MPG Ratings for Buildings: The Next Wave of Energy Efficiency

My organization, the Institute for Market Transformation (IMT) is an energy efficiency think tank in Washington, D.C. and has just released a landmark report on building energy rating and disclosure requirements in U.S. cities and states.

New laws in New York City, San Francisco, Seattle, Washington, D.C., and Austin, Texas, as well as in the states of California and Washington, will affect roughly 4 billion square feet of real estate when they’re fully implemented. The requirements are being phased in starting this year. But what are they, exactly?

Rating and disclosure policies require building owners to measure their properties’ energy consumption and disclose it, either to the government or the general public (or often, both). Similar to MPG ratings on cars, building energy ratings give the market a way to compare the energy use of buildings to buy or rent. Having this information helps consumers make more informed and cost-conscious real estate investments, and helps drive up demand for energy efficient buildings and retrofits.

For the first time, tens of thousands of businesses will be able to go to a website to find energy performance data for the buildings they occupy and pay utility bills for. It’s expected that building owners will engage in healthy competition to keep and attract energy-aware tenants, and will vie to have the most energy efficient building on the block. After all, reducing energy costs is good for their bottom line, too. And since buildings account for 40 percent of America’s total energy use and carbon emissions, the environmental benefit from the policies will be substantial.

Rating and disclosure requirements are entrenched in the European Union, but as recently as five years ago, not a single policy existed in the U.S. Rich innovation by city and state policymakers has reshaped the landscape. The policies that have been enacted will affect offices, malls, warehouses, government buildings, hospitals, and apartment buildings nationwide.

Many more cities and states in the U.S. are considering these policies, and they are tackling some big, complex issues that blur the boundaries between the real estate, utility, and public sectors. They are doing so under severe budget constraints and, in many cases, a challenging political atmosphere. Moreover, they are the first. There is no blueprint for how to do this. That is why this report is important.

Energy Collective