Colorado’s plan to cut carbon from big buildings gets a $20M boost

Colorado just got a big boost to help slash planet-warming emissions from commercial buildings.

Last week, the U.S. Department of Energy (DOE) announced the state was selected to receive a $20 million grant to help implement its building performance standards — ambitious rules that limit the amount of carbon pollution big buildings can emit. Colorado adopted the policy, which applies to edifices 50,000 square feet or greater, last year.

The funding will be used to help buildings in marginalized communities, whose owners may be less able to afford deep carbon-cutting measures like insulation and heat pumps, meet the state’s building decarbonization targets.

“We’re really excited about this DOE award to ensure the success of Colorado’s building performance standard,” Dominique Gómez, deputy director of the Colorado Energy Office, told Canary Media.

The Colorado award was the largest among the 19 grants to state and local governments announced last week as part of a broader $1 billion Inflation Reduction Act effort to clean up the U.S. building stock. The vast majority of the new round of funding went to helping cities and states design or implement performance standards for buildings, a means of tackling emissions that’s taking root around the country. From New York City’s pioneering Local Law 97 to Seattle’s Building Emissions Performance Standards, these policies set emissions or energy-use intensity caps per square foot in large structures that become more stringent over time.

Building owners have flexibility in figuring out how to meet these standards, whether that’s switching to LED light bulbs, weatherizing, electrifying heating, or all of the above. If they fall short, owners face hefty penalties that are designed to exceed retrofit costs, according to Paulina Torres, research manager at global real-estate services firm JLL.

Performance standards are sticks to the policy carrots incentivizing energy-efficiency upgrades that, on their own, largely haven’t worked to reduce building sector emissions, said Marshall Duer-Balkind, policy director at the building decarbonization nonprofit Institute for Market Transformation (IMT).

Unlike building energy codes, which generally target new construction, performance standards tackle emissions from existing buildings — a massive source of climate pollution. When you include the electricity they consume, buildings are the largest source of carbon emissions in the country — more than transportation, agriculture, or industry (excluding its buildings), according to the DOE. 

“Building performance standards are one of the most impactful policies available to a jurisdiction to drive down emissions in its building stock — and its emissions overall,” Duer-Balkind said.

The Biden-Harris administration has eagerly backed building performance standards as a carbon-reduction tool. In January 2022, it formed the National Building Performance Standards Coalition to promote widespread adoption of the strategy. In December 2022, the White House adopted a federal building standard for the first time, aiming to eliminate onsite emissions in 30 percent of the government’s building portfolio by 2030. And in April, the administration highlighted building performance standards in its national building decarbonization blueprint.

Colorado, Oregon, Maryland, Washington, Washington D.C., and eight cities have now passed building performance standards, with 34 more jurisdictions committed to doing so by 2026. If all 47 members of the national coalition were to adopt such policies, IMT estimates they’d cumulatively spur $132 billion of investment in large buildings and eliminate 676 million metric tons of CO2 by 2040, equivalent to the annual emissions of 88 million homes. 

Building performance standards appear to be working, Duer-Balkind said. While no compliance deadlines have actually yet arrived — the earliest are in 2025 — a study he co-authored found that in three cities with such standards in place, a larger fraction of buildings are in compliance now than before the rules were adopted. For example, in Denver, only 15 percent of buildings were previously in compliance; now that’s grown to 36 percent.

Colorado has economy-wide targets to cut carbon pollution in half by 2030 (relative to 2005 levels), and reach net-zero emissions by 2050. But the current building performance standards are less aggressive. Across the portfolio of big buildings covered, the rules are designed to reduce carbon emissions by 7 percent by 2026 and 20 percent by 2030 (relative to 2021 levels). Gómez expects emissions to fall faster in other sectors first, such as electricity generation. Because electricity use factors into a building’s carbon footprint, cutting electricity emissions will also help decarbonize properties.

Still, ​“a 20 percent reduction from a single policy in less than a decade is a big deal” for tackling building emissions, Duer-Balkind said.

To comply with the state performance standards, building owners can choose among different compliance pathways, with the exact energy use- or emissions-intensity limits dependent on property type. Fast food restaurants use much more energy and thus have higher caps than multifamily housing and libraries, for instance.

Denver and Colorado are facing a lawsuit against their building performance standards, which could take weeks or months to resolve. The case draws on the same arguments that led to Berkeley’s gas ban being overturned, but IMT calls this case ​“much weaker.”

The DOE funding, for its part, will be focused on lowering emissions in buildings located in disadvantaged areas. Those are largely low-income communities of color and are disproportionately impacted by pollution and the effects of climate change, Gómez said.

The state agency is considering a number of ways to support building owners in these neighborhoods. Though subject to change as the state negotiates the award with the DOE, measures include funding local governments to hire more staff and providing technical assistance to help building owners identify ​“what kinds of upgrades are the biggest bang for your buck,” said Adam Berry, senior program manager at the Colorado Energy Office. The agency also plans to use the funds to better help building owners navigate financial aid for decarbonizing retrofits, including grants, clean energy financing, and federal and state tax credits for heat pumps, insulation, solar panels, and more.

Bolstering the state’s building decarbonization efforts is another $30 million, a slice of the Climate Pollution Reduction Grant awarded to Colorado by the Environmental Protection Agency in July. The funding will be doled out via competitive grants to help building owners meet building performance standards early or beyond the required emission reductions, Gómez said.

Gómez expects that Colorado will begin deploying the DOE- and EPA-awarded funds early next year.

“The change that needs to happen in the building sector is large, so we want to make it as easy as possible,” Gómez said. ​“We know that disproportionately impacted communities need additional support.”