Regulatory Roundup: Building Energy & Carbon Policies

As the push for greener, more sustainable buildings intensifies, local and international governments alike are accelerating the implementation of stringent energy regulations. From new reporting requirements to carbon emissions caps to mandatory efficiency benchmarks that must be adhered to, these laws aim to curb GHG from the built environment while simultaneously driving the adoption of energy efficiency best practices and clean energy technologies. 

For building owners and managers, understanding and preparing for these regulations is now a critical aspect of business planning and strategic risk management. To help you understand the impact to your portfolio, we explore below several of the key regulations you should have on your radar as 2025 gets underway – and highlight additional policies that could impact your portfolio, wherever you do business.

U.S. Local Ordinances: A Mandate for Action

Building Performance Standards, or BPS, refer to a set of performance-based regulations in certain major U.S. metropolitan areas that set quantitative energy performance targets based on energy or carbon benchmarks. From a practical standpoint, this means that BPS policies mandate energy and emissions reductions for covered commercial buildings to a prescriptive threshold, typically requiring real-time tracking and reporting of energy performance to verify compliance.

Key measures to be aware of include: 

New York City – Local Law 97 (LL97)

Overview: Enacted as part of New York City's Climate Mobilization Act, Local Law 97 (LL97) requires buildings larger than 25,000 square feet to meet strict carbon emissions limits. This notorious law is one of the most ambitious in the country, and aims to reduce greenhouse gas emissions from the city's plentiful buildings by 40% by 2030, compared to 2005 levels.

Compliance Requirements:

• Buildings that exceed the square footage threshold must meet specific carbon emissions limits based on their size and type. The emissions limits become progressively stricter in 2030 and 2050.
• The law mandates that building owners track and report their emissions data annually to demonstrate compliance with these carbon reduction goals.
• Non-compliance will result in significant fines, with penalties of up to $268 per ton of excess carbon emissions beyond the established limits. These penalties can quickly add up – and have increasingly deleterious effects on asset values and NOI – per a 2023 analysis by CBRE. 

Key Dates:

• 2025: First compliance year for the 2024 calendar year’s emissions data. Buildings must submit their emissions data by May 1, 2025.
• 2030: Carbon emissions reduction targets come into full effect, and buildings must meet the city's 40% reduction goal.

Impact:

• Approximately 50,000 buildings are affected by LL97, including a wide range of commercial properties across New York City.
• With escalating fines for non-compliance, property owners must take immediate action to reduce energy consumption and emissions. This has led to increased demand for energy management systems and technologies that can track emissions, optimize energy use, and ensure compliance with stringent emissions targets.

Best Practice: 

To avoid penalties and meet the 2030 emissions reduction targets, building owners should prioritize energy efficiency improvements, including low-cost/no-cost strategies like operational adjustments and preventative maintenance, as well as considering capital upgrades and retrofits and shifting to renewable energy sources. The NYC Accelerator has resources for accessing financial incentives and financing options for upgrades. Automated energy management platforms, like Noda, can also assist in tracking energy consumption and carbon emissions in real-time, flagging non-compliant buildings, and identifying actionable opportunities for energy and emissions reductions.

Washington D.C. – Building Energy Performance Standards (BEPS)

Overview: Washington D.C. enacted BEPS to reduce energy consumption and carbon emissions in buildings across the city. The program sets energy performance targets for existing buildings based on their energy use intensity (EUI). The targets are determined by comparing a building's performance to the median energy use of similar buildings.

Compliance Requirements:

• Buildings over 50,000 square feet must meet specific EUI targets by 2026 and continue reducing energy use by 15% every five years.
• Per a D.C. Council bill passed in December 2024, the Department of Energy and Environment (DOEE) will now permit exemption from the first compliance cycle for buildings under demonstrated financial distress.
• Owners are required to submit energy benchmarking data and reports, demonstrating their compliance with these energy performance targets.

Key Dates:

• 2026: First compliance year, where affected buildings must meet the established energy targets.
• 2028: Further reductions in energy consumption will be required under subsequent phases of BEPS.

Impact: 

• Washington D.C. has approximately 2,500 buildings subject to BEPS. The regulation is pushing building owners to adopt more sophisticated energy management technologies, push for continuous operational improvement, and prioritize energy efficiency upgrades. 
• Non-compliance can lead to fines and reputational damage, making it essential for building owners and managers to get ahead of the 2026 deadline, integrate automated energy management solutions, and optimize building performance.

Best Practice: Use real-time energy data collection and automated systems to ensure buildings can meet and exceed the required EUI benchmarks. Energy management solutions (like Noda) can help with tracking performance and finding opportunities to drive efficiency. 

Boston – Building Energy Reporting and Disclosure Ordinance (BERDO)

Overview: Boston’s BERDO policy mandates that owners of large commercial buildings disclose their energy and water usage annually to the city, with the goal of improving building performance, reducing greenhouse gas emissions, and promoting sustainability. The program is designed to hold building owners accountable for energy usage and encourage investments in energy efficiency.

Compliance Requirements:

• Buildings over 35,000 square feet must report their energy and water use annually. This data is made publicly available, creating transparency about energy consumption and emissions in the city.
• In 2023, Boston updated the program to include mandatory energy efficiency improvements for buildings that fall in the top 25% of energy use, based on their EUI.

Key Dates:

• 2025: Buildings that fall in the highest energy-consuming categories will need to implement improvements and upgrades or face penalties.
• Ongoing: Annual energy and water usage reports are due by May 1 each year, with the latest data for the previous year.

Impact: 

• Around 1,300 buildings are required to report under BERDO, influencing most large commercial real estate organizations in Boston. 
• Adopting energy management systems that can streamline data reporting and improve energy efficiency will be essential, as those who do not meet the performance improvement targets may face significant fines and penalties.

Best Practice: To stay ahead of BERDO requirements, buildings should prioritize operational optimizations, integrate predictive maintenance, and leverage energy analytics platforms that simplify the reporting process. Engaging in proactive energy management and continuously optimizing building systems will help reduce consumption and ensure compliance, before costly efficiency retrofits must be undertaken. 

The EU’s CSRD: A New Standard for Global Reporting 

The EU’s Corporate Sustainability Reporting Directive (CSRD) expands energy and carbon disclosure requirements for companies with operations in the EU, compelling international businesses to provide detailed sustainability reports that include energy usage, carbon emissions, and more. It expands upon the Non-Financial Reporting Directive (NFRD), setting more rigorous standards and increasing the number of companies required to comply. 

Key Components: 

Double Materiality: Companies must assess both how sustainability issues affect them (financial materiality) and how the company’s activities impact society and the environment (impact materiality).

Broader Scope: The CSRD covers a significantly larger pool of entities, including small and medium-sized enterprises (SMEs) and non-European companies with substantial EU operations.

Enhanced Detail: Reporting must include information on strategy, risks, policies, targets, governance, and results related to sustainability and ESG topics. 

Who is Impacted

EU-Listed and Large Companies Already Under NFRD
Large public-interest entities (PIEs) with more than 500 employees.

All Large Companies Not Currently Under NFRD
Defined by meeting any two of the following:

• 250+ employees
• €40 million+ net turnover
• €20 million+ total assets

Listed SMEs (Except Micro-Enterprises)
Smaller, listed companies with fewer than 250 employees will also need to comply, though they have a slightly delayed timeline and simplified reporting.

Non-EU Companies
Non-EU companies with significant operations in the EU (generating net turnover of over €150 million in the EU and having at least one subsidiary or branch in the EU) will also be subject to reporting requirements.

What Must Companies Disclose?

Strategy & Business Model: How sustainability goals are integrated into the company’s overall corporate strategy and business model.

Policies & Due Diligence: Any policies addressing environmental, social, and governance issues, as well as due diligence processes throughout the value chain.

Targets & Progress: Setting targets (e.g., GHG emissions reduction, energy efficiency, water usage) and providing updates on progress.

Risks: Identification and management of sustainability-related risks (physical risks to properties, regulatory changes, etc.).

KPIs: Standardized and industry-specific metrics, including energy intensity, carbon emissions (Scope 1, 2, 3), and building certifications.

Reporting Framework

European Sustainability Reporting Standards (ESRS): Developed by the European Financial Reporting Advisory Group (EFRAG), these standards define precise metrics and disclosures.

External Assurance: The CSRD mandates limited external assurance at first, moving toward a more robust assurance requirement over time.

Key Reporting Dates

Implementation of the CSRD and its reporting obligations will roll out in phases:

FY 2024 (Reporting in 2025)

• Companies already subject to NFRD (large public-interest entities with 500+ employees).

FY 2025 (Reporting in 2026)

• Other large companies (≥250 employees, ≥ €40 million turnover, ≥ €20 million total assets).

FY 2026 (Reporting in 2027)

• Listed SMEs, except micro-enterprises. SMEs can opt for a limited reporting deferral until 2028.

FY 2028 (Reporting in 2029)

• Non-EU companies meeting the turnover threshold in the EU.
  

The CSRD's Impact on Commercial Real Estate

Commercial real estate will be heavily influenced by the CSRD, particularly in relation to building efficiency and emissions management. Under the CSRD, firms are expected to disclose detailed information about energy use and efficiency improvements, highlighting both operational and embodied carbon across their portfolios. This elevated focus on transparency means that real estate owners must track how energy is consumed at each property and plan upgrades that reduce overall consumption.

Another central requirement involves measuring and disclosing GHG emissions across Scope 1, Scope 2, and any relevant Scope 3 categories. For many real estate portfolios, Scope 3 can include tenant-controlled emissions and impacts from the construction supply chain, necessitating more robust data collection and collaboration across multiple stakeholders. In parallel, the CSRD places increasing importance on building standards and certifications, such as LEED and BREEAM, and looks for metrics that address occupant health, well-being, and overall building safety.

A further dimension of compliance pertains to supply chain and lifecycle analysis. Commercial real estate companies need to demonstrate that they have identified and mitigated ESG and climate risks at every stage of a building’s lifespan – from the sourcing of construction materials to end-of-life considerations. Taking a proactive, holistic view of these lifecycle factors ensures that properties meet evolving environmental benchmarks and remain compliant over time.

Finally, investor pressures also intensify the need for thorough disclosures. Institutional investors increasingly rely on ESG data to guide their decisions, and high-quality, transparent CSRD reports can help differentiate a real estate portfolio, attracting capital and building stakeholder trust. Meeting the EU’s rigorous standards can thus offer a measure of future-proofing, ensuring that properties retain their value under more stringent regulations and shifting market expectations.

CSRD Compliance Best Practices

The EU’s CSRD marks a significant leap forward in standardized sustainability reporting, demanding far more detailed and verified disclosures than some organizations may be accustomed to providing. For commercial real estate, this directive not only raises the bar on energy and ESG transparency, but also provides an opportunity to showcase long-term asset resilience and gain a competitive edge in an increasingly sustainability-focused market. By understanding compliance requirements early, enhancing data management practices, and integrating sustainability strategies across the property lifecycle, real estate firms can effectively meet the challenges of the CSRD while positioning themselves as leaders in sustainable real estate.

Prepare Early and Form Cross-Functional Teams

Preparing for CSRD compliance should begin with the establishment of a multi-disciplinary ESG working group that includes representatives from finance, legal, operations, sustainability, and engineering/facility operations. This team can map existing data sources, clarify responsibilities, and set clear deadlines to ensure timely and accurate reporting. Early coordination across departments will help prevent data silos and create a more cohesive strategy for meeting sustainability objectives. Executive sponsorship is also key to ensuring prompt action across the disparate business units that the ESG working group will touch.

Embrace Data Management and Technology

Effective data management and the adoption of technology are crucial for reliable ESG reporting. Specialized energy, carbon management, or ESG compliance software can automate data tracking and simplify the reporting process. Centralizing and streamlining data—whether from tenant utility usage, building sensors, or project management platforms—helps real estate firms maintain accurate records and gain insights into where improvements can be made. By unifying these data streams, organizations can more easily track energy consumption, water usage, and emissions across their portfolios.

Engage Stakeholders and Tenants

Stakeholder and tenant engagement are essential for achieving meaningful sustainability outcomes – especially where Scope 3 emissions are concerned. Real estate firms can encourage tenants to participate in energy-saving programs, provide educational materials around the mutual benefits of efficiency measures, and consider formally adopting green leases to standardize sustainability practices across the portfolio. Equally important is collaborating with any applicable contractors, suppliers, and service providers to catalogue Scope 3 emissions, ensuring that the same practices for measurement and reporting extend throughout the supply chain.

Focus on Materiality and Relevance

In the context of CSRD, double materiality requires real estate firms to consider both financial and the broader environmental or social impacts across their portfolios. Tailoring disclosures to showcase key sustainability risks and opportunities unique to each building or operation ensures that reports remain transparent and relevant. By prioritizing the most material issues, organizations can build trust with investors and stakeholders and clearly align downstream initiatives and reporting.

Set Clear Targets and Metrics

Setting specific, measurable, achievable, relevant, and time-bound (SMART) sustainability objectives helps real estate organizations stay focused on their key priorities. Benchmarking building performance against industry standards, such as ENERGY STAR and GRESB, offers a valuable frame of reference. By regularly measuring progress against these benchmarks, firms can identify areas for improvement and highlight their successes. This is, of course, another are where the right technology can provide a meaningful lift.

External Assurance and Continuous Improvement

Engaging independent auditors for third-party verification strengthens the credibility of ESG reports. This external assurance provides confidence to stakeholders that data and disclosures are accurate and reliable. Moreover, real estate firms should view the reporting process as iterative, using audits and feedback loops to refine ESG strategies, enhance data accuracy, and improve stakeholder engagement over time.

Other Relevant Regulations to Watch

While the above policies are among some of the most high-profile measures globally, there are several additional jurisdictions with laws and programs that may affect building owners and managers. We've shared our top three below.

California

California has a complex and interconnected slate of state-level energy policies, including its Building Efficiency Standards (which include Title 24 and the constituent CALGreen Energy Code), Executive Order B-18-12, and a host of additional legislative measures such as SB 350 and AB 802. 

Though many of its most stringent energy requirements apply exclusively to new construction, major renovations, or state-owned buildings (e.g. all new construction, both residential and commercial, must comply with Title 24 efficiency standards; state-owned buildings have heightened mandates around sourcing energy from renewables and achieving net zero under executive orders), large commercial buildings face additional reporting and disclosure requirements through AB 802, and California has further set a goal of retrofitting 50% of existing buildings to net zero by 2030, per the California Energy Efficiency Strategic Plan. Perhaps surprisingly, in spite of these numerous policies, California has yet to adopt a state-wide BPS policy that mandates emissions or efficiency thresholds on existing commercial buildings. 

Despite its lack of BPS, California has made significant strides towards mandating transparency in corporate climate disclosures (arguably, its own version of the EU's CSRD) via a related pair of state bills. California SB 253 – officially known as the Climate Corporate Data Accountability Act – was signed into law in 2023 and requires companies with annual revenues exceeding $1 billion that do business in California to disclose Scope 1 and 2 emissions beginning in 2026, and Scope 3 emissions in 2027. Similarly, SB 261 (the Climate-Related Financial Risk Act) requires corporations with annual revenues above $500 million to analyze and report their climate-related financial risk and the strategies in place to address it. While the bill does not prescribe a specific framework, it strongly aligns with the TCFD’s increasingly adopted standards for documenting and reporting climate-related risks. 

For real estate firms with assets in California, staying abreast of the numerous executive orders, Senate and Assembly bills, amendments, and related incentive and rebate programs is no small task. CRE investors must keep a close eye on California and be on the lookout for new developments that may impact compliance. 

Seattle 

Similarly to other major U.S. metropolitan areas, Seattle mandates that commercial and multifamily buildings benchmark and disclose their annual energy use. A new city-wide BPS policy (Seattle BEPS) is currently in development to move beyond disclosure to requiring active energy improvements, with the first deadlines expected in 2027.

As with California, if you own or manage properties in the Pacific Northwest, monitoring Seattle’s evolving policies will be crucial for remaining compliant. 

The United Kingdom 

Across the pond, the UK has introduced increasingly stringent measures to drive energy efficiency in buildings, with its Minimum Energy Efficiency Standards (MEES) playing a central role. Under MEES, landlords must ensure that properties meet a certain Energy Performance Certificate (EPC) rating in order to be legally leased. The current requirement is an EPC rating of at least “E,” with stricter standards scheduled to be phased in over the coming years – potentially rising to “C” by 2027 and even higher by 2030, although exact timelines and thresholds are still under governmental review.

Just as in California and Seattle, if you own or manage properties in the UK, you face a moving target of energy and emissions regulations in the coming years – with potentially significant repercussions for noncompliance. Failing to meet MEES standards can result in significant fines and even the inability to collect rent on properties or acquire new tenants, as renewing or granting a new lease on a non-compliant property is illegal until efficiency improvements are made. By proactively planning for EPC requirements and integrating energy efficiency measures into your ongoing management strategies, you can stay ahead of the upcoming deadlines, manage your costs effectively, and uphold the long-term value of your assets. 

Final Thoughts

Building energy regulations are complex and continually evolving, making it imperative for real estate owners, developers, and managers to stay informed and proactive. As we kick off 2025 – a crucial reporting and compliance year for multiple policies – forward-thinking organizations will view these requirements not merely as compliance obligations, but as opportunities for optimizing and enhancing operations, adopting next-generation technologies that better enable their teams, all with an eye towards growing the value of their assets. By integrating sophisticated energy management platforms, embracing real-time data analysis, and investing in targeted upgrades where it makes sense, real estate owners and operators can meet – and even exceed – performance standards. 

Ultimately, navigating these regulations successfully can help you stay ahead of the curve in a rapidly changing landscape. By preparing now, you’ll be better positioned to protect your bottom line, preserve your organization’s reputation, and meet the requirements of the coming years head on. 

About Noda

Noda is a data and analytics company on a mission to make every building smarter, more efficient, and more sustainable. Recently ranked in the top 10 tech companies leading the charge on climate action, its AI-powered suite of products surface unique insights that empower real estate teams to reduce costs, decrease time spent on routine work, and find and act on opportunities to save energy and carbon. Discover how Noda's solutions can unlock the potential of your assets and accelerate the transition to net zero. Visit us at noda.ai to learn more.