives to encourage property owners to boost energy efficiency and reduce emissions.

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The Inflation Reduction Act (IRA) of 2022 includes Section 25C energy efficient home improvement tax credits, Section 179D commercial buildings energy efficiency tax credits, and Section 45L tax credits for zero energy ready homes to push for building energy performance enhancement. The IRA has also established rebate programmes and energy efficiency for affordable housing programmes to compensate for retrofitting and installation projects. In addition, the Infrastructure Investment and Jobs Act (IIJA) of 2021 directs hundreds of millions of dollars towards improved building weather resilience, and helps state governments set up building efficiency codes. Moreover, all the incentives offered by the IRA and IIJA in accelerating renewable energy development will make clean technologies more easily available to be installed in buildings.

Looking at the elections in November, we think that the IRA and IIJA have the potential to survive a potential second-term Trump administration – and even a Republican Congress on top of that – because of the significant economic benefits they can bring. However, with a Republican White House and/or Congress, not only could the implementation of these policies become more difficult, but the magnitude of funding could also be reduced, especially if fiscal deficits become more of a problem. This means that property owners could experience reduced funding availability and longer application times.

Many local governments have established their own policies, and these can be more stable than the federal ones. As of the end of 2023, Maryland, Oregon, Colorado, and Washington state, as well as about ten cities, had established emissions and/or efficiency-based building performance standards, with almost 30 jurisdictions considering it. In New York City, Local Law 97 (effective as of 1 January 2024) sets phased-in emissions reduction targets for buildings with 25,000 square feet or more through to 2050. Local Law 97 covers 60% of New York City’s building area and 50% of its building emissions. While most eligible buildings can meet the 2024 requirement, many of them fall short of the requirements set for 2030 and beyond.

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