Carbon Trading Study

In 2018, the New York City Council passed the Climate Mobilization Act, a package of bills that represents one of the most ambitious legislative actions taken by any major city to reduce greenhouse gas (GHG) emissions and create new green jobs. The centerpiece of the Climate Mobilization Act is Local Law 97 (LL97), which requires significant GHG emissions reductions from buildings larger than 25,000 square feet beginning in 2024.

As required by the law, the Mayor's Office of Climate & Environmental Justice is studying the feasibility of a citywide carbon trading program to help buildings meet the emission reduction targets.

Carbon trading is a method that incentivizes emission reduction by setting an emission target and allowing parties like building owners to sell or purchase credits based on their emission levels. Buildings that emit less than the target level are granted credits that they can sell. Buildings that emit more than the target level can find ways to reduce their emissions or purchase credits, or a combination of both.

The result of the carbon trading study, due January 2021, will include:

  • assessments of carbon trading scenarios;
  • methods to ensure equitable investment in Environmental Justice Communities;
  • recommendations based on the research and stakeholders engagement;
  • an implementation plan for a market-place approach to carbon trading that consists of pricing mechanisms, carbon credit verification, and monitoring and evaluation processes.

If implemented, the City's carbon trading program will be the first-of-its-kind system in the U.S. to provide building owners across all sectors with alternative options to comply with LL97, ensure long-term investment in frontline communities, and help meet the City's goals to reduce carbon emissions by at least 80% by 2050.

Study Timeline

The study is taking place between February 2020 and January 2021 and is divided into three phases.

Carbon Trading Timeline

Phase 1: Discovery (Spring 2020)

  • Research
  • Stakeholder engagement
  • Inputs and assumptions
  • Legal analysis

Phase 2: Modeling and Scenario Test (Summer-Fall 2020)

  • Baseline model
  • Scenario testing
  • Stakeholder engagement on scenario evaluation
  • Scenario recommendation

Phase 3: Market Design and Implementation Plan (Winter 2020-2021)

  • Implementation proposal
  • Stakeholder and community engagement
  • Implementation plan

Carbon Trading Program Requirements

Any carbon trading program recommended for implementation through the study needs to meet the following core objectives. The program must:

  1. Ensure equitable investment in Environmental Justice Communities that preserves a minimum level of benefits for all covered buildings and does not result in localized increases in air pollution or inequitable diversion of investments and resources;
  2. Provide additional flexibility to the market to help building owners comply with LL97;
  3. At minimum, meet the projected total emissions reduction targets under LL97 for all buildings larger than 25,000 square feet;
  4. Incentivize additional emissions reductions beyond LL97 targets;
  5. Encourage building owner to invest in deeper emissions reductions sooner than they otherwise would have without a trading program in place;
  6. Create a simple and straightforward marketplace to help building owners streamline the trading process and keep transaction costs low;
  7. Establish rules for additional buildings sectors or sub-sectors that participate in the marketplace on a voluntary basis to ensure that emissions reductions are aligned with the City's climate goals.