California’s new rules will boost heat pumps in commercial buildings

California just took a big step to reduce carbon pollution from its buildings — though the state didn’t go as far as advocates wanted.

Last week, the California Energy Commission (CEC) adopted a fresh set of building energy efficiency standards, the rules the state wields to reduce energy use, utility bills, and greenhouse gas emissions associated with new buildings and those getting major renovations. The updated energy code, which takes effect January 1, 2026, promotes ultraefficient electric heat pumps in new homes and commercial buildings over the use of planet-warming fossil-gas appliances.

Commissioners, however, scrapped a provision backed by national and local decarbonization nonprofits that would have encouraged homeowners to replace their broken air conditioners with heat pumps.

It’s a major ​“missed opportunity,” said Matt Vespa, senior attorney at nonprofit Earthjustice. Replacing broken ACs with heat pumps is ​“probably the easiest, lowest-hanging fruit, as far as intervention points for getting gas out of existing buildings.”

But it’s not all disappointment: An analogous rule for the commercial sector made it into the code. Advocates are calling it a first-in-the-nation measure that encourages owners of commercial buildings to replace broken-down rooftop heating, ventilation, and air-conditioning (HVAC) systems with heat pumps. Heat pumps aren’t mandatory under the provision; building owners could install additional measures such as insulation, high-performing windows, and LED lighting alongside a gas furnace to meet the code’s efficiency requirements. But experts expect a heat pump to be lower cost.

Getting commercial building owners to swap old rooftop HVAC units with heat pumps is a ​“really important” update to the building energy code, said Meg Waltner, project manager at energy efficiency consultancy Energy 350. ​“When you’re replacing any equipment, that’s really your opportunity to make a change. If you miss that opportunity, it’s 15 [to] 30 years before you have one again.”

The code takes specific aim at so-called packaged rooftop HVAC units, which account for about a quarter of commercial HVAC systems in California, according to the Natural Resources Defense Council. The boxy systems sit on top of flat roofs and typically burn fossil gas for heating and use electricity for cooling. But heat pumps can serve both functions using only electricity — and without generating on-site carbon pollution.

The new measure is the first time the state’s energy code has ventured into encouraging electrification in existing buildings, Waltner added. It applies to commercial structures such as retail outlets, grocery stores, schools, offices, and banks that have rooftop HVAC units that provide fewer than 65,000 British thermal units per hour of cooling.

Besides promoting heat pumps for existing commercial buildings, the new code also encourages developers to install heat pumps and heat-pump water heaters in new homes. That’s a step up from the last building energy code, adopted in 2021, which promoted heat pumps for either heating or water heating, not both, Vespa said.

The code also pushes builders to put heat pumps in new schools and offices fewer than five stories tall. California already had trailblazing rules encouraging builders to put the appliances in smaller commercial structures that have a single heating-and-cooling zone controlled by one thermostat — now, that directive applies to offices and schools with multiple thermostats too.

While the rules for new commercial buildings leave out heat-pump water heaters, the code specifies that structures with central water-heating systems do need to be electrically wired to accommodate heat pumps in the future, Vespa said.

Cleaning up new and existing buildings

The new energy code for the fifth-largest economy in the world comes as the Biden-Harris administration unleashes funding for local and state efforts to revamp building codes and performance standards, including $1 billion from the Inflation Reduction Act. These sets of rules are a critical tool for cleaning up buildings large and small, which together account for about a third of U.S. emissions, according to the Department of Energy.

For its part, the CEC projects that the update will reduce carbon emissions by about 4 million metric tons, equivalent to the pollution spewed by a coal plant in a year; deploy half a million heat pumps in the first three years; and save Californians $4.8 billion in energy costs.

The new energy code also follows on the heels of other regulatory changes pushing construction in the state to be fossil-fuel-free. In 2022, California became the first state to end subsidies for gas lines to new buildings, a rule adopted by the public utility commission that went into effect in mid-2023. In July, California ditched incentives for electric lines to buildings with fossil gas or propane, thereby eliminating all utility subsidies that expand the gas network.

“You can see the economic incentives aligning toward all-electric new homes,” Vespa said.

But given the commission’s unwillingness to adopt the rule encouraging homeowners to replace their conked-out central ACs with heat pumps, there’s more work to do when it comes to existing homes.

Commissioners had initially considered the rule, which would have not only helped replace ACs but also prevented homeowners from needing to replace their fossil-gas furnaces. That would have given people a chance to get ahead of the approaching zero-emissions appliance standards, Vespa said: Starting in 2030, the Golden State will effectively ban the sale of gas furnaces.

However, citing potentially high operating costs for consumers, the CEC struck the proposal from a draft of the code released in March.

Instead of enshrining the AC-to-heat pump provision in the statewide code, the commission has added it to the state’s voluntary California Green Building Standards Code. Local governments will have the option to adopt it.

Sacramento and Los Angeles, which have climate targets and publicly owned utilities that offer lower electricity rates than elsewhere in the state, could be early adopters, Vespa predicted.

The statewide code is ​“extremely pro-electrification” for new homes, not leaving much more for cities to address on this front once the code goes into effect in 2026, Vespa said. ​“It goes that far.” But ​“there’s so much [that California] cities can do for existing buildings” to halt planet-warming pollution.