Green Building Law Update

Environmental Law and Sustainability for Business

Greenhouse Gas Data Must be Collected Beginning January 1 in Maryland

This post is adapted from a Client Alert to commercial real estate owners and tenants in those buildings in Maryland about the new regulations requiring that beginning January 1, 2024 greenhouse gas emission data be collected for reporting to the state government.

The Maryland Department of the Environment has given notice to the legislature that it intends to publish new regulations on December 15, 2023, to create Maryland Building Energy Performance Standards (BEPS) implementing the Climate Solutions Now Act of 2022.

The stated goal of that Act is to reduce net direct greenhouse gas emissions from Maryland’s building sector for certain buildings that are 35,000 square feet or larger. The regulation requires covered building owners to measure and report net direct GHG emissions (kg/CO2e/sq ft) data to MDE. The regulation further requires that covered building owners not only meet specific net direct GHG emissions but also energy use intensity (EUI) standards (kBtu/sq ft). This regulation of EUI is not authorized by the statute, but MDE staffers argue the government should regulate not only GHG emissions but also how much energy is used by a building.

The 2022 Act sets the big, hairy, audacious goal of dramatically reducing statewide GHG emissions by 60% below 2006 levels by 2031, arguably the strictest state standard in the nation (i.e., Michigan, Connecticut, New York, and Oregon all have GHG mandates but nothing like Maryland) and achieve net zero emissions by 2045. Among the requirements in that statute is that Maryland implements BEPS mandating covered buildings achieve a 20% reduction in net direct GHG emissions on or before January 1, 2030, as compared with 2025 levels for average buildings of similar construction; and, ultimately attain net zero direct GHG emissions on or before January 1, 2040 (.. although disproportionately burdening privately owned buildings by exempting nearly all government buildings, including schools from the law). For broader context see our blog post from last year, Maryland is the First State to Regulate Carbon.

To accomplish that, MDE has given notice of its intention to publish new regulations which have been described by a Maryland business owner as looking like a misguided kamikaze run. Specifically, those new rules provide:

“Each calendar year beginning in 2025 or in the first calendar year after which a newly constructed covered building is occupied, the building owner shall collect and enter all required benchmarking information for the previous calendar year into the benchmarking tool.” The regulations mandate that buildings will be required to benchmark energy use utilizing the United States Environmental Protection Agency’s ENERGY STAR Portfolio Manager tool. The debate over the efficacy of using Portfolio Manager for a purpose it was not created for, is left for another day, however, we are already doing Portfolio Manager calculations of buildings for our clients. Of import beyond the actual proposed regulations, there is a draft TM 23-01 Technical Guidance and Calculations Methodologies document that prescribes how some of this is to be done.

A building owner is required to submit an ENERGY STAR Portfolio Manager report to MDE by June 1st of each year, beginning in 2025. The information required to be inputted into Portfolio Manager is not only energy meter data, but for offices also weekly operating hours, number of workers on main shift, number of computers, percent that can be cooled, and more; all of that may vary for a building with more than one use.

Beginning in 2026 that data must be third party verified and not only have we already been assisting building owners in collecting the required data, we will also be offering that third party verification service.

The building owner is to exclude from the benchmarking report submetered and separately metered energy consumption data for: Food service facilities that engage in commercial cooking and water heating; electric vehicle charging; and other electricity uses excluded from site energy use by the benchmarking tool.

Also to be excluded are emissions from required combustion equipment under the following conditions: Emissions from generators shall be excluded from the net direct emissions requirements if a federal or state regulation requires a covered building including a health care facility, laboratory, assisted living and nursing facility, military building, critical infrastructure, and a building used in life sciences that use a backup generator or other equipment that run on combustible fuels. And a covered building is required to include emissions from a combustion generator if the relevant federal or state regulation is updated to allow battery storage or other types of systems that do not produce direct emissions.

How a building owner (i.e., the person required by the law to report and ultimately reduce GHG emissions) as opposed to its tenants who are not subject to or even mentioned in the statute are going to obtain this data will no doubt be the work of attorneys. While not authorized to do so by the statute, the regulations dubiously provide, “A tenant of a covered building shall, within 30 days of a request by the building owner, provide all requested benchmarking information that cannot otherwise be acquired by the building owner from other sources.”

And there is a statement that although curious does not quite address ownership or confidentiality of the GHG data, “Nothing in this regulation shall be construed to permit a building owner to use tenant energy usage data for purposes other than evaluation of the performance of the building.”

The regulations are very specific that on and after January 1, 2025 (.. correct, not 2024), upon the request and authorization of a building owner an electric or gas company shall provide the building owner with at least the most recent 12 consecutive months of whole building energy consumption data by fuel type.

But then in the very next section, the regulations provide, “For covered buildings with five or more tenants, electric and gas companies shall deliver to requestors the monthly whole building energy consumption data capturing total consumption by fuel type of all relevant fuel(s) across all meters at the building.” Followed by the specious statement, without any authority, “The whole building energy consumption data shall not be deemed confidential information by the electric and gas companies for purposes of delivery to the building owner.”

This is followed by, “For covered buildings with fewer than five tenants, electric and gas companies shall deliver whole building energy consumption data to the building owner if the building tenants provide written or electronic consent for the delivery of the tenant’s energy data to the building owner .. The building tenant’s consent may be provided in a lease agreement provision.” But with no tenant consent the building owner who is required to report the data, and no data?

Additionally, as soon as these regulations become effective, they require also without statutory authorization, “Before a buyer signs a contract for the purchase of a covered building, the building owner selling the covered building shall: Disclose to the prospective buyer that the building is subject to requirements ..” under these regulations, including transferring a list of specific records and information to the prospective buyer, including the complete benchmarking record from the benchmarking tool, documentation of data verification, and more.

All those who have an interest in a building in Maryland, or better yet everyone who is not an opponent of innovation, must review the regulations, and that includes more than 90% of businesses in the state that are a tenant in a building. We are happy to provide you with a copy now before they are published.

There will be a virtual public hearing on the regulations on January 18, 2024, at 10:00 am and public comments will be accepted through that day. We are working with clients on their individual comments to MDE on the regulations proposed to be published on December 15. We anticipate posting our comments for you to see, including who benefits from this regulatory scheme (.. recall our post, Tenants Monetizing their GHG Emission Data), on this blog next week.

These proposed regulations are retroactive, requiring January 1, 2024 GHG emission data to be collected and reported to MDE (absent some act of the Maryland legislature or intervention by the courts), and as such we have been and are continuing to work with building owners including determining the best building specific strategies for calculating GHG emissions ( .. there is no one homogenized building type). We would be pleased to speak with you if your business is an owner or tenant in a building in Maryland.

Join us for a live webinar “GHG Data Must be Collected Beginning January 1st in Maryland” 30 talking points in 30 minutes, Tuesday, December 19 at 9 am EDT presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

EU to Ban Greenwashing and Much More

By Stuart Kaplow on November 26, 2023 Posted in Codes and Regulations, Green Washing, greenwashing

The EU Parliament and Council have reached a provisional agreement on new rules to ban misleading environmental marketing claims.

The agreement reached on September 19, 2023, updates the existing EU list of banned commercial practices and adds to it several problematic marketing habits characterized as greenwashing. The new rules aim is to protect consumers from misleading advertisements and help them make better purchasing choices, but many suggest they go too far as a prior restraint by government prohibiting free speech or other truthful expression before it happens (.. yes, a uniquely American tenet).

These rules may take on far greater significance than only regulating environmental claims in the EU when they are being seen as a precursor to the long delayed updated Federal Trade Commission Green Guides for the Use of Environmental Claims in the U.S. Similar to this action in the EU, in the U.S. the Green Guides help marketers avoid making environmental marketing claims that are unfair or deceptive providing bumpers for businesses for safe lanes in which to respond to increasing consumer interest in buying environmentally friendly products including those that respond to climate change.

What will be banned?

Negotiators from Parliament and Council agreed to proscribe the following:

generic environmental claims, e.g., “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco”, without proof of recognized excellent environmental performance relevant to the claim;
commercial communications about a good with a feature that limits its durability if information is available on the feature and its effects on the durability;
claims based on emissions offsetting schemes that a product has neutral, reduced, or positive impact on the environment;
sustainability labels not based on approved certification schemes or established by public authorities;
durability claims in terms of usage time or intensity under normal conditions, if not proven;
prompting the consumer to replace consumables, such as printer ink cartridges, earlier than strictly necessary;
presenting software updates as necessary even if they only enhance functionality features; and
presenting goods as repairable when they are not.

Next steps

To become law, the provisional deal will now have to get the final okay from both the Parliament and the Council. The European Parliament is made up of 705 members elected in the 27 member states of the enlarged European Union. The members of the European Council are the heads of government of the 27 EU member states. The vote by MEPs is expected to pass overwhelmingly before the end of the year. When the directive comes into force, member states will have 24 months to incorporate the new rules into their law (.. likely by the end of 2026).

Social media widely reported that the provisional agreement was helped greatly by the release of an investigation of the 2022 FIFA World Cup’s claim to be the first carbon neutral tournament of its kind, which investigation found that the organizers’ estimate of the event’s GHG emissions did not accurately reflect the actual carbon footprint. Many in the EU take their football seriously if not their concerns over the environment.

The Implications

There is some concern that as a practical matter, the rules will mean that businesses are effectively prohibited from making environmental marketing claims altogether, setting back the role that companies play in the environmental movement and their key place in repairing the world.

And that concern over abridging free speech must be taken seriously in light of activist claims like, “There is no such thing as ‘carbon neutral’ or ‘CO2 neutral’ cheese, plastic bottles, flights or bank accounts. Carbon neutral claims are greenwashing, plain and simple,” attributed to Ursula Pachl, the deputy director of EU consumer advocates BEUC, the umbrella group for 45 independent consumer organizations from 31 countries.

These rules will not go into effect until the late fourth quarter of 2026, but there is trepidation that this action by the EU will put a thumb on the scale of the process of updating the FTC Green Guides in the U.S. Of course, companies doing business in the EU must now begin modifying their business practices to comply. As verboten as the process may be, the rules offer substantive guidance on what subject matter will likely be regulated for U.S. businesses that want to mitigate the risk of greenwashing claims.

Marketing tactics of making false or misleading claims about a product or service’s environmental benefits are greenwashing pure and simple and should not be allowed to continue. U.S. businesses and for that matter companies across the globe would be better served if the FTC were to update the Green Guides in a nation where prior restraint, government action that prohibits speech or other expression before the speech happens, is banned by the First Amendment of the U.S. Constitution.

Solar Panels may be Hazardous Waste No More

By Stuart Kaplow on November 19, 2023 Posted in Codes and Regulations, Energy, recycling, Solar Panel

Solar panels provide clean energy from the sun, and their prevalence as an energy source has been growing dramatically. In 2020, solar panels provided about 40% of new U.S. electric generation capacity, compared to just 4% in 2010. Overall, more than 3% of electricity in the United States was produced using solar technologies in 2020.

While in use, solar panels safely generate electricity without creating greenhouse gas emissions. However, like any energy source, there are unintended consequences like waste that needs to be safely disposed of when solar panels reach their end of life. As the solar photovoltaic market grows and then panels become obsolete, so will the volume of end of life panels. By 2030, the United States is expected to have as much as one million total tons of solar panel waste. By 2050, the U.S. is expected to have the second largest number of end of life panels in the world, with as many as 10 million tons of panels, although some have estimated the number will be more than double that, and cumulatively that would be more than 60 million tons of solar panels lying in landfills.

Hazardous waste testing on solar panels across the marketplace has indicated that different varieties of solar panels have different metals present in the semiconductor and solder. Some of these metals, like lead and cadmium, are harmful to human health and the environment. If these metals are present in high enough quantities in the solar panels, solar panel waste could be a hazardous waste under RCRA.

As a practical matter, many solar panels are a hazardous waste, and some are not, but testing the waste stream will be problematic and stifle the continued uptake of solar.

On October 23, 2023, EPA announced a new rulemaking effort to improve the management of end of life solar panels. EPA is drafting streamlined requirements to increase solar panel recycling through the proposed addition of solar panels to the universal waste regulations (first issued in 1995 and streamlining the ‘collection’ of certain ubiquitous hazardous waste while the facility that receives the waste remains subject to the law).

This change in the RCRA regulations could provide one system for handling all discarded solar panels, without regard to hazardous or not. Universal waste regulations are intended to streamline the process further encouraging the solar marketplace by promoting the collection and recycling of solar panels including prompting the development of municipal and commercial programs to reduce the quantity of these wastes going to municipal solid waste landfills. Some believe this end of life government subsidy to the solar industry is key to continuing the greater solar market uptick and reducing greenhouse gas emissions.

EPA is developing this rule in response to the November 19, 2021, petition submitted by a broad coalition of industry associations making this ask to aid the sustainability and long term growth of the solar industry. Others questioning the wisdom of this energy public policy have suggested this is little more than the government picking winners in power generation. And there are those that observe that today, this is no good recycling option for most component parts of the majority of solar panels making this life cycle speculative, despite that many panels are 76% glass, 10% plastic, 8% aluminum, 5% silicon and 1% metals(.. nothing that 900 degrees F will not thermally separate?

Some states have enacted their own laws, regulations, and policies impacting solar panel waste, including California and New Jersey, but most like Maryland, while driving solar panel installation do not yet have an end of life plan. Accordingly, many are awaiting this new rule that may be proposed as early as summer 2025, but is likely years in the implementation. If states want to drive solar installations within their borders, by subsidizing the solar industrial complex, they could move forward with their own changes in laws creating universal waste rules for solar panels (.. and why not also lithium batteries that power electric vehicles while the states are at it, if we want government energy policy to lead an industry?).

There is much to be considered in the death of a solar panel.

Greenhouse Gas Data Confidentiality Takes Two Steps Forward

By Stuart Kaplow on November 12, 2023 Posted in Codes and Regulations, Environmental, GHG, greenhouse gas

Earlier this year, the EPA issued a notice of proposed rulemaking that would amend provisions in its Greenhouse Gas Reporting Rule altering data collection including expanding the confidentiality of data collected. Then last month, California Governor Gavin Newsom signed the Delete Act overhauling the State’s data broker law.

At a time when the world’s most valuable resource is no longer oil but data, we recently blogged about this new and emergent space in Do You Own Your GHG Emission Data? And considering the Trillions (.. yes, T, Trillions) of dollars involved we also blogged, Tenants Monetizing Their Greenhouse Gas Emission Data.

Best in class companies recognize it is time for business to own their own GHG data.

Today under its Greenhouse Gas Reporting Rule, EPA requires the reporting of GHG emission data by more than 7,500 businesses whose emissions exceed 25,000 metric tons of CO2e per year including fuel and industry gas suppliers.

EPA previously admitted in a Federal Register notice, “due to the large numbers of entities reporting” GHG data, it cannot timely address data security and privacy concerns over confidential business information because the information the Agency has “.. must be available to the public.” But then in Food Marketing Institute v. Argus Leader Media, the Supreme Court ruled where commercial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is “confidential” within the meaning of 5 U. S. C. §552(b)(4), the Freedom of Information Act’s Exemption 4.

In response to that Supreme Court decision, EPA revised its approach to confidentiality. The Greenhouse Gas Reporting Rule requires reporting of numerous data elements to characterize, quantify, and verify GHG emissions and related information, and on May 22, 2023, EPA published the proposed rule, Revisions and Confidentiality Determinations for Data Elements Under the Greenhouse Gas Reporting Rule.

When final, it will remain EPA’s reporting platform, but it will be business data and businesses will own it.

Then on October 10, 2023, the California Delete Act that had been SB 362, became law, bolstering the state’s existing data broker registry law by, in part, requiring more disclosure by companies that regularly and systematically collect, analyze, and share or sell the personal information of consumers and proprietary information of businesses. This includes data brokers that collect and profit, including utility data and other GHG emission relevant data, from this data without having any direct relationship with the utility consumer or business whose information they amass.

Of note, the updated California law also expands rights to have data deleted and requires the state to create an accessible deletion mechanism that allows, through a single request, to request that every data broker to delete personal or business information, including utility data, held by the data broker.

And the risk associated with this utility and associated data is dramatic in scope and vulnerabilities all of which are exacerbated when the data is not held confidentially. There have been media accounts in recent months about cybercriminals, malware, and more, who appreciate the dollar value that passes hands in the utility sector, about nation state actors who may want to cause disruptions, and hackers who oppose a utilities agenda (from a substation location to GHG reductions), and more. Because utilities are geographically diverse by nature there are untold points of entry for malicious activity. And the sector’s broad and expanding use of technology from wireless smart meters, to aggregating customer data for sale to government actors, all of it often managed by third parties, create heightened risk for businesses that simply need access to electric and gas power. A building owner ‘air gapping’ or transmitting data via a third party provider of its utility operational technology systems is important but does not provide adequate security for its utility and associated GHG data.

And while GHG data confidentiality has taken two steps forward with these enactments it takes one big step backward when despite that EPA will going forward treat as confidential information in EPA’s GHG large emitter program it inexplicably does not afford similar protections to businesses inputting data in the EPA Energy Star Portfolio Manager program in clear violation of federal law as made clear by the U.S. Supreme Court in the Argus Leader case. As increasing numbers of state and local government building energy performance standards (BEPS) mandate that thousands upon thousands of businesses utilize Portfolio Manager without any express safeguards despite that most of those governments (e.g., Maryland) have the same or similar obligations for business data confidentiality that the U.S. Supreme Court found in Argus Leader under their existing exemptions in state freedom of information act laws. There are increasing calls to correct these dangerous violations of law expressly affording confidentiality protections to those businesses mandated to input their data into Portfolio Manager including when done in response to the increasing number of mandatory BEPS.

Best in class companies not only recognize it is time for business to own their own data and profit from it while also protecting themselves from utility sector data vulnerabilities, including those driven by wrongheaded government actors who in the name of responding to climate change have no regard for the risks that arise from the failures of confidentiality.

Businesses must protect their data, not to mention monetize it for their benefit, and can do both while at the same time leading the way toward decarbonizing the economy and repairing the world.

A live webinar “How to Make ‘Net Zero’ Pledges and Claims” 30 talking points in 30 minutes, Tuesday, November 21 at 9 am ET presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

US Appeals Court Upholds Nasdaq Board Diversity Rule, However

By Stuart Kaplow on November 5, 2023 Posted in ESG, Federal

Last week, a federal appeals court upheld Nasdaq’s board diversity rule potentially impacting the large numbers of businesses having initiatives to advance gender and racially diverse talent.

Nasdaq Stock Market, LLC proposed a rule that would require companies listed on its stock exchange to have women and minority directors on their boards or explain why they do not.

A three judge panel of the Fifth Circuit Court of Appeals explained the “fundamental purpose” of the Securities Exchange Act of 1934 is to enforce “a philosophy of full disclosure . . . in the securities industry.” Nasdaq is a private company that operates a securities exchange.

Consistent with this goal, on December 4, 2020, Nasdaq filed proposed rule changes to address board diversity.

The proposed rules included two parts: Under the Board Diversity proposal, Nasdaq proposed “to require each Nasdaq listed company, subject to certain exceptions, to publicly disclose in an aggregated form, to the extent permitted by applicable law, information on the voluntary self-identified gender and racial characteristics and LGBTQ+ status of the company’s board of directors.”

Nasdaq also proposed to require each Nasdaq listed company, subject to certain exceptions, to have, or explain why it does not have, at least two members of its board of directors who are Diverse, including at least one director who self-identifies as female and at least one director who self identifies as an Underrepresented Minority or LGBTQ+.

Under the proposed rules, “Diverse” would be defined to mean an individual who self identifies in one or more of the following categories: (i) Female, (ii) Underrepresented Minority, or (iii) LGBTQ+ ..; “Female” would be defined to mean an individual who self identifies her gender as a woman, without regard to the individual’s designated sex at birth; “Underrepresented Minority” would be defined to mean an individual who self identifies as one or more of the following: Black or African American, Hispanic or Latinx, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, or Two or More Races or Ethnicities; and “LGBTQ+” would be defined to mean an individual who self-identifies as any of the following: Lesbian, gay, bisexual, transgender, or as a member of the queer community.

On August 6, 2021, the SEC issued an Approval Order, approving the proposed rule changes. After the SEC approved these rules, the Alliance for Fair Board Recruitment and the National Center for Public Policy Research petitioned for review.

Last week, the Fifth Circuit panel found that the challenge was flawed, as Nasdaq is not a state actor and not subject to constitutional scrutiny. The Court further concluded that the SEC acted within its statutory authority in approving Nasdaq’s rules, explaining, “This evidence is sufficient to support the SEC’s determination that regardless of whether investors think that board diversity is good or bad for companies, disclosure of information about board diversity would inform how investors behave in the market.” Accordingly, the petitions seeking to block the rules were rejected.

Read the lengthy but very interesting decision at Alliance for Fair Board Recruitment, et al v. SEC, United States Court of Appeals for the Fifth Circuit.

This may not be the end of this dispute. The Alliance for Fair Board Recruitment has filed a petition for a rehearing before the full Fifth Circuit. Such could be significant because the three judges on the panel in this decision were each Democratic appointees while the majority of the Fifth Circuit are Republican appointees. And given the U.S. the Supreme Court’s June ruling declaring unlawful the race-conscious student admissions policies used by Harvard University and the University of North Carolina, final approval of the Nasdaq rule is less than certain.

In a similar vein we posted earlier this year, Court Finds California Racial, Ethnic and LGBT Quotas for Boards Unconstitutional.

And for those interested in the subject, the SEC has announced it will propose a rule on “human capital management” that commentators have speculated will be even more expansive than this Nasdaq rule.

With large numbers of businesses having initiatives to advance gender and racially diverse talent, keeping track of the law on this subject is a necessity.

Join us for our live webinar “How to Make ‘Net Zero’ Pledges and Claims” 30 talking points in 30 minutes, Tuesday, November 21 at 9 am ET presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

Net Zero, Carbon Offsets and more Now Require Disclosures

By Stuart Kaplow on October 29, 2023 Posted in Climate Change, Codes and Regulations, Environmental, GHG, greenwashing

California has just enacted the Voluntary Carbon Market Disclosures Act which requires the disclosure of specified information about net zero claims, carbon offsets, and more by businesses, including by an untold number of companies located beyond the Golden State’s borders.

Businesses need to immediately pay attention to this first in the nation law because it is effective January 1, 2024, subjecting violators to civil penalties of up to $2,500 per day for each violation up to $500,000.

At best, this new law is being heralded as an anti greenwashing crusade. At worst, critics challenge it as a frontal attack on using carbon offsets. Most believe that carbon offsets, which in simple terms are a credit a business buys in a project that reduces greenhouse gas to decrease its carbon footprint, serve the valid purpose of decreasing the use of fossil fuels and advancing the movement toward clean energy; despite the recent collapse of the Kariba project, the world’s biggest carbon enterprise in Zimbabwe which laid bare there is little in any way for the carbon industry to backstop failures. On its face, this statute requires disclosures in 3 categories of environmental claims:

First, a business “that purchases or uses voluntary carbon offsets that makes claims regarding the achievement of net zero emissions, claims that the entity, related entity, or a product is “carbon neutral,” or makes other claims implying the entity, related entity, or a product does not add net carbon dioxide or greenhouse gases to the climate or has made significant reductions to its carbon dioxide or greenhouse gas emissions shall disclose” on the business’ website all of the following:

(a) The name of the business entity selling the offset and the offset registry or program.

(b) The project identification number, if applicable.

(d) The offset project type, including whether the offsets purchased were derived from a carbon removal, an avoided emission, or a combination of both, and site location.

(e) The specific protocol used to estimate emissions reductions or removal benefits.

(f) Whether there is independent third-party verification of company data and claims listed.

Second, a business marketing or selling voluntary carbon offsets within the state now has particular disclosures mandated on the business’ website describing details regarding the applicable carbon offset project as can be found at Assembly Bill No. 1305.

And third, a business that makes claims regarding the achievement of net zero emissions, claims that the entity or a product is “carbon neutral,” or makes other claims implying the entity or a product does not add net carbon dioxide or greenhouse gases to the climate or has made significant reductions to its carbon dioxide or greenhouse gas emissions, is by this new law mandated to disclose on its website:

1. “All information documenting how .. the claim was determined to be accurate or actually accomplished, and how interim progress toward that goal is being measured.”

2. “Whether there is independent third-party verification of the company data and claims.”

The law additionally requires that disclosures be updated no less than annually.

“Consumers deserve to feel confident that carbon offsets are actually resulting in meaningful emissions reductions,” according to the bill’s sponsor, Assemblymember Jesse Gabriel. “This legislation will provide critical transparency and accountability to ensure that corporations are meeting their climate goals and that we are protecting our planet for future generations.”

This expansive new regulation of environmental marketing claims is in almost all articulable ways bigger and more expansive than anything currently required by the FTC Green Guides, that regulate environmental marketing claims made by businesses, but it is unclear what preemption issues will be presented with the soon to be released updated version of the Green Guides. And some question if one state, California, despite its street cred as having enacted the nation’s first air pollution law in 1947, should control environmental policy in the other 49 states?

There are some uncertainties, like undefined terms and that this statute has no temporal limitation arguably applying to a business’s current marketing claims about past offsets and GHG emission reductions, but such is to be anticipated in this first ever regulation of this space. This is an anti-greenwashing effort, but we suspect that it will lead to more greenhushing and businesses, public and private, large and small, will make fewer environmental claims in their marketing to mitigate their risk under this enactment and similar laws that may follow in other jurisdictions.

This new law, approved by Governor Gavin Newsom on October 7, 2023, applies to companies that operate in California or make the relevant claims in California, potentially making its application incredibly broad and wide, applying to California businesses and businesses organized outside of the state and there is no minimum activity threshold.

We anticipate that we will be providing the law’s required third party verification for businesses in a host of sectors.

Our attorneys are well positioned to advise clients on compliance with decarbonization matters at the local, state, and federal levels, including this enactment that will have ripple effects across the country if not the world.

Advantages of Adopting the Model State Indoor Air Quality Act: Prioritizing Human Health Amid Energy Concerns

By Stuart Kaplow on October 22, 2023 Posted in Climate Change, Environmental, GHG, Green Building, greenhouse gas

The quality of the air we breathe is fundamental to our well being if not life itself. With Americans spending nearly 90% of their lives indoors, the importance of healthy indoor air quality (IAQ) cannot be overstated.

In response to the growing concerns about IAQ, a Model State Indoor Air Quality Act has just been proposed. However, a vocal minority of climate doomers (.. we count ourselves among climate optimists) are heard to argue that improved indoor clean air will lead to increased energy consumption and the consequence of greater greenhouse gas emissions. In this blog post, we’ll explore the advantages of adopting this Act (.. contrary to our usual stated position that more government regulation is bad) discussing why the imperative of clean air should be prioritized, even when global warming concerns come into play.

The Importance of Clear Air Indoor and Otherwise

The COVID-19 pandemic taught us all the critical importance of clean air and well ventilated indoor spaces. The air inside buildings can be laden with pollutants, allergens, and even infectious agents, making it a potent health risk. While air pollution spewed by forest fires this past year and other “code red” unhealthy air days are most visible outdoors, the fine inhalable particulate matter in smoke makes its way indoors without good filtering through HVAC equipment. Poor IAQ can lead to a higher risk of airborne infections, respiratory illnesses, and exposure to harmful pollutants, ultimately affecting the well being of those who live and work indoors (e.g., radon is the second leading cause of lung cancer only behind smoking).

Advantages of the Model State Indoor Air Quality Act

1. Improved Public Health: The most compelling reason to adopt the Model State Indoor Air Quality Act is “to help people reduce their risks of cancer, asthma, infertility, and other long-term health problems, as well as limit infectious disease transmission and reduce triggers for allergies.” By setting IAQ standards, this model law goes a long way to ensuring that the air we breathe indoors is free from quantities of harmful contaminants, reducing the risk of health issues.

2. Reduced Sick Days: Healthier indoor air means reduced sick days for employees and students alike with reduced healthcare costs for individuals and society. Cleaner indoor air improves cognition and productivity, as well as increases employee satisfaction.

3. Tenants are Demanding It: Prospective office tenants seeking new space identify IAQ as the number 1 priority, that is at least 5 air changes each hour, upgraded MERV-13 filters, that HVAC fans circulate constantly, more fresh air be introduced, UV air treatment and even CO2 monitors, often surpassing the prior office tenant number 1 ask of electricity back up.

4. Increased Rental Income: Anecdotally we are aware of a landlord who posted, in conspicuous spaces in lobbies of its large office buildings, IAQ test results, and it attributes those lobby signs to a faster lease up than it had ever before experienced, contributing to overall significantly better rental income.

5. Legal Liability Reduction: Implementing IAQ standards can also help businesses mitigate the risk of legal jeopardy. Inadequate IAQ can lead to workers’ compensation claims from employees and lawsuits from customers suffering from health issues attributed to poor air quality. Compliance with the Act can mitigate this risk.

Balancing Energy Efficiency and Clean Air

It’s important to acknowledge the concerns related to increased energy use and greenhouse gas emissions that some may associate with adopting the Model State Indoor Air Quality Act. We are told that Covid-19 transmission was reduced by 80% with improved indoor ventilation and air filtration, but that clean air used more energy. It is essential to broadly strike a balance between responding to the imperative of global warming and good IAQ (.. something the LEED green building rating system has successfully done for many years) to now immediately save lives, rather than seeing them as opposing forces.

1. Technological Advances: Technological advances are making it possible to achieve better IAQ without significant increases in energy use. High efficiency ventilation systems, air purification technology (e.g., UV does not use much electricity), and building energy management systems can help optimize IAQ while keeping energy consumption in check.

2. Renewable Energy Integration: None of this stops or slows efforts to decarbonize our economy through the use of renewable energy sources, from solar and wind to nuclear and geothermal, to offset and ultimately reduce potential GHG emission increases from improved IAQ. This approach aligns with both public health and global warming goals.

3. Incentives: Governments can provide incentives to promote energy efficient building practices alongside IAQ improvements. But importantly government must articulate clearly public policies, like adopting this Act, requiring healthy air, by way of example having building energy performance standards (BEPS) exempt from calculating energy used in enhanced IAQ equipment and trumping energy codes.

Conclusion

The Model State Indoor Air Quality Act represents a significant step forward in prioritizing human health by ensuring clean and safe indoor air. While concerns about increased energy use and greenhouse gas emissions are valid, they should not deter states from adopting this essential legislation while concomitantly seeking to repair the planet. While this model Act is new, striking this balance is not, having been pursued in LEED green buildings for many years.

Breathing healthy indoor air has vital benefits for the occupants of the planet.

Breathing should not make people sick, and it’s our responsibility to ensure that indoor spaces are not hazardous to human health. In the long run, the advantages of adopting clean air indoors far outweigh any concern surrounding energy consumption. Breathing clean air is a human right (.. you never thought you would read that here?). Hard stop.

Join us for our next live webinar “Are You Able to Make Your Building Net Zero?” 30 talking points in 30 minutes, Thurs, Oct 26 at 9 am EDT presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

Tenants Monetizing their Greenhouse Gas Emission Data

By Stuart Kaplow on October 15, 2023 Posted in Codes and Regulations, Environmental, GHG, greenhouse gas

In response to new building energy performance standards and other laws requiring reporting of greenhouse gas emissions from buildings, tenants are beginning to monetize their GHG emission data, including their utility data.

In recent days we have seen a drugstore chain, a general merchandise retailer, and other commercial tenants begin putting their landlords on notice that they, the tenant, own their utility data, as well as other proprietary information necessary to calculate GHG emissions and that the tenant will charge their landlord and place restrictions on the use of their proprietary information.

With commercial leasing slow to adapt, one retailer’s policy is to charge its landlords an annual flat fee for providing the information to the landlord so that the landlord can report whole building information to the government and restrict the landlord’s use for any other purpose requiring the landlord to treat the information as confidential. Another tenant has stated that it must be reimbursed for its costs in gathering the information and then expects to share in any incentives attributable to the greener building (e.g., local property tax credits, reselling of aggregated data, public utility incentives, etc.). That tenant policy goes on to provide that the landlord may not pass through charges or other costs to the tenant either to reduce GHG emissions in the building or for the failure of the building to comply with environmental laws.

This is admittedly a nascent movement in commercial leasing but make no mistake tenants are creating this new revenue stream and mitigating risks, including against future costs of complying with new laws, and such has a huge future upside. This is but one modest example of how a decarbonized economy will look dramatically different than that exists today, and when the vast majority of businesses operate in leased premises, there will be reallocations among stakeholders of profits and losses.

That is, while this is new to the landlord tenant relationship (i.e., most landlords have not provided in their leases for obtaining this data they need for government reporting), it is not new to the broader business community where according to published reports data analytics the U.S. utility market generated more than $9.5 Billion in 2021 and is projected to have double digit growth in those data sales each year for the next 10 years.

And appreciate that that huge dollar amount passed hands at a time when there is less than consensus (.. and an absence of well established jurisprudence or new laws, anywhere) about who owns that GHG emission data. In a recent poll that sought to replicate the questions asked in a now widely circulated 2011 poll of utility executives, nearly 50% of the executives responded confidentially that they were unsure whose property the granular customer energy data is. Just over 26% of respondents said it belongs to the customers, while 22% said it belongs to the utility. This of course begs the question of scenarios where electric utilities will charge noncustomer landlords for the data.

Newly enacted laws (.. to the extent they even can trump contracts between private parties) only contribute to the uncertainty when for example, New Jersey, September 7, 2022, BPU Board Order Q021071023, mandates,

“To protect consumer privacy, the regulated utilities check whether a commercial building has four or more tenants, and check to confirm that no single tenant consumes more than 50% of the energy or water in that building. If both of these conditions are satisfied, the regulated utility will send the building owner the data. If either condition is not satisfied, then the building owner must get consent from each tenant.”

That is, if the New Jersey 4/50 rule is not satisfied, then a building owner must obtain the consent of individual tenants to release their data, and in this new era those tenants will want to be compensated and have their risk, including for inaccuracies in the data, mitigated.

Maryland is still implementing a new regulatory scheme for decarbonizing buildings, and its yet unpublished proposed regulation, seeking to cure a complete void in the enacted BEPS statute, will further drive landlords to compensate tenants and otherwise mitigate their risk,

“7) For covered buildings with fewer than five tenants, electric and gas companies shall deliver whole building energy consumption data to the building owner if the building tenants provide written or electronic consent for the delivery of the tenant’s energy data to the building owner.

(a) The building tenant’s consent may be provided in a lease agreement provision.”

At present, most legal authorities believe that a business owns its energy consumption data, subject to state laws. That is, a utility is prohibited from providing or selling such information to third parties for commercial purposes not related to services provided by the utility. Another consideration for commercial utility customers may be that protection of the data might be important for competitive or other proprietary reasons, not to mention government imposed confidentiality for some customers. Today, many utilities suggest customer information gathered in connection with time of day metering and appliance energy consumption metering, demand response program metering, and the like should be protected from disclosure to utility affiliates including subsidiaries, and third parties for commercial purposes. Many utilities believe utility customers, as consumers of electricity and gas, warrant privacy protection that restricts access to consumption data to only those parties that consumed the product.

We recently explored some of these issues in a post, Do You Own Your GHG Emission Data?

The surge in BEPS and similar laws is all but weaponizing that data, putting a target on the back of building owners in sophomoric efforts to respond to greenhouse gas emissions that will be a pivotal driver propelling businesses to protect their economic interests and de-risk their utility company interaction.

If there is any doubt that these matters will fundamentally alter the landlord tenant relationship as well as the utility commercial customer relationship, one need only consider the magnitude of dollars involved; in 2022, the utilities market had a valuation of over $6.03 Trillion (.. yes T, Trillion) annually, being more than 6% of worldwide GDP.

We are already working with a broad breadth of businesses, including tenants and landlords, to develop strategies to assist them in taking advantage of this opportunity to monetize their GHG emission data and we expect this will be a burgeoning part of our work into the future.

Join us for our next live webinar “Are You Able to Make Your Building Net Zero?” 30 talking points in 30 minutes, Thursday, October 26 at 9 am EDT presented by Stuart Kaplow and Nancy Hudes. The webinar is complimentary, but you must register here.

Green Building may be our Best Hope to Repair the Planet

By Stuart Kaplow on October 8, 2023 Posted in Climate Change, GHG, Green Building, greenhouse gas

The de riguer environmental imperative of responding to the immediate threat of global warming through reducing greenhouse gas emissions, to the detriment of other environmental impacts, is simply taking one environmental impact too far.

This is not my perspective alone. Most people identify “clean drinking water” as their top environmental concern. Not surprisingly, in a soon to be published literature search of polls across the globe in the last year, access to “clean potable water” was the top environmental issue. Polling of Americans by Gallup almost always results in a majority expressing “pollution of drinking water” as their top environmental concern, and the same was true this year. Global warming is not at the top of public concern, and what concern there was, has consistently dipped in recent years, despite a vocal coterie of global warming apocalypticism.

I would be remiss if I did not note that this blog post is being written when my office and home both north of Baltimore City are under a boil water advisory not to drink the public water due to contamination with the parasite cryptosporidium, a leading cause of waterborne illness in the United States. Clean drinking water is the principal environmental concern today for those in my office and residents in about half of Baltimore City, Baltimore County, and Howard County who should not drink the water.

However, global warming has sucked the air out of the room, ignoring that it isn’t just about GHG emissions, and definingly leaving no meaningful opportunity for businesses to talk about potable water quantity and quality or humanity’s other environmental impacts, leaving businesses at risk of being single minded to the point of being subject to jeopardy.

There are a variety of ways that companies assess the materiality of environmental matters focused on the “total mix of information from the perspective of a reasonable investor,” the SEC standard (.. which appears to be in conflict with the SEC’s own proposed rule for climate change disclosure above all other environmental matters), and while it is not mandatory for nonpublic corporations it is a good guide to the use of a host of sustainability metrics, from life cycle impact assessment to traditional industrial ecology as well as process design impact assessment for developing increasingly sustainable products, processes, facilities, and companies; which means considering a whole lot more than only climate change including to avoid claims of executional greenwashing.

Those metrics allow the quantification of stressors that have potential environmental effects and that people are apparently concerned about, including:

acidification
eutrophication
ecotoxicity
fossil fuel depletion effects
global warming
ozone depletion
human health criteria related effects
human health cancer
human health noncancer
tropospheric ozone (smog) formation
land use, and
potable water.

That substantive list is substantially the same as the original version of TRACI released by EPA in August 2002.

The TRACI compilation of environmental effects was the basis of the US Green Building Council’s LEED green building rating program. Green building, be it LEED, Green Globes or BREEAM may be the best single activity a business can undertake to repair that breath of environmental effects on the planet. Green buildings reduce negative effects on the natural environment and improve the human condition by using less water, energy, and other natural resources; employing renewable energy sources, eco-friendly and responsibly sourced materials; and reducing emissions and other waste. And having those efforts third party verified limiting possible greenwashing claims and other challenges. I was at Greenbuild 23 last week which heralded the release of LEED v5, so stressors may bend as the public’s interest evolves, but it is still a whole lot more than global warming alone.

In response to including global warming as one of the environmental effects on the list, Christie Todd Whitman, the EPA Administrator in 2002 at the time of the release of the TRACI tool famously told President Bush, “The climate issue is politically challenging not only because it’s at the bottom of people’s priority lists, but also because of overreach on both sides of the debate. Humans aren’t the sole ‘cause’ of climate change, and environmentalists have done a disservice in making that claim too assertively.” She went on to recommend that we must act on climate change with the same fervor that we are acting on the other environmental impacts to protect our planet.

.. which does not sound all that different more than 20 years later, “There’s a lot of climate exaggeration,” said Bill Gates, last month. “The climate is not the end of the planet. So the planet is going to be fine.”

This struck us oddly as the same thing George Carlin said in 1992 when joking about all of the environmental stressors we needed to address, not just climate change, “The planet has been here four and a half billion years. We’ve been here what? 100,000? Maybe 200,000? And we’ve only been engaged in heavy industry for a little over 200 years. 200 years versus four and a half billion. The planet is fine. The people are fucked.”

But the takeaway from all of this is that single shooting climate change is not what the majority of people want and does not satisfy a corporation’s legal requirement to disclose the total mix of information. A holistic response to human beings’ environmental impacts on the health of ecosystems including the health of humans (e.g., why there are more than 100 possible LEED credits) most of which are interconnected, is sustainable and will allow us to repair the planet.

A live webinar “Are You Able to Make Your Building Net Zero?” 30 talking points in 30 minutes, Thursday, October 26 at 9 am EDT presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

White House to Define Zero Emission Building

By Stuart Kaplow on October 1, 2023 Posted in Federal, GHG, Green Building, greenhouse gas

Last Thursday, White House National Climate Adviser Ali Zaidi announced that the federal government will define what is a “zero emission” building.

The announcement was made at the U.S. Green Building Council’s annual Greenbuild conference and expo in Washington DC, in a live on stage conversation Zaidi held with Juliet Eilperin of The Washington Post on Thursday, his public comments are all of the information available at this time. The implications are huge.

That the public unveiling of a new federal standard was made at Greenbuild 23, ‘the’ target rich environment of the year for green people and the very best place to learn what is new in green building, should not be lost on anyone given that the construction and building sector accounts for more than 39% of greenhouse gas emissions.

Zaidi’s comments from the stage included that he views climate change, “not as a story of doom and despair but of hope and possibilities. Possibilities that we will build together.”

He sounded elated as he described that the new federal Zero Emission Building standard will have a three pillar approach:

Ensuring energy efficiency
Cost effective renewable energy, and
Incentivizing electrification.

Again, the details, in particular about the third pillar, are still coming into focus.

Ensuring energy efficiency. We were able to glean that the first pillar, ensuring energy efficiency is proposed to mean a building that achieves an ENERGY STAR score of 75 or higher.

Cost effective renewable energy. The second pillar requires a building to obtain at least 30% of the total energy it consumes (on a site basis) from renewable sources. Renewable energy sources can include onsite renewable electricity, offsite green power procurement, renewable fuels, and renewable thermal certificates. (Renewable energy components of standard grid supplied electricity or district energy would not count toward the 30% requirement.)

Incentivizing electrification. The third pillar is a bit fuzzier, and different folks who were in the room at Greenbuild are reporting different things, but here is what we heard, .. that a building’s direct (i.e., onsite) greenhouse gas emissions “intensity” is at or below a specified level. Each building will have a unique direct intensity target normalized for the building type and the weather. Buildings that use only electricity would automatically meet this criterion as they have zero direct GHG emissions.

The public comments also included that the White House would later in the day be convening a process to finalize details.

All of this is not so easily done. The Federal government does not have the statutory authority to enact a binding nationwide Zero Emission Building standard and the divided Congress will all but certainly not grant it to the EPA. However, if this new standard were mandatory for the thousands of GSA and DOD buildings such would not only have an incremental benefit, but lead by example what state and local governments should do while, and maybe most importantly, providing good consensus based guidance on what Zero Emission Building actually means.

There have been fits and starts among a few states and cities from California to New York City with building energy performance standards, most of which only require calculation and reporting but not any reduction in GHG emissions, and none of which has been fully implemented yet. By way of example that is emblematic of the desirability for good federal guidance, Maryland law mandates certain commercial buildings be “net-zero direct greenhouse gas emissions on or before January 1, 2040” but does not define that one off operative term leaving it to regulations to be prepared by environmental agency bureaucrats and global warming consultants, that have already missed key dates for issuing the regulations for that state’s unique definition (.. maybe Maryland should use this new national standard?).

All of this bodes well for the future of LEED and other private green building standards that will benefit from a single federally suggested defined term that the private sector can coalesce behind.

If you cannot wait for the White House’s final Zero Emission Building definition, clues can likely be found at ENERGY STAR NextGen Certification for Commercial Buildings. And we would be happy to speak with you as we continue to advise and counsel building owners and other businesses in matters of green building as well as greenhouse gas emissions.

All should be positive when Zaidi’s Greenbuild presentation made clear there are “massive moonshot opportunities” in green building and made the case that climate action is not about sacrifice but rather about building a healthy economy with new opportunities for everyone.