NYC Begins Fining Buildings $268 a Ton Under Local Law 97
New York City's Department of Buildings has begun issuing the first fines under Local Law 97.
New York City's climate law for buildings has moved from threat to enforcement. This year, the Department of Buildings issued the first penalty notices under Local Law 97, charging building owners $268 per metric ton of CO₂ equivalent for emissions above the city's annual limits. The law targets the 50,000 buildings that represent 60% of the city's building area, with approximately 29,000 buildings required to file emissions reports. Understanding which buildings face penalties, how the fines are calculated, and what the good-faith compliance pathway offers has become essential for owners and boards.
Which buildings are covered and when
Local Law 97 applies to buildings exceeding 25,000 gross square feet, or multiple buildings on the same tax lot or under the same condo board management totaling over 50,000 square feet. The law treats different types of buildings separately. Most commercial and residential buildings fall under Article 320, which requires direct compliance with declining annual carbon emission caps. Affordable housing buildings and houses of worship fall under Article 321, which offers alternative paths: either completing 13 energy conservation measures or meeting tighter 2030 carbon limits.
The first compliance period began in 2024. Building owners were required to file energy reports with the Department of Buildings by May 1, 2025, certifying their 2024 emissions. This data determined their first penalty status this year. Even so, enforcement in the first year has been deliberately lenient: the Department of Buildings issued a total of $270,150 in penalties to non-compliant Article 320 properties, while non-filers were issued Notices of Deficiency and given 60 days to submit overdue reports without penalty. The filing deadline has been extended to December 31, 2025, for any building that missed the initial May deadline.
The penalty formula
The penalty calculation is straightforward in theory but can produce substantial bills in practice. For every metric ton that a building's annual emissions exceed its limit, the owner pays $268. The fine recurs each year the building remains out of compliance.
To understand the impact, consider how emissions are measured. Buildings are assigned carbon limits based on property type and size—60 different property types exist within the regulations. A 100,000-square-foot office building with a limit of 8.4 kilograms of CO₂ equivalent per square foot that emits 10.2 kilograms per square foot in a given year exceeds its cap by 1.8 kilograms per square foot. Multiplied across 100,000 square feet, that equals 180 metric tons of excess emissions. At $268 per ton, the annual penalty reaches $48,240.
The penalty applies only to emissions above the assigned limit. Buildings that meet their caps pay no penalties. However, the Department of Buildings also penalizes buildings that fail to file reports on time, though owners have a 60-day grace period to file before penalties apply.
The good-faith compliance pathway
Recognizing that some buildings need time to implement costly retrofits, the Department of Buildings established a good-faith compliance pathway to reduce or eliminate penalties for the 2024-2029 compliance period. The pathway acknowledges that building owners cannot immediately overhaul HVAC systems or electrify heating in a single year.
To qualify for relief under the good-faith pathway, a building owner must demonstrate that the building is actively working to reduce emissions through concrete steps. According to DOB's proposed rules, an owner must prove any one of four things: a fully approved permit for work necessary to achieve compliance, proof from a utility company that an electrical conversion is underway, that the building was already under its emissions limit in the previous reporting year, or a decarbonization plan showing how the building will achieve compliance by 2026 for the 2024-2029 limits and by 2030 for the tighter 2030-2034 period.
Owners pursuing the good-faith pathway must also certify that their building complies with other city energy laws, including energy benchmarking reports and mandatory lighting upgrades. A building cannot claim good-faith status while ignoring other statutory requirements. The Department of Buildings may offer mediated resolution instead of formal enforcement actions, negotiating timelines rather than assessing immediate penalties. Buildings still exceeding limits in 2030 will face the steeper emission caps set for that five-year compliance period.
“The multiple pathways—direct emissions cuts, offsets, alternative compliance plans, and good-faith efforts—reflect the law's recognition that a one-size-fits-all approach would fail across 50,000 buildings with vastly different characteristics.”
First-year compliance and what changed
The inaugural year under Local Law 97 yielded better results than anticipated. Nearly 95% of the buildings required to file were within their 2024 carbon limits, surpassing the 80% compliance rate that regulators had projected. Of 10,500 Article 320 commercial and residential properties that filed, only 470 exceeded their caps. This performance meant only a small fraction of buildings actually faced fines this year.
Building owners employed multiple strategies to achieve compliance. According to Laura Popa, DOB's deputy commissioner for sustainability, these included "lighting upgrades, envelope work, installing heat pumps, and used energy management systems." The ceiling for 2024 was generous; emissions limits tighten significantly in 2030.
The 2030-2034 compliance period will be far more stringent. Approximately 57% of properties are projected to exceed the 2030 limits based on current data. This dramatic shift means that buildings passing the 2024 test may face substantial penalties in four years unless they undertake major capital projects. The first compliance period is already prompting the Department of Buildings to examine whether its rules account for factors like occupant density and equipment lifecycle—questions that could become increasingly important for cooperatives and condominiums.
Alternative compliance methods available
While direct emissions reduction remains the primary pathway, the law permits several alternatives. Buildings may purchase offsets supporting Department of Housing Preservation and Development–qualifying electrification projects in New York City. The offset price is set at $268 per metric ton of CO₂ equivalent, the same as the penalty, and buildings can purchase offsets up to 10% of their annual emissions limit.
In the first year, 79 buildings used offsets to bridge compliance gaps, generating $1.7 million for affordable housing electrification initiatives. Six buildings claimed beneficial electrification credits for switching from fossil fuels to electric systems. Ten buildings reported using cogeneration methodology to reduce their measured emissions. Solar installations were the most commonly claimed compliance method, while renewable energy certificates were not yet available during the first compliance period.
The multiple pathways—direct emissions cuts, offsets, alternative compliance plans, and good-faith efforts—reflect the law's recognition that a one-size-fits-all approach would fail across 50,000 buildings with vastly different characteristics. Building owners who rely on alternatives rather than addressing underlying consumption and fuel sources face escalating costs when compliance deadlines sharpen.
