Green Building Law Update

Environmental Law and Sustainability for Business

H&M Wins Dismissal of Greenwashing Lawsuit

Abraham Lizama bought a turquoise knitted sweater in H&M’s “The Conscious Choice” collection from a retail store in St. Louis.

According to Lizama, he believed this meant his sweater was made using “more sustainable and environmentally friendly” manufacturing practices. However, he now claims this sweater is not “environmentally friendly” (a term he uses more than 100 times in his 55 page Complaint but does not appear anywhere in the H&M advertising for the sweater) and he feels so misled by the representation that he brought a nationwide putative class action over the alleged greenwashing.

Greenwashing is a term used to describe the marketing tactic of making false or misleading representations about a product or service’s environmental benefits. As we described in a recent blog post, Executional Greenwashing is a Thing, the rapid and explosive growth in greenwashing claims against businesses across a range of industries tracks the public becoming more environmentally conscious, and increasingly likely to rightly or wrongly scrutinize the environmental impact of the products they purchase.

In addition to quoting the Swedish fashion retailer H&M’s website, the Complaint also includes an image of a green Conscious Choice clothing hangtag that states “59% Recycled Polyester” as part of H&M’s alleged misrepresentations. But what appears to really be complained about in the pleadings amounts to ‘recycling’ itself. Plaintiff alleges a fake circular economy when several products in the Conscious Choice line contain up to 100% polyester, a material that does not biodegrade and disperses microfibers into the environment, although H&M describes it as using polyester recycled from PET bottles. But the plaintiff complains this does not mean “closing the loop” since while the bottles could be recycled several times over, converting them into textiles (which, on the contrary, are difficult to recycle) instead only accelerates the path to landfill. A thought provoking argument, but maybe an averment more spurious than greenwashing?

Additionally, Lizama alleges that H&M’s Conscious Choice collection misleads consumers including by making the following statements:

“You can identify our most environmentally sustainable products by looking out for our green Conscious hangtags.”

“[P]ieces created with a little extra consideration for the planet. Each Conscious Choice product contains at least 50% of more sustainable materials – like organic cotton or recycled polyester – but many contain a lot more than that. The only exception is recycled cotton, where we accept a level of at least 20%.”

H&M moved to dismiss Lizama’s Complaint for failure to state a claim upon which relief could be granted.

And the Federal Court responded affirmatively, despite the Complaint’s allegations that H&M’s Conscious Choice “labeling and advertising were false, misleading, and deceptive” by tricking consumers into thinking “the products are more sustainable,” H&M does not represent that its products are “sustainable” or even “more sustainable” than its competitors. Rather, H&M states that its Conscious Choice garments contain “more sustainable materials” and that the line includes “its most sustainable products.” No reasonable consumer would understand this representation to mean that the Conscious Choice clothing line is inherently “sustainable” or that H&M’s clothing is “environmentally friendly” when neither of those representations was ever made by H&M. Instead, the only reasonable reading of H&M’s advertisements is that the Conscious Choice collection uses materials that are more sustainable than its regular materials. Lizama’s claims of consumer deception were based on statements that H&M never made and were dismissed by the Court for failure to state a claim.

The Court further found Lizama’s allegations failed to meet the plausibility standard in this case because H&M provides consumers with copious amounts of information including specifically about the relevant comparison between recycled versus virgin polyester on its website, which Lizama admits he reviewed before purchasing his Conscious Choice clothing.

Lizama also alleged that H&M’s representations violate the Federal Trade Commission Green Guides because they imply environmental benefits that do not exist. The Green Guides prohibit marketers from making “[u]nqualified general environmental benefit claims” without “clear and prominent qualifying language that limits the claim to a specific benefit or benefits.” The Court could not have been clearer when it ruled, H&M has not made any unqualified environmental benefit claims.

Whereupon Judge Rodney Sippel dismissed the Complaint for failure to state a claim against H&M.

Not that we know if he is prone to be litigious, but it is not insignificant, this plaintiff is the same Abraham Lizama who filed a putative class action against Victoria Secret in 2002 in Missouri over how sales tax was calculated for out of state sales.

Curiously a greenwashing case was filed last week against Nike, by the same attorney in the same Missouri federal court seeking to exploit the state’s consumer friendly Merchandizing Practices Act to certify a class of U.S. customers challenging the 2,452 products in “Nike’s Sustainability Collection” as not.

This H&M case should be a wake up call not just for the fashion industry, but for all businesses. In an era when allegations of greenwashing are de rigueur properly vetted and drafted environmental marketing disclosures can withstand a challenge. In fact, a growing number of businesses have established their own private third party review of ESG disclosures and specifically environmental claims to be made by the company, including H&M which discloses a great deal of environmental information vetted before a committee of outside professionals. And that additional review (.. sometimes by attorneys, scientists, advertising executives, etc.) of ESG disclosures, environmental claims, and the like is becoming standard practice because the often threshold for legal challenges, “.. a representation likely to mislead consumers” is so low that the best limbo contestant could not pass under it.

This decision is worth reading by every business person because it is an excellent example of how a court will likely analyze the growing numbers of greenwashing claims, providing guardrails for companies and mitigating their risk.

For those attending the MSBA Legal Summit in Ocean City, Maryland, Stuart Kaplow and Nancy Hudes will be presenting “Maryland is the First State to Regulate Carbon” on Thursday, June 8 at 1:30 pm EST. You can register here.

Commercial PACE: Filing the Financing Gap for GHG Reductions in Commercial Building

By Stuart Kaplow on May 20, 2023 Posted in Environmental, ESG, GHG, Green Building

As the business world grapples with demands to combat climate change, the role of commercial buildings in reducing greenhouse gas emissions has come into sharp focus. Commercial properties account for a significant portion of global emissions, making it crucial to find innovative ways to fund energy efficiency upgrades to those existing buildings.

Enter commercial Property Assessed Clean Energy (PACE) financing, a game changing solution that empowers commercial building owners to invest in sustainability improvements while simultaneously reaping financial benefits. In this post, we will explore commercial PACE and its potential to catalyze the transformation of commercial buildings into energy efficient and environmentally desirable spaces.

PACE programs have been only modestly successfully employed in residential settings in recent years, including some instances of abuse of consumers, but the application to commercial properties is relatively new and little used. Commercial PACE is a financing mechanism that enables building owners to fund energy efficiency, renewable energy, water conservation projects, and the like, through private loans collected with government property tax assessment billings. These assessments are repaid over a predetermined period, typically ranging from 10 to 25 years, as a separate line item on the property tax bill.

There are a host of benefits of commercial PACE, including:

Accessible Financing: Traditional funding options for energy efficiency upgrades to existing commercial buildings can be challenging if not unattainable due to high upfront costs, currently high interest rates, the inability of owners to obtain additional financing on already mortgaged buildings, as well as perceived risk. Commercial PACE addresses those hurdles by making accessible a mezzanine style loan tied to the building (not the owner nor impacting the owner’s balance sheet) with longer repayment terms and lower interest rates, which are secured through a local government collection process tied to the property’s tax bills rather than the owner’s creditworthiness.

Positive Cash Flow: One of the key advantages of commercial PACE is its ability to generate positive cash flow from day one. Energy efficiency improvements can reduce utility bills, take advantage of tax breaks and other government incentives, and comply with government mandates to reduce GHG emissions, enabling building owners to offset the additional costs incurred through PACE assessments. This approach not only enhances the financial viability of these improvements but also creates a win win scenario for both the environment and the building owner’s bottom line.

Increased Property Value: Energy efficient buildings have higher market value and appeal to eco-conscious tenants. By implementing sustainability measures through commercial PACE, building owners can improve the marketability and competitiveness of their properties. Reduced operating costs, enhanced tenant comfort, and improved indoor air quality further contribute to the overall value proposition.

Environmental Impact: Commercial buildings are responsible for a substantial percentage of GHG emissions. With commercial PACE, building owners can leverage financing to undertake a range of emission reduction projects, such as upgrading HVAC systems, installing energy efficient lighting systems, moving from gas to electric equipment, incorporating renewable energy sources, and implementing smart building technologies. These initiatives significantly reduce energy consumption and carbon footprint, aligning with global efforts to mitigate climate change and state and local law mandates to reduce GHG emissions.

And there are unintended benefits of commercial PACE, in the more than 35 states that have authorized PACE loans, because many of the PACE lenders are other than federally insured banks, including that because those lenders are willing to make loans to projects housing cannabis businesses; and also, because commercial PACE exists outside of the traditional capital stack (i.e., PACE financing is not equity or debt) these loans actually have the effect of reducing the weighted average cost of capital for many commercial projects.

The road ahead is not clear because while commercial PACE holds immense promise, its widespread adoption still faces some challenges. Chief among the flaws is many of the state programs have been described as sophomoric lacking in the rigor of the legal structure surrounding commercial real estate. Challenges also include varying regulatory frameworks across states and even local jurisdictions, a lack of awareness among building owners, and concerns regarding the transferability of assessments during property sales. Addressing these obstacles in a relatively immature PACE lending industry will require some bold collaboration (.. similar in order of magnitude of the problem looking to be addressed) between government entities, financial institutions, and industry stakeholders to create standardization, raise awareness, and robust mechanisms for seamless real estate transfers.

Commercial PACE financing presents an innovative and effective solution for financing greenhouse gas emission reductions in existing commercial buildings and even in new construction. By offering accessible financing, positive cash flow, increased property value, and significant environmental impact, commercial PACE is poised to revolutionize the way we pay for sustainability in the commercial real estate that cuts across all sectors.

As more building owners recognize the benefits and governments refine the regulatory landscape, we can look forward to a future where energy efficient and environmentally responsible commercial buildings are the norm and commercial PACE can be a key way to pay for it.

Join us THIS TUESDAY for a webinar “Do You Own Your GHG Emission Data,” 30 talking points in 30 minutes, Tuesday, May 23 at 9 am EST presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

For those who may be attending the MSBA Legal Summit in Ocean City, Maryland, Stuart Kaplow and Nancy Hudes will be presenting “Maryland is the First State to Regulate Carbon” on Thursday, June 8 at 1:30 pm EST. You can register here.

Maryland Releases Draft GHG Regulations to Implement SB 528

By Stuart Kaplow on May 14, 2023 Posted in Climate Change, Codes and Regulations, GHG, greenhouse gas

In a proactive move toward reducing greenhouse gas emissions from buildings in the state, the Maryland Department of the Environment has today released draft regulations to implement key aspects of Senate Bill 528 of 2022 – The Climate Solutions Now Act of 2022.

This blog post explores the implementation of SB 528, highlights some major elements of the draft regulations, and discusses the potential impact of these measures on the environment and businesses in Maryland.

Understanding Senate Bill 528:

The Climate Solutions Now Act of 2022 is the most rigorous state law in the country reducing GHG emissions when among other requirements the 104 page enactment requires MDE to develop standards for buildings that achieve:

A 20% reduction in net direct GHG emissions by January 1, 2030, as compared with 2025 levels for average buildings of similar construction and;

Net zero direct GHG emissions by January 1, 2040.

All buildings 35,000 square feet or larger (excluding the parking garages) are covered by the statute. Only certain historic properties, public and nonpublic elementary and secondary schools, manufacturing buildings, and agricultural buildings are exempt. Owners of covered buildings must report GHG emission data to MDE each year beginning in 2025.

Major Elements of the Draft Regulations:

It is in and of itself, a huge positive that MDE has invited stakeholders to provide comments before MDE begins the formal regulation promulgation process, including the act of publishing the regulations in the Maryland Register.

And the task itself is also huge to be the first state to regulate carbon. Again, what is proposed in these draft regulations is not the mere ‘reporting’ of GHG emissions, like other Building Energy Performance Standards adopted in cities and localities elsewhere in the country, but that buildings report now and begin to reduce emissions in the short term on the way to net zero GHG emissions before 2040.

In 5,715 words, MDE has accomplished a lot in what has already been characterized as very good regulations. But this is an entirely new area of government regulation; no government has ever done this before! So, maybe the risks to the state economy associated with regulating carbon in an estimated 9,000 to 12,000 commercial buildings across the state, are such that very good regulations are not good enough and maybe the implementing rules need to be great.

It is difficult to determine how the regulations are intended to work because another document, MDE Technical Memorandum 23-01 (.. that includes key definitions and processes) has not been released, and references to that Memo are scattered throughout the 19 pages of regulations.

The draft regulations present a broad breath of modest questions both about what is included and what is not. Maybe the most significant included item is the selection of Energy Star Portfolio Manager as the only benchmarking tool both for the calculation and reporting of GHG emissions. Only allowing the use of Portfolio Manager will be damaging to a building that reduces its GHG emissions by for example 20% by 2030 but still does not qualify under Portfolio Manager. Also for example, why when the statute does not exempt federal buildings do these regulations (.. when the federal government often enters into memoranda agreeing to comply with state and county land use rules), when federal buildings may need to be included for the state to meet its overarching 2045 net zero target?

It has been suggested that there is no language about preemption over local government BEPS programs, like the one in Montgomery County. Some have pointed out there is no waiver or variance procedure, something that would administratively allow flexibility and adaptability to the many building types and could cure the ills of the application of this new regulatory scheme (e.g., think about buildings that for security reasons cannot report). There are no provisions about GHG emission data privacy and the regulations appear to mandate nonsecure reporting of data on the closely related topic of who owns that GHG emission data. And the draft appears devoid of the required special provisions and exemptions including where a tenant owns the HVAC equipment and the like instead of the building owner, or when individual condominium unit owners own their mechanical equipment, but the building owner is subject to this law.

One of the early criticisms of this regulatory scheme, but not necessarily of these regulations themselves is the aim of saving the planet with these GHG emission reductions to the detriment of advancing environmental justice or social equity.

Potential Impact on Maryland:

Make no mistake this statute and its implementing regulations will reset the trajectory of Maryland’s economy, making sweeping changes to the Old Line State’s already tough climate change regulatory scheme when it requires the State to achieve net zero statewide GHG emissions by 2045, and covered buildings must be net zero before 2040!

The implementation of the new statute through the proposed draft regulations will have a significant impact across literally every business sector in Maryland, not just the commercial real estate industry, but every business that owns or rents a commercial space or does business with someone in the state.

Rather than treating these regulations as a draconian mandate, businesses should treat this as an opportunity to gain a competitive edge, embracing the behests of tenants, employees, and other stakeholders, as Maryland businesses become national leaders in environmental social, and governance stewardship.

Conclusion:

MDE’s release of draft regulations to implement this built environment portion of SB 528 represents a crucial step toward realizing the state’s climate change policy objectives and demonstrating effective governance of what will be greatly impacted constituencies including the evolving needs and challenges faced by Maryland businesses and residents alike getting to net zero.

And now the stakeholders need to do their part and react to these draft regulations.

MDE advises that comments are to be provided by way of an email transmitted letter on letterhead. And “.. if you would like to suggest changes to the draft regulation language, please specify the section and page number and include the current draft language with your proposed language. Email it as an attachment to BEPS.MDE@maryland.gov by 5:00 PM June 5, 2023.”

These brief 19 page regulations belie the fact that the implementation of SB 528 is the largest and single most impactful regulatory program, ever, in Maryland. These proposed regulations provide guidance, enforcement mechanisms, and stakeholder engagement to facilitate accountability and compliance with the underlying policies seeking a positive impact on climate change. By translating the legislature’s most aggressive in the nation GHG emission reduction statute into actionable measures, MDE has demonstrated the Executive branch’s commitment to addressing these critical issues and fostering a prosperous future for its residents and businesses alike. The implementation of this component of The Climate Solutions Now Act of 2022 through these GHG emission regulations will undoubtedly shape the state’s trajectory by decarbonizing the economy. The question is, did MDE strike the right balance in these proposed regulations? You should read the draft regulations and comment, and we would be pleased to assist in preparing those comments to protect and advantage your business.

A live webinar “Do You Own Your GHG Emission Data,” 30 talking points in 30 minutes, Tuesday, May 23 at 9 am EST presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

Rising Demand for Man Made Diamonds is ESG Personified

By Stuart Kaplow on May 7, 2023 Posted in ESG, Sustainability

For centuries, diamonds have been coveted for their rarity, beauty, and as a status symbol. However, the diamond jewelry industry has been plagued with controversy over the years, including issues related to environmental impact, human rights violations, and questionable business practices. As a result, in recent years, man made diamonds have emerged as a popular alternative to mined from the earth diamonds.

And this may be particularly relevant this year, 2023, when for the first time the global diamond market will be worth more than $100 Billion.

The Knot wedding website surveyed nearly 12,000 couples married in 2022 and more than 36% of center stones in engagement rings were man made, literally doubling in popularity in the past two years (i.e., increasing more than 18% since 2020).

To buttress that trend, it is reported in 2022 man made diamonds accounted for 13.6% of total diamond jewelry sales up from less than 1% of jewelry in 2015. The reasons for that surge are several:

Firstly, one of the biggest advantages of gem quality synthetic diamonds made by man is their significantly lower environmental impact compared to dinosaur age diamonds mined from the earth. The process of diamond mining involves extensive land excavation, energy consumption, and water usage, which can lead to soil erosion, water pollution, and other environmental degradation. In contrast, man made diamonds are created in a laboratory type setting increasingly using renewable energy sources and recycled materials, which literally and figuratively significantly reduce their carbon footprint. Diamonds are pure carbon and mined diamonds take millions of years of exposure to pressure and heat to form (.. although some suggest more than 1 billion years), at a time when we are supposed to be decarbonizing society, whereas man made diamonds take about 600 hours to grow each carat. As a result, the solid form of the element of carbon with its atoms arranged in a crystal structure by man in a diamond cubic is considered by many the environmentally sustainable choice that aligns with ESG principles.

Secondly, the social impact of diamond mining has been a major concern for many years, with reports of child labor, forced labor, and human rights abuses in the industry. By opting for man made diamonds, consumers can ensure that their jewelry is free from such ethical concerns. Man made diamonds are produced in a controlled environment without the involvement of any labor exploitation, ensuring ethical and fair labor practices. This makes them a socially responsible choice that aligns with ESG principles.

Thirdly, the corporate governance practices of companies that produce and sell diamonds have also come under scrutiny in recent years. The diamond industry is suggested to be opaque and lacking transparency, which can make it difficult for consumers to know whether their jewelry has been ethically sourced. Despite that the Clean Diamond Trade Act, signed into law on July 29, 2003, prohibits the “importation into, or exportation from, the U.S. of any rough diamond, from whatever source, unless the rough diamond has been controlled through the Kimberley Process Certification Scheme,” the concern persists over “conflict diamonds,” defined as diamonds used by rebel movements to finance military action opposed to legitimate governments. This makes man made diamonds a choice that aligns with ESG principles and can help promote good corporate governance.

Additionally, the cost of producing manmade diamonds has decreased dramatically, making them more affordable than their mined counterparts. Today a man made 1 carat diamond might retail for $1,430 compared to $5,635 for a similar stone mined from the ground. Accordingly, market data bears out that man made diamonds have become astoundingly more popular in a short time, especially among younger consumers who are more conscious about sustainability and ethical practices and after they make their engagement ring purchase (often their first diamond) they will be more likely to make similar man made jewelry purchases in the future, something particularly damning for the legacy diamond industry.

Another reason why man made diamonds are becoming more popular, including among the jewelry trades (itself a key sector of the diamond industrial complex) is that those stones caused by human beings offer greater design flexibility. Mined diamonds are limited in size, shape, and color, whereas man-made diamonds can be created in a variety of shapes, sizes, and colors, offering greater customization options for jewelry designers (.. think a stone fitting in a watch face).

Finally, after overreaching by the Federal Trade Commission which took several steps beginning in 2018, including in its Jewelry Guides, to alter the many facets of advertising man made diamonds with clarity despite that they have the same chemical composition and physical properties, the agency has now shifted its focus on other industries. In fact, increasing numbers of high end jewelers are even using man made diamonds in their designs, including in watches, proving that they are just as valuable as mined diamonds.

The FTC appeared to be confused if not blinded by the instance of cubic zirconia which is the crystalline form of zirconium dioxide, or the agency thought consumers were confused, but those stones are not a diamond and at best might be a simulated stone or imitation diamond; and certainly not what is being described here. It is troubling when government prohibits the use of true statements of fact when an agency unilaterally deems them unfair or deceptive.

And it should also be noted that all of this does not even consider the multi Billion dollar industrial diamond market that today is almost exclusively man made and is key where diamonds have the highest hardness and thermal conductivity of any naturally occurring material.

Diamonds made by man are replacing dinosaur age diamonds mined from the earth for a host of reasons, including their lower environmental impact, ethical labor practices, affordability, design flexibility, and comparable quality. As more consumers become aware of the ESG associated advantages of diamonds caused by human beings, it is all but certain their popularity will continue to grow, making them a preferable alternative to legacy mined diamonds in the more than $100 Billion diamond market and the impact will be felt far beyond only diamonds as these same ESG factors are applied by stakeholders in other transactions.

And if human beings can geoengineer carbon rich deposits into diamonds why not geoengineer that same carbon into fossil fuel for energy, .. just asking?

More Than 1,000 Shipments of Solar Panels Seized at the Border

By Stuart Kaplow on April 30, 2023 Posted in Environmental, ESG, Federal, Solar Panel, Uncategorized

More than $1 Billion of shipments have been interdicted by the U.S. government under the Uyghur Forced Labor Prevention Act since that law became effective last June 21.

“ .. underscoring our commitment to combating forced labor everywhere, including in Xinjiang, where genocide and crimes against humanity are ongoing,” according to Secretary of State, Anthony Blinken, the UFLPA prohibits imports made by forced labor into the U.S.

The UFLPA establishes a rebuttable presumption that the importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China, or produced by certain entities, is prohibited by Section 307 of the Tariff Act of 1930 and that such goods, wares, articles, and merchandise are not entitled to entry into the U.S.

Details about the number of solar panels and related equipment in the seized shipments are hard to obtain because brand names on packaging confidential trade secrets under federal law. But, based on the best available information, solar energy equipment (including solar panels) are the most seized product by far (with apparel and footwear a distant second) under the UFLPA.

We know from public records that between June 21, 2022, and October 25, 2022, U.S. Customs and Border Protection seized 1,053 shipments of solar energy equipment, and according to the Agency, none of the shipments have been released.

Despite the seizures, shipments continued with more than 1,120 additional shipments seized in the first quarter of 2023 alone, although many were laundered through Malaysia, Viet Nam and Thailand. Through March 31, 2023, 3,588 shipments were seized or otherwise denied under the UFLPA by U.S. Customs with a more than $1 Billion value.

China dominates owning the vast majority of the world’s solar panel supply chain, controlling at least 86% of solar panels produced in 2022, including 79% of polysilicon mined, 96.8% of polysilicon ingots sliced into wafers, 85.1% of manufacture into a crystalline solar cell, and 74.7% of cells wired together and laminated to form modules. China also leads in investment recording $41 Billion in the first 6 months of 2022, making up almost 2/3 of global large scale solar investment in the first half of last year.

On a closely related but different matter, this past Friday, the House of Representatives approved H.J.Res. 39, to resume tariffs on solar panel imports suspended by the Biden Administration. Despite the Democratic majority in the Senate, the resolution is likely to pass the upper chamber as well. The Congressional Review Act allows Congress to overturn a federal rule with a simple majority in both chambers. The White House has already vowed to veto the resolution in a move being criticized for its moral equivalence, arguing “the tariff suspension is vital to allow the U.S. to build up renewable energy infrastructure for the transition away from fossil fuels.”

“Modern slavery” is an umbrella term covering various forms of coercion into labor situations. This includes such crimes as human trafficking for forced labor, forced commercial sexual exploitation, and indentured labor. A typical typology of modern slavery involves a lack of consent, with victims unable to refuse or leave because of threats, violence, coercion, deception, or abuse of power.

We have blogged about modern slavery when it is forced labor imposed by state authorities in the UN Human Rights Assessment of Uyghurs by China Drives ESG.

The EU is far ahead of the U.S. in protecting people from modern slavery as we recently posted in German Law a Model for Safeguarding Human Rights in Supply Chains.

And concomitant with those efforts of governments, businesses are increasingly aggressively adopting sustainable practices in the fight against modern slavery, with many businesses publicly announcing their modern slavery practices, including a groundswell of companies acting on moral grounds not installing Xinjiang Uyghur Autonomous Region sourced solar panels.

We believe strongly that human rights are much more than a business’ pursuit of the S in ESG, and this protection of not only modern slavery of the Uyghur people but also genocide and crimes against humanity against that population provides organizations with a baseline for how to examine and assess business practices including matters of supply chain (i.e., a recent poll found 92% of American businesses would not install solar panels associated with forced labor from China in the name of reducing carbon).

We can assist your business in complying with this and other human rights laws and more than that for those that want to be among the winning companies of the future we would be pleased to share practical steps and best practices in anti modern slavery efforts for your supply chain as you work to repair the world.

Court Saves Gas Stoves from the Government

By Stuart Kaplow on April 23, 2023 Posted in Codes and Regulations, Energy, Environmental, ESG, GHG

“By completely prohibiting the installation of natural gas piping within newly constructed buildings, the City of Berkeley has waded into a domain preempted by Congress,” is the opening sentence and ultimate holding in the April 17, 2023, decision of the Ninth Circuit Court of Appeals in California Restaurant Association vs. City of Berkley.

This precedent setting decision by a federal appellate court did not require preternatural abilities by the judges who simply stated the obvious to many of us and is a significant setback for state and local governments, including Maryland and New York City, Denver, and Brookline, that seek to ban natural gas in buildings in the name of climate change and otherwise.

The three judge panel held that the federal 2005 Energy Policy and Conservation Act preempts the Berkeley ordinance. The panel wrote that, in this express preemption case, it addressed the plain meaning of the Act without any presumptive thumb on the scale for or against the efficacy of preemption. The Act expressly preempts State and local regulations concerning the energy use of many natural gas appliances, including those used in household and restaurant kitchens.

Instead of directly banning those appliances in new buildings, Berkeley took a more circuitous route to the same result and enacted a building code that prohibits natural gas piping into those buildings, rendering the gas appliances useless. The Restaurant Association complaint said, “the drastic step of requiring ‘all-electric’ new buildings stands at odds with the need for a reliable, resilient, and affordable energy supply.”

All three judges held that, by its plain text and structure, the Act’s preemption provision encompasses building codes that regulate natural gas use by covered products. By preventing such appliances from using natural gas, the Berkeley building code did exactly that.

And so do laws in Maryland, New York City, Denver, Brookline, and a host of cities across the country, that in the name of climate change have played short shrift to federal law in seeking to ban natural gas. Make no mistake about it, the 2005 Energy Policy and Conservation Act is the same law that banned the Edison 100 watt incandescent light bulb and gives us the 179D tax deduction (.. one would think those bona fides would result in those concerned about climate change being cognizant of the Act and these matters).

Judge Baker wrote in a concurring opinion that the Berkeley ordinance cut to the heart of what Congress sought to prevent, state and local manipulation of building codes for new construction to regulate the natural gas consumption of covered products when gas service is otherwise available to the premises where such products are used.

In a free society, most believe it is bad public policy to ban something that is legal. It was not wise in 2005 for the Energy Policy and Conservation Act to ban the Edison 100 watt light bulb, the greatest invention in the history of mankind, and it is not wise to now ban natural gas. Not to mention there is some irony in Maryland attempting to be the first state to ban natural gas when Baltimore, Maryland in 1816 became the first city in the United States to light its streets with gas.

The better environmental policy might be for government to incentivize the development of and fund alternative energy technologies.

There is no doubt this decision by the California federal appeals court is a significant setback for state and local governments across the country seeking to ban natural gas, directly, indirectly, or otherwise. But there also is no doubt that the court is correct and that the arrogance or ignorance of state and local lawmaking will not stand in this instance of clear and unambiguous federal preemption dating to the 2005 Act.

This federal appellate court decision is not the end of this discussion. Congress could act to amend the 2005 Act, however, it is all but certain that will not happen if only because of the 2005 Faustian bargain where Congress set a national energy policy, including banning the incandescent light bulb, in exchange for limiting future acts by others by saying there can be “no State regulation concerning the energy efficiency, energy use, or water use” if a federal energy conservation standard is effective for a “covered product.” Energy certainly includes natural gas.

In the 7 days since the court decision, some in the climate apocalypse industrial complex have actually been heard to suggest that the existential threat of climate change is so important it should trump the preemption doctrine of the U.S. Constitution. But there is no realistic hope of that. The only question may be how quickly regulatory schemes like Maryland’s move to ban natural gas will be vanquished.

Instead of more bad laws, the best response is a marketplace solution where business owners across the globe strive to make the world better off because their business is in it.

To be clear, we believe strongly in repairing the world but do not suffer fools gladly.

Read the decision here and participate in this discussion about how to make the world better.

A live webinar this Wednesday “Strategies Gleaned from our GHG Emission Poll” 30 talking points in 30 minutes, April 26 at 9 am EST presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

Do You Own Your GHG Emission Data?

By Stuart Kaplow on April 16, 2023 Posted in Climate Change, ESG, GHG, greenhouse gas

As governments and businesses alike try to measure their carbon footprint and strive to reduce their greenhouse gas emissions to limit the damage caused by climate change, there is increased interest in GHG emissions data.

GHG emissions data is hugely important, including that ownership can affect how this information is collected, shared, and acted upon.

And to be clear this is not some philosophical debate when the world’s most valuable resource is no longer oil, but data. Data from the more than 150 million electric utility connected households across the U.S. alone likely means more active users than the 260 million Facebook users in the U.S., such that the implications for that data security and privacy are enormous (.. think Cambridge Analytica on steroids).

So, who owns your GHG emissions data? The answer is not straightforward and arguably depends in large measure upon the context in which the data is collected. Here are a few key scenarios to consider:

National emissions data: When it comes to the GHG emissions of a nation as a whole, ownership of the data is typically ascribed to the national government (although the word “ownership” is rarely if ever used in U.S. federal programs and maybe never in federal laws). Governments collect this data through various channels, such as mandatory reporting by businesses like the EPA GHG Reporting Program for large emitting facilities and the government’s own independent monitoring. Altruistically, it is nice to think that only aggregated data is then used to guide public policy and maybe even to announce compliance with international climate commitments, but governments regularly provide that data to others, including for consideration and opening the door for industrial espionage, state surveillance, foreign government spying, and more. EPA 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 such that confidential business information “.. must be available to the public.”

Individual emissions data: For individuals, ownership of emissions data may be more ambiguous. While some individuals may collect data on their own emissions, such as through personal energy usage monitoring, this information is not typically regulated or reported. Increasingly, individuals may share GHG emission data with public utilities that provide electricity and natural gas, through the use of smart thermostats, demand response programs, and the like, and in most states, the utility company owns energy consumption data, however, the answer may be different in California and Utah with broad personal data privacy laws.

Business emissions data: When it comes to the emissions of a particular business or even industry, the ownership of data is more complex. In many instances, businesses are required to report their confidential and otherwise proprietary emissions data to government agencies, as they typically own the data although they may lose control of it after reporting. Increasingly governments are requiring reporting by using Energy Star Portfolio Manager as the input, an EPA online tool where the collection and analysis of data is controlled by the federal government (.. an earlier version of the Energy Star website said the government owned the data, but that language apparently does not appear today, although it has not been replaced with any clear disclaimer), and arguably owned by the government. Make no mistake, the EPA online tools, including Portfolio Manager, do not meet even minimal data security and privacy standards. And when those online tools are used to report the data to state or local governments for Building Performance Standards not a single program we reviewed met even minimal standards for data security and privacy; and nearly all would allow the government actors to sell the private data.

Note that the current standard of care for building automation systems is they are not connected to the Internet because of concerns over criminals including acts with ransomware and terrorists taking control of infrastructure. But then as part of this entirely new regulatory scheme in America, of regulating carbon emissions, owners may be required to upload Portfolio Manager data over the Internet to state or local government actors, resulting in an entirely new set of risks for business.

Many public utilities today collect energy consumption data and plan to calculate GHG emissions and own that data to sell to customers and third parties.

Most businesses operate in leased space so the question of who owns building GHG emission data, the landlord or the tenant, is a complex and sometimes contentious issue. A single tenanted building may present one set of issues whether the landlord or tenant is in control of energy systems, which is very different from a multi tenant building.

There are many new laws at the state and local level that are largely trumped by federal personal data privacy laws. Maryland enacted a statute last year that requires electric utilities to share tenant energy consumption data with landlords, but the law does not address tenants that are required to report GHG emission data and need information from their landlord and that statute does not require enough information to be shared to calculate GHG emissions; and, it is silent as to the new risk it creates for business associated with that data.

This does not even take into account the business of owning multi family residential buildings and other businesses that lease to residential users, a business model that adds complexity to this issue and is unresolved in nearly all places, even those with mandatory GHG emission laws on the books.

There are untold numbers of other problems in this space. For example, the U.S. Green Building Council a non-profit trade organization that promotes sustainable building practices publishes building specific data on the energy performance of buildings that are certified under its LEED program and makes no offer of data security. Of course, there are governments that mandate private buildings to be LEED certified or offer government incentives for LEED certification.

In nearly all instances, there are multiple important considerations when it comes to ownership of GHG emission data. One key issue is transparency versus green hushing.

Another key issue is accuracy. Ownership of data comes with responsibility, and whoever owns emissions data may be charged with ensuring that it is collected, analyzed, and reported accurately. This is particularly important for businesses, which may face legal and reputational risks if their emissions data is found to be inaccurate.

And there are issues of incentives. Who benefits from collecting and owning GHG emissions data, and how does this affect behavior? For example, if a business owns its own emissions data, it may be more motivated to reduce emissions in order to meet sustainability goals or avoid regulatory penalties. In many jurisdictions, there are public utility and government incentives, tax and otherwise, available based upon GHG emission data reporting, so, again, who owns the data is key.

We are working with businesses to monetize GHG emission data, so we appreciate that data security and privacy is too complex a topic for a single blog post so we will blog more about this in the coming weeks.

Ownership of GHG emission data is complex, varies from jurisdiction, and is context dependent. Matters of accuracy, transparency, and incentives are key considerations for ensuring that this data is effectively used to address the challenges of climate change. But none of that should stop an organization from mitigating the risk associated with keeping its own data safe while monetizing that valuable asset.

Drafted with the assistance of ChatGPT

GHG Emissions Poll Provides Strategies for Business

By Stuart Kaplow on April 9, 2023 Posted in GHG, greenhouse gas, Sustainability

While the term greenhouse gas emissions easily rolls off the tongue these days and there has been a ballooning of net zero GHG commitments by government and non-state actors alike, this is all still a very new idea and in point of fact, as of April 2023, few U.S. businesses have actually calculated their GHG emissions.

At a time when matters of GHG emissions are not just trending, but dominating the news cycle, we decided to survey our clients, friends, and others to see what was really going on in the marketplace.

Our goal with this survey was modest in seeking to report on the current business acceptance and adoption of calculating GHG emissions such that our clients and other stakeholders can utilize these results to guide their company plans for GHG emission measurement, disclosure, and reduction in 2023.

Setting the stage, ESG is uncharted territory with few authoritative sources of information, including no scholarly treatises and few if any peer reviewed published papers, so blogs like this one are the best source of reliable information. Concomitantly, readers of this blog are a target rich environment from whom we can solicit timely ESG information, including seeking current data on the ESG subset of GHG emission activity (which activity is the single most dominant ESG factor in the U.S. today). Our readers have proven to be a group ripe for surveying.

The survey is not a truly scientific survey in that, after piloting a questionnaire, we curated the survey methodology, sample design, and data collection with the aim of providing essential benchmarks that will on a timely basis offer predictive accuracy, in the emergent and fast growing and still very new idea of GHG emission reductions, on how a company can adapt for the future. And it should not be lost on the reader that this survey was in the field in the first quarter 2023, a period of increased economic uncertainty.

Not one to bury the lead, statistically, the most compelling result of our polling of business stakeholders is that 84% of respondents believe there will be mandatory ESG disclosure requirements including specifically required GHG disclosure regulation within the next 12 months, but only 14% reported their company today calculates GHG emission data.

That overarching result recognizes the dichotomy between people’s environmental aspirations of being good stewards of the planet versus the day to day reality of simply trying to comply with all environmental laws, which is now being complicated with the ESG umbrella covering such a broad spectrum of subjects, not just environmental matters. We undertook this survey as a deep dive into matters of GHG alone, and not the larger subject of ESG, such that our clients and friends can use these results for practical company business planning in GHG emission measurement and reduction in 2023.

As attorneys assisting businesses with law and non law professional services including providing GHG calculation services ourselves, our work is about balance. We push the science of GHG measurement whilst assisting clients in turning a profit. This poll has buttressed our belief that the market for ESG work, particularly GHG is hugely strong with a growth rate in double digits.

Here are the meaningful insights we can report from our survey:

When asked about the ESG initiatives that are most important to their company, 72% reported GHG emissions followed by 59% who said advancing gender and racially diverse talent (.. no other ESG initiative polled over 50%).
In a compelling result, over 67% of our poll respondents said that in the last 12 months, they have become aware of a demand on their company to report GHG data.
84% of respondents believe there will be mandatory GHG disclosures required of businesses within the next 12 months, including that 79% of respondents are concerned about financial penalties arising from noncompliance with those new GHG regulatory requirements while 70% are concerned about energy prices (.. driving an aim to reduce energy use with the resultant reduction in emissions).
As noted above, maybe not surprisingly only 14% reported their company today calculates GHG emission data. However, 68% of the public companies that responded to the poll calculate GHG emissions, although more than 60% of those public companies have not publicly disclosed emission data (.. green hushing is alive and well) which makes clear that the vast majority of poll respondents were small and midsize businesses.
And while the same 14% of companies report they measure Scope 1 emissions or direct emissions, similarly 11% measure Scope 2 only, but only 3% measure Scope 3 GHG emissions (which is problematic where the vast majority of GHG emissions are Scope 3).
In response to the query, does your company have the expertise or other ability in house to calculate GHG emissions, less than 16% replied yes.
Asking the question again differently did not change the result, when only 13% of companies answered affirmatively that they had ever measured GHG emissions, even as a pilot, part of an energy model during construction, or otherwise.
Only 9% of respondents have disclosed GHG emission data or information.
Maybe surprisingly, 19% of replying companies have made a public GHG commitment (e.g., Net Zero by 2040 or the like).
28% of those who replied believe other companies (.. not their company) will achieve their stated GHG reduction commitments.
61% believe companies frequently overstate or exaggerate their GHG emission reduction progress when making disclosures.
79% believe companies will face increasing litigation or government action as a result of not reporting accurately or not achieving their stated GHG commitments.
53% are concerned about the potential impact GHG matters, including failure to disclose, may have on brand perception or brand value.
47% said they lack funding to add the task of calculating GHG emissions.
77% said they lack funding to reduce GHG emissions 20% or more in their business.
Only 31% expect most companies will establish and communicate a Net Zero plan in the next 12 months, but 58% believe “many” companies will.
55% responded that they expect investors and lenders will reward companies that have communicated Net Zero plans with an increased valuation.
57% would pay a premium for real estate with an on site renewable energy system and 49% for a green building certification, but interestingly 76% would pay a premium for a building with features that reduce energy consumption.
38% favor mandatory GHG disclosures and more GHG regulation within the next 12 months.
61% believe law firms should be doing more to support companies with GHG matters.
Only 8% said the law firm their company principally uses offers GHG capabilities to its clients.
42% reported their company engages outside consultants for compliance with GHG matters.
Of the companies that calculate GHG emission data, only 26% are confident their company owns 100% of its GHG emission data, including own all of the supporting utility data and the like, while over 70% said they do not know with certainty.
66% are concerned, including 100% of public companies, about issues of proprietary data privacy of their GHG emission data.

While highly informative, again be aware this poll is not a truly statistically pure survey. Including in an effort to keep true to our sample design but allow all who are interested to participate via survey monkey, we permitted self selected stakeholders to respond to 10 key questions and to be 10% of the sample size.

In conclusion, these results can assist companies as they strategize to adapt and create value through their GHG emission reduction activities in 2023. In the highest numeric response, respondents believe there will be mandatory ESG disclosures including required GHG emission regulation this year and the respondents are concerned about financial penalties arising from noncompliance with those GHG laws. But, today less than 15% of respondents have ever calculated their GHG emissions. And not to be lost among this poll data, a nearly similar number of respondents are concerned about the potential impact GHG matters may have on their brand perception or brand value.

Maybe the best summation of our poll results is about adapting to change, “we cannot direct the wind, but we can adjust the sails,” quoting our favorite philosopher, Dolly Parton.

In the accelerating regulatory environment of 2023 when a broad breadth of stakeholders want to repair the world and make a profit, our poll results make clear businesses need to accelerate their GHG measurement efforts now.

A live webinar “Strategies Gleaned from our GHG Emission Poll” 30 talking points in 30 minutes, Wednesday, April 26 at 9 am EST presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

Executional Greenwashing is a Thing

By Stuart Kaplow on April 2, 2023 Posted in Environmental, ESG, Green Washing, greenwashing

Greenwashing is a term used to describe the marketing tactic of making false or misleading claims about a product or service’s environmental benefits. “Executional greenwashing” is a neologism characterizing the way in which a business promotes or executes an environmental initiative, rather than the actual environmental impact of the initiative.

That is, a company might promote a recycling program as a positive environmental initiative, but if that recycling program is poorly designed or not effectively implemented, it may not actually have a significant impact on reducing waste or otherwise protecting the environment. In that instance, the company would be guilty of executional greenwashing.

Executional greenwashing can also occur when a company promotes an environmental initiative that is only a small part of its overall business practices while ignoring its other practices that have a larger negative environmental impact. For example, a business might promote the use of sustainable packaging for one product, while ignoring the fact that their overall production process is energy intensive and hugely greenhouse gas emitting.

But the largest number of executional greenwashing claims have arisen where that new term has also been coined to describe when a business uses “nature evoking” imagery in communication campaigns instead of making verbal claims about the sustainability of their product or services to artificially enhance a brand’s ecological image. It is used to subconsciously communicate messages about greenery to the consumer, influencing their decision making. Consider the large number of businesses that have a wind turbine in their advertising.

It is suggested that executional greenwashing can be particularly deceptive, as it can create the illusion that a company is committed to sustainability, environmental stewardship, and broader ESG factors while masking the reality of its business practices. There are instances that it could be unintentional. Consumers and other businesses trying to make environmentally conscious choices may be misled by these claims and may inadvertently support companies that are not committed to sustainability.

And this is playing out real time in a class action case brought in Federal Court in the Western District of New York by Darlene Hangen-Hall against The Proctor & Gamble Company, case 1:23-cv-00218-GWC, filed March 13, 2023, “the world’s largest producer of laundry detergents under a variety of brands” as the manufacturer and seller of Gain laundry detergent. The complaint alleges “’executional greenwashing’ as the ‘next stage’ of telling customers that what they are buying is consistent with supporting the environment.”

The complaint claims, “the product was manufactured, identified, marketed, and sold by Defendant and expressly and impliedly warranted to Plaintiff and class members that its use was beneficial for the environment, based on its successful ‘executional greenwashing,’ with its natural elements such as stylized flowers, leaves, butterflies and intensive use of the color green [on the label on the container], even though it contained high levels of dioxane, a toxic chemical incompatible with those same natural elements, because of its detrimental effects on the health of humans and the environment.”

Of import despite being the claim de rigueur, greenwashing is not a cause of action and this case avers violation of state consumer protection laws, breach of express warranty, breach of the implied warranty of merchantability, negligent misrepresentation, and fraud. There is also an allegation that this consumer product exceeds a regulatory level of dioxane, which is problematic for the manufacturer, however, lab results from “an independent” lab may well mean little if anything.

In counseling businesses in this era of exponential growth in green claims, we must stress public policy regulation of this phenomenon has been lax, hence there is little good regulatory guidance out there, including the failure of the FTC to issue a timely updated version of the now more than decade old Green Guides for the Use of Environmental Claims (.. now expected in late 2023), does not help businesses avoid making environmental marketing claims that expose them to risk both in the courts from environmental groups and to reputation in the marketplace.

Properly drafted environmental marketing claims can withstand a challenge as was made evident last year when the DC Superior Court granted Coca Cola Company’s motion to dismiss in an executional greenwashing case brought by the Earth Island Institute that alleged the company, “portrays itself as ‘sustainable’ and committed to reducing plastic pollution while polluting more than any other beverage company ..” The Court found that Coca-Cola’s statements were aspirational in nature and, therefore, not a violation of the DC consumer protection laws.

The rapid and explosive growth in greenwashing claims against businesses across a range of industries tracks the public becoming more environmentally conscious, and increasingly likely to scrutinize the environmental impact of the products they purchase. We recently posted a blog, New Greenwashing Case is Troubling to Future of ESG focusing on a claim in the airline industry. Companies that make false or misleading environmental claims risk not only legal action but often more significantly, damage to their reputation and loss of consumer trust.

In response, increasing numbers of businesses note that they can avoid charges of greenwashing and resultant litigation simply by green hushing, saying little or nothing. Green hushing has been identified as one of the big environmental trends of 2023 and does at times have a very valid place in communication campaigns. As you consider saying little or nothing about your business, read our recent blog post, Green Hushing versus Confidentiality.

We work with businesses, assisting their creative freedom to differentiate products and services through their communication campaigns striking the correct balance in the need to properly inform consumers while being cognizant that the company can and should thrive as an active actor in a more sustainable world.

Drafted in part with Chat GPT

Maryland is Leading the Transition to All Electric Buildings

By Stuart Kaplow on March 26, 2023 Posted in Climate Change, Energy, Environmental, ESG, greenhouse gas

There is a move toward all electric buildings as a way to reduce greenhouse gas emissions and combat climate change. The state of Maryland is leading the way in this movement, including several local jurisdictions adopting all electric building code laws.

All electric building codes require that new construction and major renovations be powered by electricity rather than fossil fuels. This means that buildings must use electric heating, cooling, and hot water systems instead of natural gas or oil. It also means that buildings and the power grid must be equipped to handle the increased electrical load, with sufficient capacity and infrastructure to support electric appliances and equipment.

Most business leaders understand the need to mitigate greenhouse gas emission risk and many companies are already seized with the multi-trillion dollar economic opportunity that accompanies this economy wide transition to all electric buildings.

In 2022, the Maryland legislature enacted the Climate Solutions Now Act (SB 528) which mandates a 60% reduction in the state’s GHG emissions by 2031 relative to 2006 levels and net zero GHG emissions by 2045. Dramatically, that Act includes the requirement “to transition to an all electric building code in the State” and expressly “supports moving toward broader electrification of both existing buildings and new construction as a component of decarbonization.”

No other state has ascribed into law moving so quickly and so broadly with economy wide climate ambitions by decarbonization.

But be aware that depending upon how that Act is implemented there are very real U.S. Constitutional concerns of Federal preemption by the 2005 Energy Policy and Conservation Act which expressly preempts State and local regulations concerning energy conservation and specifically will not allow banning natural gas in buildings even when characterized as decarbonization.

A recent report by the Maryland Codes Administration describes that in 2022 within Maryland, most of the electricity is generated from natural gas (48%), followed closely by nuclear (37%), then from coal fired power plants (11%) and petroleum fired power plants (<1%). A small percentage comes from hydroelectric (<1%) and non-hydroelectric renewables (3%).

Significantly, Maryland uses more energy than it produces, so the state also draws electricity from the interstate power grid. According to the U.S. Energy Information Administration, Maryland uses as much as 60% more energy than it generates, so any additional electricity demand from buildings that use all electric systems will either have to come from increased in state generation or be imported from other states. Because the electric grid itself relies in large part on carbon based fossil fuel, increasing demand for electricity from the grid is not carbon neutral such that all electric building codes in Maryland will result in more coal generated power than is used today.

So, the change to all electric buildings is not a simple issue.

The Biden administration issued a rule on December 7, 2022 through the U.S. Department of Energy that orders all new and refurbished federal buildings to become fully electrified by 2025. In the guidance document explaining the announcement, they note that this will result in an increase in carbon dioxide, nitrous oxide, mercury, and sulfur dioxide emissions:

“DOE’s analyses indicate that the proposed regulation would save a significant amount of site energy; however, switching from gas loads burned on-site to electric loads produced off-site, at national average level emission rates, would result in an increase of CO2, N2O, Hg, and SO2 emissions with a decrease in NOX and CH4 emissions.”

So, again, the change to all electric buildings is not a simple issue.

There was a hue and cry this past January about the government coming for people’s gas stoves and while that story may have been overcooked nationally, yes, it is correct that in Maryland the State government is in the process of banning newly installed gas stove and all gas appliances in residential as well as commercial building as part of this all electric building mandate.

Not surprisingly there was no meaningful opposition to that SB 528 mandate last year, bar some negative testimony from the natural gas utilities.

Several jurisdictions in Maryland have already adopted all electric building code laws even in advance of express authority from the state. Montgomery County became the first county in the state requiring the county executive to issue an all electric building code for new construction by December 31, 2026. The city of Takoma Park also adopted an all electric building code law. And Howard County adopted a law requiring an all electric building code be implemented for new construction and renovations. But those local enactments each have not only a Federal preemption fail but also a State preemption problem, neither of which is likely correctable.

The fossil fuel based economy has changed, but building codes didn’t.

Note, later this week New York may leap frog ahead of Maryland with a measure that is proposed to be added to the state budget banning gas and other fossil fuel in new buildings. The measure would be an end to gas stoves and other appliances in new homes, but will likely have broad exemptions that it appears Maryland will not.

Make no mistake, the future of all electric buildings is bright in Maryland, New York and across the country! As technology continues to improve to be able to make that change a reality, the current increased first costs of all electric buildings will decrease.

But be certain that this public policy driven change is and will significantly increase the cost of power, increasing energy insecurity at a time when 1 in 6 American households are already more than 4 months behind in their utility bills, and driving businesses to relocate seeking lower operating costs when for example utility rates in Nevada are less than 50% of those in California. Before these all electric mandates are even implemented electricity rates in Maryland are already higher than the national average while rates in adjoining states are below the average.

We are already advising some clients, and certainly many of those in Maryland that own 35,000 sq. ft. buildings and larger that they should not be replacing equipment with gas fueled models and rather should be installing all electric HVAC, hot water heating and the like. We anticipate counseling many more businesses about matters of all electric codes as decarbonization of the economy becomes a commonplace business decision. And recognizing that this is too large a topic to address comprehensively in a single blog post, we will write more, here about the subject.

Decarbonizing our fossil fuel economy is the biggest business opportunity in history, waiting to be unlocked; and it is happening in incredibly short order. We would be pleased to assist you in repairing the planet and making a nickel.