The State of California is facing a particularly acute flavor of the housing affordability crisis both in terms of rent and mortgage costs, and in terms of rapidly rising utility bills. At the same time, California has some of the most ambitious climate commitments in the world, including a goal of achieving carbon neutrality by 2045. Existing buildings account for some 25% of greenhouse gas (GHG) emissions in the state. It will be effectively impossible for California to meet its climate commitments without adopting a building performance standard (BPS) that spurs retrofits of its existing building stock. Politicians across the country are wavering not only on climate commitments but also slashing energy efficiency programs (which in the case of California’s building energy codes has saved residents $100 billion over the past 50 years), but a BPS is a means to both meeting California’s climate goals and tackle the very real concerns around housing affordability.
The State of a Statewide BPS
California is a member of the National BPS Coalition and, in 2023, the Governor signed Senate Bill 48, the Building Energy Savings Act (SB 48), which requires California Energy Commission (CEC) to develop a BPS strategy. For a deeper dive into the details of SB 48 check out my colleague Cliff’s blog.
Community engagement was a core piece of the law. It required CEC to sincerely engage with communities and any community based organizations (CBOs) that may represent them. SB 48 also required that CEC’s BPS strategy seek to protect against increasing rental and energy cost burdens among other community concerns. These efforts dovetailed with the start of my organization’s project to support equitable decarbonization in California. The goals were to:
- Create or strengthen partnerships between communities and government, building a foundation that will remain after this project for lasting impacts and future policies as measured by the Spectrum of Community Engagement to Ownership.
- Develop and implement policy and programs through community-led processes.
Starting in the autumn of 2024, IMT and People’s Climate Innovation Center facilitated conversations among several community based organizations (CBOs) and CEC staff. The CBOs included: Emerald Cities Collaborative (ECC)–Northern California, Local Clean Energy Alliance (LCEA), Physicians for Social Responsibility–Los Angeles (PSR–LA), PODER–San Francisco (PODER–SF), and Strategic Actions for Just Economy (SAJE). My colleagues and I recently compiled the results of these conversations and submitted them to the California Building Energy Performance Strategy Report docket.
Key Comments and Recommendations
Strong support for the adoption of a statewide BPS in California
IMT and our CBO partners believe that adopting a BPS is crucial for the state to address the affordability crisis and achieve its climate goals. As utility bills continue to skyrocket, one of the most effective ways to insulate residents and businesses from these hikes is to reduce the energy that buildings use. This isn’t about promoting a scarcity mindset or asking people to survive with less. It’s simply that more efficient buildings cost less to live in, less to run a business out of, less to own, are worth more when they sell, and are more resilient to volatile shifts (like extreme weather events or spiking energy costs). Also, energy efficiency is the cheapest supply-side resource, making it the best way to tackle rising energy demand. If California is committed to an electricity grid completely free of fossil fuels by 2045, there is no better way for building owners and tenants (both residential and commercial) to avoid the rollercoaster of today’s energy prices than improving energy efficiency. And what is the most effective policy tool to incentivize energy efficiency investments in large existing buildings? A BPS of course.
Guidance on how to include community accountability mechanisms
Too often, policy officials exclude frontline communities—those that experience “first and worst” the consequences of climate change—from critical decisions, policies, and technical processes. Such exclusion denies these residents the opportunity to share their knowledge and experience, provide consent, and fully participate in decisions that will impact their daily lives. And what about after policies are designed? Examples of communities having genuine oversight and impact of how laws are implemented are few and far between.
SB 48 laid out clear expectations that CEC would buck this trend with their engagement efforts, and the agency has made ongoing, concerted efforts to address this. Our recommendations cover clear, actionable steps that CEC can take to continue their good work. They also describe how community accountability can be formalized to ensure BPS implementation is responsive to the needs and priorities of frontline communities. One of the strongest ways to embed community power directly into governmental decision-making is to establish a Community Accountability Board (CAB). Boston, MA, and Evanston, IL, have already adopted this governance approach.
Our recommendations spell out how and why a statewide CAB should be enacted, and how responsibilities could be shared between this CAB and county-level CABs (given the sheer size of California we determined that a single CAB would be insufficient). The table below outlines how we recommend responsibilities breakdown across the statewide and county-level CABs:
| Statewide CAB | County-Level CABs |
|---|---|
| Overseeing and coordinating efforts of county-level CABs, and advocating for them to be provided additional resources (including staff support from CEC and other agencies as appropriate) as needed. | Creating criteria to define and determine which covered buildings in their county can be considered “community priority buildings”. |
| Developing and publicizing statewide equity impact reports that assess the impacts of BPS implementation on community priorities. | Deciding which buildings are given priority for financial assistance in complying with BPS targets. |
| Distributing a proportion of any available funds to county-level CABs. Such funds may be gathered through either payments in lieu of performance, or funds that may be distributed from the state purse to support building owners. | Evaluating the impact on affected communities of proposals by specific buildings to comply with the BPS through alternative compliance pathways. |
| Ensuring communities most affected by environmental harms — energy burden, health inequities, displacement risk — hold formal authority, not just advisory influence, over policies shaping their lives. | |
Note: We recommend CEC and others refer to IMT’s CAB Toolkit for further guidance.
How to avoid unintended consequences and expand access to better buildings
In our recommendations, IMT, the CBOs, and Building Electrification Institute provide thoughts on how best to prioritize support for building owners and tenants in complying with a BPS; how the state can support building owners and workforce through a high performance building hub; and how to address existing gaps in residential tenant protections. This final piece draws extensively on the expertise of SAJE, which has published valuable related research. I recommend that anyone interested in tenant affordability and protections read: Los Angeles Building Decarbonization: Tenant Impacts and Recommendations, Decarbonizing California Equitably, and Tenants at the Center: An Equitable Path to Building Decarbonization (written in collaboration with Public Health Law Center with contributions from IMT).
Housing affordability is composed of many factors, of which energy costs and BPS are just one. However, the current debate makes clear the dire need for reforms at the state and local levels. By adopting our recommendations, the CEC will allow California to achieve its decarbonization goals tied to existing buildings and strengthen—not weaken—housing affordability and stability.
Guidance on technical components
IMT submitted separate comments that are concerned with the technicalities and details of BPS design, see “SB48 BPS Strategy Report Comments And Recommendations–Technical Policy Design (Institute for Market Transformation).” We recommend that all buildings currently covered by California’s benchmarking law (AB 802) be required to comply with a statewide BPS. We also suggest that the BPS cover co-op and condominium buildings, which would require an amendment to AB802. Our high-level recommendations include the following:
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Denver, Maryland, and Montgomery County have adopted this approach, and the District of Columbia is looking at rewriting their policy to be more like a trajectory approach. The trajectory approach strikes the best balance of providing building owners with long-term certainty of knowing their final targets while ensuring that each individual building has its own specific interim targets. This empowers owners to make the improvements in a way that makes sense for their particular building.
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For the efficiency metric, we propose that CEC consider the adoption of either normalized site EUI or an hourly or other time-of-use metric. One option would be a total greenhouse gas metric that accounts for hourly GHG variability in grid electricity.
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We recommend metrics for 1) water use efficiency and 2) indoor air quality and/or ventilation performance.
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This metric focuses on the times when demand for electricity is the highest and the electrical grid is under the greatest strain. Reduced demand from buildings at these moments would provide the greatest value. This shouldn’t be confused with “peak electrical demand” which refers only to the highest summer or winter demand for electricity from an individual building. Lowering energy demand from buildings is far less expensive than investing in costly supply-side investments in generation, transmission, and distribution. California would be the first BPS to adopt such a metric, and few other governments have either the level of need to incorporate real-time emissions, or the data necessary to make this happen.
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These include short-term extensions, short-term target adjustments, and a Building Performance Action Plan. Our recommendations in this area build on our recent work assessing alternative compliance pathways in existing BPS laws nationwide, and we will publish more detailed recommendations soon on a framework of BPS alternative compliance pathways.
Tackling Affordability and Climate Together
Improving the performance of existing buildings in an economy of this size (4th or 10th largest in the world depending on your metric of choice) will have drastic impacts on both the amount of energy buildings consume and the state’s GHG emissions. With potentially 50,000 buildings being covered by a statewide BPS in California, translating to ~4 billion square feet of property, this would be the largest BPS adopted in the country. BPS is a necessary tool for California to meet its climate commitments; the state’s Building Energy Action Plan explicitly highlights BPS as a key way to improve the performance of existing buildings. Cutting GHG emissions and energy use in the state will have significant implications for both climate adaptation and climate change. Due to the increased frequency of severe weather, including heat waves and fires, the state must ensure the apartments, offices, shops, and schools that Californians use every day are well insulated, providing them with clean and healthy air, and efficiently maintaining safe and comfortable temperatures. Given the state’s increasingly prolonged and extreme drought conditions, reducing water use should also be a priority (even if only 10% of the state’s water use can be attributed to urban environments).
Protecting residents from climate consequences is also aligned with long-term affordability. There is real political pressure for decisionmakers to immediately address the cost of living crisis. Energy efficiency programs can be targets for spending slashes because it is hard for constituents to actually see the benefits they bring. However, energy efficiency investments are some of the cheapest and most effective ways to improve affordability for residents and businesses, especially in a durable, long-term sense. Many things we purchase have both upfront costs and costs over time; focusing solely on the former is disastrously shortsighted. The legislature in Maryland just passed a law aimed at reducing utility bills for residents, a worthy and extremely necessary endeavour.
However, a clause in the law slashes the amount utility providers have to spend on energy efficiency programs. This will require more spending on grid infrastructure—costs which will be far higher and which ratepayers will bear.
The short-term political win will anger many Maryland voters when their electricity costs increase by almost $600 million as a result of program cuts.
In adopting a BPS, California will require building owners to pay for upgrades. Making those investments will greatly reduce their operating costs and could lower the utility bills for residential and commercial tenants. Upfront costs are important, but they aren’t the full picture. We need to view affordability across a longer timeline than just next month’s bill. A slight tweak of the old adage is necessary here: you have to spend money to save money. Spending money on improving building performance in California is one of the best things the state can do right now.
