Maryland’s Climate Solutions Now Act (SB 528) is described as the most rigorous state legislation addressing climate change in the country, and it is poised to have deep and wide-ranging impacts on the commercial real estate industry. In the first installment of NAIOP Maryland’s Climate Change and Solutions webinar series, environmental lawyer Stuart Kaplow discussed the first legislative requirement that CRE owners will have to meet – namely, measuring and reporting their buildings’ direct greenhouse gas (GHG) emissions.
SB 528 requires owners of most commercial and multi-family buildings measuring 35,000 square feet or larger to begin reporting direct GHG emissions in 2025. (Exempted buildings include schools and historic, manufacturing and agricultural facilities.) The first GHG data handed over to the state, however, will be 2024 emissions which means that building owners will need to establish processes to gather that information by the end of 2023.
Although SB 528 refers to direct emissions from fossil fuels used onsite to power building systems, some uses are exempt (such as commercial kitchens), exact details of the GHG calculations are still being developed, and the Maryland framework appears to deviate from GHG calculation frameworks adopted by other states and countries.
Measuring buildings’ GHG emissions is a “big, hairy, audacious goal,” Kaplow said. However, he stressed it is important for CRE owners to start learning about how GHG emissions are calculated and start getting a sense of how their buildings rank.
Several products and services can greatly facilitate that effort. The Environmental Protection Agency offers three GHG emissions calculators: Energy Star Portfolio Manager, the GHG Equivalencies Calculator and the Simplified GHG Calculator. Kaplow recommended that building owners run their information through two calculators to get different perspectives and a general understanding of their emissions levels. Assorted environmental lawyers and consultants have also developed proprietary calculators and offer paid services to assess buildings’ GHG emissions.
Developing precise calculations of commercial buildings’ GHG emissions will do more than enable companies to comply with SB 528.
“This greenhouse gas disclosure needs to be viewed in a macro context. We need to look at it in terms of what the Securities and Exchange Commission is doing,” Kaplow said.
In late March, the SEC released proposed requirements for GHG emissions reporting, which “extend beyond public companies,” Kaplow said. “Their requirements will require people downstream and upstream in the supply chain of public companies to begin making disclosures. That law is far deeper than the new Maryland law.”
A GHG emissions analysis for one client, Kaplow added, produced a spreadsheet of 900 columns of GHG sources to track.
The SEC requirements, which could go into effect in 2023, and SB 528 “certainly impose a responsibility on the commercial real estate industry,” he said. “But I would respectfully say…that you also consider the opportunities.”
If CRE owners implement GHG emissions tracking systems that meet the SEC requirements, “that makes your space a whole lot more valuable than a landlord who has never done those calculations or doesn’t have the ability to make that data available,” Kaplow said.
In California, where state government has already enacted requirements similar to the SEC, “landlords are actually advertising that they have an ability to provide that data to prospective tenants,” Kaplow said. “That is a new national model. That is a huge business opportunity.”
SB 528 also presents numerous business challenges. Governor Larry Hogan let the bill become law without his signature, describing it as a “reckless and a controversial energy tax bill.” Other analysts have predicted SB 528 will reset the trajectory of business in Maryland.
The bill includes 208 mandates, establishes four major study groups and orders the completion of two dozen studies in the next two years. Assorted provisions could impact the CRE industry in the coming years, including state adoption of the International Green Construction Code, development of an all-electric building code, levying of alternative compliance fees for buildings that fail to meet energy performance standards, provision of new incentives to lower GHG emissions, and new requirements for the use of low-carbon concrete. Details of many new requirements have yet to be determined and trigger clauses within SB 528 could result in revision or elimination of some requirements.
Consequently, NAIOP Maryland members need to be informed about the legislation and engaged in its implementation, Kaplow said.
NAIOP Maryland plans to focus on other aspects of SB 528 in future installments of the Climate Change and Solutions webinar series.