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Attachment 3: Building Decarbonization Policy Options
This memo describes a short list of policy options to decarbonize San Mateo’s building stock through regulatory requirements, incentives, and other programs . The project team first completed a nation- wide scan of existing policies and programs to decarbonize existing buildings in August of 2023.
Policies addressing building decarbonization is an emerging and evolving space. This short list of policy options was selected based on the cost and building stock analysis developed by the project team and is intended to illustrate a range of feasible approaches being considered in other cities.
These policies are meant to be considered as a menu of options to achieve the City ’s climate goals while considering implementation and cost challenges for residents and property owners across the City. Most local governments considering a building decarbonization strategy (e.g. City of Berkeley, City of Sacramento) combine multiple strategies together to produce the most comprehensive, and equitable policy result.
The City has established a Climate Action Plan goal (BE:2: All -electric existing buildings) of reducing GHG emissions by electrifying existing buildings by 102,210 MT CO2e by 2030 and by 221,260 MT CO2e by 2045. 1 Based on the City of San Mateo Climate Action Plan t his reduction equates to approximately 14,840 water heaters and 9,890 furnaces electrified by 2030.
Most policy options described in Table 1 only affect a subsection of the building stock or a particular appliance. Establishing a building decarbonization strategy that will span all building types found in the City while providing equitable support to the community will likely require combining multiple policy approaches. The sections below provide further detail on the policy options, identify c ities that have implemented or are considering implementing the policy approach, and expand on policy pros and cons.
1 City of San Mateo Climate Action Plan, Table ES-2: Reductions by Measure. https://sanmateo.primegov.com/Portal/viewer?id=8895&type=2 City of San Mateo
2 Table 1 Building Decarbonization Policy Summary
Policy Option Name and Number Description Pros Cons
Option 1: Follow State/BAAQMD
requirements, continue adopted reach
codes & focus on outreach and
incentives
Introduce no new building
decarbonization policies, increase
outreach and education around
incentives
Only voluntary costs taken on by
residents and business owners
Minimal/no additional GHG reductions
Option 2: New reach codes to
encourage and/or require
electrification at time of renovation
Explore and adopt new reach codes to
require electrification at time of
renovation
City has experience with reach code
implementation
Resistance to new regulations
Option 3: Require electric equipment
upon replacement ahead of BAAQMD
Zero NOx requirements
Require electrify on replacement for
water heating and space heating,
passed ahead of the 2027 Ruling 9-6 for
water heaters and 2029 Ruling 9-4 for
space heaters
Cost effective (time of replacement) –
appliance level
Wide reach --- encompasses both
commercial and residential building
stock
Leverages federal and local monies
Prepares community and workforce for
upcoming BAAQMD requirements
More politically difficult as affects
largest amount of building owners and
may incur upfront project costs.
Option 4: Building Performance
Standards for commercial buildings
Requires standards to track and
increase energy performance across
commercial buildings
Allows for a flexible approach for
variable commercial building
equipment
Allows for future right-sizing of systems
before they electrify
Policy precedes building electrification
for cost-effectiveness reasons, but
does not guarantee electric end uses.
Option 5: Electric First Policy for City
facilities
Requires municipal facilities collect
information for gas and electric
equipment, and choose the electric
option
Allows city to lead by example
Leverages known processes like capital
improvement plan to electrify
Robust municipal incentives from CCAs
to decarbonize municipal buildings
Only impacts municipal buildings
City of San Mateo
3 Policy Option Descriptions
Option 1: Follow State/BAAQMD requirements, continue adopted reach code implementation & focus on outreach and incentives
Policy Option 1 introduces no new building decarbonization requirements. Instead, Option 1 relies on City’s adopted reach codes and identifies opportunities to incentivize the electrification process using education, outreach, and connecting the community to rebates and technical support. The City’ s adopted reach codes established electric requirements for all new construction and electric equipment and electric -readiness requirements for specific residential remodels. The City’s most recent reach codes went into effect on January 1, 2023 and will expire at the end of the code cycle on December 31, 2025.2
This option would use future staff time to readopt the same reach codes each code cycle. It would also use future staff time to promote existing programming and incentives run by partners (e.g., PCE) to assist voluntary behavior shift towards electrification , and prepare the community to electrify space and water heating end uses in advance of upcoming BAAQMD Zero NOx requirements . For example, this option could include an education campa ign to encourage homeowners to prewire for water heaters and furnaces, so they are ready to make the switch once their appliance burns out. Another example of incentivizing electrification would be waiving permit costs for electric equipment upgrades.
Other Cities:
More than 100 cities in California have adopted reach codes that require all-electric new construction.
San Mateo is among a handful of cities with reach codes for residential remodels. Many cities focus on education and outreach to encourage dec arbonization. Menlo Park and Burlingame are local examples of cities that waive permit costs for electric equipment upgrades.
Policy Pros
• Policy already in place/ has received community support • No policy-related additional costs to building owners unless they voluntarily opt-in • Allows community to prepare for upcoming BAAQMD requirements through City -led outreach and education
• Allows community to prepare for upcoming requirements through electric -readiness requirements
Policy Cons
• Limited impact and reach: The adopted reach codes do not affect the majority of existing building stock (which is unlikely to be renovated)
• Outreach and education programs are extremely variable in their effectiveness .
Investment of staff time and city resources into outreach may not achieve substantial shifts in behavior that will be required to decarbonize buildings , even through major outreach campaigns.3
2 https://www.cityofsanmateo.org/3363/Reach-Codes
3 https://www.wastedive.com/news/survey-save-the-food-campaign-successfully-raised-waste-awareness-in-first/446200/; this case study illuminates a $34 million NRDC & Ad Council ad campaign in food waste reduction that is considered a success because it raised consumer awareness (not underlying behavior change) from 51-54% during the campaign period. This illustrates the significant investment needed to effectively raise awareness, and the current lack of data behind environmental education campaigns and tangible behavior shifts.
City of San Mateo
4 Option 2: New reach codes to encourage and/or require electrification at time of renovation
Option 2 would include the evaluation of additional reach codes to encourage and/or require electrification. Reach codes are typically evaluated on a three -year cycle in alignment with the new Building Code. New reach codes options would vary depending on the updated Energy Code and Green Building Code. The City’s adopted reach codes apply to residential remodels. The City could consider a variety or reach codes that apply to different building types and/or equipment.
Other Cities:
• City of Piedmont Building Electrif ication Ordinance (Adopted 2021 and updated 2022):
Ordinance requir es existing low -rise residential building owners spending $25,000 on home improvement projects, including kitchen or both updates, to select one item from a list of energy efficient insulation or electrification fixes (renovations of $100,000 or more must include two)4
• City of Burlingame (Adopted 2022): All-electric requirements apply to qualifying alteration projects.5
Policy Pros:
• City has experience exploring, adopting and implementing reach codes • Further analysis needed, policy pros are dependent on the reach code adopted Policy Cons:
• Community and builder resistance to new regulations.
• Further analysis needed, policy cons are dependent on the reach code adopted
4 https://piedmont.ca.gov/services___departments/planning___building/about_building_/reach_code_information 5 https://www.burlingame.org/departments/building/reach_codes.php City of San Mateo
5 Option 3: Electric equipment replacement requirements for space and water heating ahead of BAAQMD requirements
The Bay Area Air Quality Management District (BAAQMD) requires zero NOx (currently the only options for Zero NOx appliances are all-electric) appliances for water heating by 2027 and space heating by 2029. Option 3 has the greatest potential to achieve GHG reductions and the goals outlined in the City’s CAP by moving faster than the 2027 and 2029 timelines outlined by BAAQMD. The City of San Mateo issues permits for space and water heating end uses that currently burn natural gas. The City could adopt and implement a local version of the BAAQMD zero N0 x threshold ahead of the current schedule to require all new space and water heating to have zero NOx emissions, and therefore, zero GHG emissions.
A ‘time of replacement’ ordinance would require the replacement of gas appliances with zero NO x versions when they fail or are voluntarily upgraded. This approach maximizes the lifespan of the existing gas appliance s. This is the most cost -effective approach for the building owner . As these appliances may function for dozens of years, it also is the timeliest option to replace gas appliances with electric-run appliances instead of locking in emissions from natural-gas appliances which could potentially continue to operate past the City’s target for carbon neutrality.
Other Cities:
Although time of replacement policies are widely considered to be the best way to reduce GHG emissions and achieve climate goals, there is not significant political precedent for establishing such a code. If passed, the City of San Mateo wou ld be the first local government in the nation to pass a time of replacement ordinance (not including BAAQMD zero NOx threshold). • City of Sacramento Existing Building Electrification Strategy [draft] has electrify on replacement for water and HVAC as a co re strategy for the Single-Unit Residential/ Small Multi-Unit Residential buildings. The strategy is currently open for public comment and has not yet been approved by City Council.
• City of Berkeley Electrification Strategy includes provisions but are not yet adopted:6 Adopt a time of replacement electrification policy for all municipal buildings Implement a time of replacement requirement for HVAC and hot water heaters once accessible funding/ financing option is available.
Policy Pros:
• Ambitious policy and opportunity to show leadership potential in Bay Area • Community and workforce prepared for 2027 and 2029 BAAQMD requirements • Upfront cost savings for water heating and homes with AC replacement with rebates • On-bill savings for homes that go all-electric
Policy Cons:
• Potential upfront costs for residents for home electrification • Not yet been passed by local government
6 Berkeley is in the early stages of Phase 1 (2021-2025) which will include pilot projects, voluntary electrification programs, tenant protections, and holistic funding and financing programs:
https://www.cityofberkeley.info/uploadedFiles/Planning_and_Development/Level_3_- _Energy_and_Sustainable_Development/Draft_Berkeley_Existing_Bldg_Electrification_Strategy_20210415.pdf City of San Mateo
6 Option 4: Building Performance Standards (BPS) for Commercial Buildings Option 4 introduces new policy standards for commercial buildings (Building Performance Standards) aimed at increasing energy efficiency, and eventually, electrifying commercial buildings as a phased efficiency-focused approach.
Commercial buildings feature frequently oversized systems for heating and cooling. Process loads also vary significantly across commercial building types . For these reasons, electrifying commercial buildings necessitates a flexible approach where building managers can first make strides towards energy efficiency before electrifying to avoid potentially increased energy bills post installation of an all-electric system.
Typically, a BPS Program is implemented in phases where buildings first report energy use for several years, then perform a retro -commissioning process to identify opportunities before finally reducing emissions below an established threshold. Energy benchmarking must be completed prior to settin g BPS thresholds. Best practices for implementing a BPS threshold that would likely be a feature of the City’s BPS policy include:
• Standards and methods for energy benchmarking : Covered Buildings (buildings and properties with buildings totaling the specified size threshold or larger) report their annual energy usage in Energy Star Portfolio Manager. This process is already mandated by AB 802, which requires energy usage reporting to the CEC for buildings over 50,000 square feet. The data collected in the benchmarking phase improves building manager and City understanding of building energy usage and will inform GHG -emissions performance standards.
• Retro-commissioning: Retro-commissioning is a process through which a building’s energy consuming systems are analyzed for efficiency and proper operation. The retro- commissioning process serves two primary purposes. The first is to uncover inefficient operations, increase energy efficiency, and save building owners money. The second is to identify cost -effective opportunities to reduce building GHG emissions through electrification and energy efficiency. Building owners of covered buildings may complete retro-commissioning as a means of improving building performance and prioritizing retrofits prior to BPS implementation. Retro-commissioning would be a voluntary approach that building managers could pursue to identify the most cost -effective and efficient investments available for their building.
Other Cities:
Building performance standards are a well-established policy mechanism that has been adopted by many local governments across the country including the City of Reno, City of Ch ula Vista, City of Seattle, City of St. Louis, City of Boston, and City of New York.7 • City of Brisbane Building Efficiency Program adopted in 2019, requires annual energy and water benchmarking and reporting, and co mpliance with Beyond requirements to show that they are high performing, or improving performance for commercial buildings 10,000 SF and larger.8
7https://www.energycodes.gov/BPS#:~:text=Building%20Performance%20Standards%20(BPS)%20are,gas%20emissions%2Dbased%20p erformance%20targets.
8 https://www.brisbaneca.org/bbep
City of San Mateo
7 • City of Denver [2021], Building Performance Standards require buildings that are 25,000 square feet or larger to submit annual benchmarking data and meet specific energy efficiency requirements based on the building’s Energy Use Intensity [EUI]. It also features phased requirements to electrify buildings with heat pumps starting in 2025.9 Policy Pros
• BPS approach addresses high degree of variability in commercial building types by focusing on performance-based requirements
• Phased approach allows for structured guidance for facility managers , uncovering cost savings over time
• Can lead to incremental reductions in energy intensity (and corresponding GHG emissions reductions) but is still not a guarantee for decarbonization as some highly efficient options still may be mixed fuel
• Reduces pressure on harder to electrify equipment types (e.g. gas stoves) through phased approach, longer runway for electric equipment to become widely available and cost - effective on-market
• Robust programming examples from Cities who have already implemented Policy Cons
• Necessitates new staff time and staff members to implement and track BPS Data tracking through BPS requires facility manager education and fluency in new software and systems, requiring new uses of staff time by facility managers • Does not guarantee all-electric end usage in short term until phased retro commissioning phase, potentially missing some appliances that could be electrified • Limited building stock reach, best suited to large commercial building s (for example buildings >25,000 sq ft)
9 https://www.denvergov.org/Government/Agencies-Departments-Offices/Agencies-Departments-Offices-Directory/Climate-Action- Sustainability-Resiliency/High-Performance-Buildings-and-Homes/Energize-Denver-Electrification-Program City of San Mateo
8 Option 5: Electric First Policy for City Facilities
This policy establishes a mechanism for local government renovations to go ‘electric first’, collecting comparative costs for mixed fuel vs. all electric renovations and new projects owned and operated by the City. This policy can also allow for technical and cost infeasibility on a project-level, as granted by Council. The main purpose of the policy is to ensure that financial and feasibility data is being collected for municipal facilities that will allow them to compare costs to electrify vs. replacing gas equipment, and opting out of electrification, instead of opting in.
Other Cities:
• City of Mountain View: Municipal Green Building Policy (2020): requires analysis of opportunities for electrification upon major upgrade of City-owned buildings, and develops a minimum of LEED Gold for new construction.10
• City of San Diego: Zero Emissions Municipal Buildings and Operations Policy ( 2022): any time a natural gas burning sys tem is being replaced, requires the new equipment to be electric.11
Policy Pros:
• Demonstrates City leadership of hard -to-electrify buildings that mirror the commercial sector
• Availability of significant local government incentives to electrify through Peninsula Clean Energy’s Gov BE and Willdan GK12 program
• Existing resources available through County of San Mateo including staff report, model code language, and case studies
Policy Cons:
• Limited reach as policy only covers municipal buildings
10 https://www.mountainview.gov/home/showpublisheddocument/790/637940944813700000 11 https://www.sandiego.gov/sites/default/files/zero_emissions_municipal_buildings_operations_policy.pdf