This is Blog #4 on this this topic that will look at two issues.  First, where is the line between what is preempted and what is not under the Energy Policy and Conservation Act (EPCA)? This will look at rules of thumb and focus on examples at the state and local level.  Second, when local, state, or federal authority to regulate emissions from appliances is used, how is it harmonized with the EPCA and are there potential conflicts?  This will look at what authority exists, how it has been used, and discuss the legislative record of the preemption language of the EPCA to discuss how it may interact with the Clean Air Act and state and local authority over air pollution and greenhouse gas (GHG) emissions from appliances. It will examine authority and approaches used by the City of New York, State of California, local air district regulators in California, and two local governments in California.

You can access the Berkeley Decision blog, EPCA Blog # 1 on the lawsuit against the City of Denver and State of Colorado, EPCA Blog #2 on the building performance standards adopted by the City of Denver and State of Colorado, and EPCA Blog #3 on the what the limited case law can tell us about the EPCA and to extent of its preemption.

You can access all of EPIC’s blogs here.

Where does EPCA Preemption End for Regulated Appliances in New and Existing Buildings?

There are two areas of regulating appliances in buildings that are relevant to new and existing buildings. For existing buildings, appliance standards are based on U.S. DOE approved standards for covered products and any state approved standard for non-covered products (a list of covered products, deadlines, and additional regulations of states can be found here) except for where the U.S. DOE has granted a waiver to federal preemption to a state under 42 U.S.C. § 6297 (d).  U.S. DOE is mandated to update is standards generally every 8 years but there is sometimes a lag in adopting new standards.

For new construction, state and local government energy use and efficiency regulations are subject to the language of 42 U.S.C. § 6297 (f)(3). 42 U.S.C. § 6297 (f)(3) creates a seven-part test that must be met to allow the local regulation to not be superseded, and therefore preempted, by the EPCA. The seven-part test is stated below:

1. Code allows a builder to meet energy consumption or conservation objective for a building by selecting items whose combined energy efficiencies meet the objective.
2. The code does not require that the covered product have an energy efficiency exceeding the applicable energy conservation standard established in or prescribed under section 6295 of this title, except that the required efficiency may exceed such standard up to the level required by a regulation of that State for which the Secretary has issued a rule granting a waiver under subsection (d).
3. The credit to the energy consumption or conservation objective allowed by the code for installing covered products having energy efficiencies exceeding such energy conservation standard established in or prescribed under section 6295 of this title or the efficiency level required in a State regulation referred to in subparagraph (B) is on a one-for-one equivalent energy use or equivalent cost basis.
4. If the code uses one or more baseline building designs against which all submitted building designs are to be evaluated and such baseline building designs contain a covered product subject to an energy conservation standard established in or prescribed under section 6295 of this title, the baseline building designs are based on the efficiency level for such covered product which meets but does not exceed such standard or the efficiency level required by a regulation of that State for which the Secretary has issued a rule granting a waiver under subsection (d).
5. If the code sets forth one or more optional combinations of items which meet the energy consumption or conservation objective, for every combination which includes a covered product the efficiency of which exceeds either standard or level referred to in subparagraph (D), there also shall be at least one combination which includes such covered product the efficiency of which does not exceed such standard or level by more than 5 percent, except that at least one combination shall include such covered product the efficiency of which meets but does not exceed such standard.
6. The energy consumption or conservation objective is specified in terms of an estimated total consumption of energy (which may be calculated from energy loss- or gain-based codes) utilizing an equivalent amount of energy (which may be specified in units of energy or its equivalent cost).
7. The estimated energy use of any covered product permitted or required in the code, or used in calculating the objective, is determined using the applicable test procedures prescribed under section 6293 of this title, except that the State may permit the estimated energy use calculation to be adjusted to reflect the conditions of the areas where the code is being applied if such adjustment is based on the use of the applicable test procedures prescribed under section 6293 of this title or other technically accurate documented procedure.

From these requirements, there are several rules of thumbs to require more stringent standards for energy use of buildings, either through performance standards, prescriptive requirements, or another mechanism. First, granting builder discretion in how to comply is the authorized pathway for new construction. This favors the use of multiple compliance pathways, including the voluntary use of covered products that exceed federal energy conservation standards. It is, for example, common to use a performance or prescriptive pathway for compliance depending on whether the whole building is the focus or specific end-uses like space or water heating.

Second, there must be at least one option to comply by using an applicable covered product that meets but does not exceed the applicable federal energy conservation standard except for where a waiver exists for that covered product. Based on the 9^th Circuit Berkeley decision, there must be at least one natural gas option for applicable covered products where compliance does not require exceeding the federal energy conservation standard. Outside of the 9^th circuit and the pending current litigation in Colorado and New York, it is arguable that all-electric requirements are viable despite prohibiting compliance with a natural gas fueled covered product assuming that the applicable all-electric regulation does not exceed the applicable federal energy conservation standard for the electric covered product. This is based on concluding that an all-electric option which meets federal energy conservation standards follows the language 42 U.S.C. § 6297 (f)(3)(E).

Third, the credit for the energy consumption or conservation objective for installing covered products that exceed federal applicable energy conservation is on a one-for-one equivalent energy use or equivalent cost basis. This allows local and state governments to use either energy or cost as the relevant measure for compliance and comparison. California for example, uses energy as the primary calculation but also a cost-effectiveness calculation under state law while most states use one or the other depending on their policy priority. Fourth, the baseline building design contains a covered appliance that does not exceed federal applicable energy conservation standards. For examples, California’s most recent updated Title 24 Energy Code uses electric heat pumps that meet federal energy conservation standards for space and water heating in the baseline building design. Because the baseline building design uses the federally approved heat pump standard, it meets 42 U.S.C. § 6297 (f)(3)(D).

From these rules of thumbs, there are long used new construction buildings codes that require less energy use and more energy efficiency over time like California’s Title 24. Title 24, however, is not unlimited in its ability to set more stringent standards given the 9^th Circuit Berkeley decision. Consequently, there is a threshold issue under which the state and local governments are limited in banning natural gas covered products through heightened standards. This threshold has not been breached by the State of California but it is clear that Title 24 is nearing this threshold in the not distant future. Other state governments in the 9^th Circuit reflect this reality, namely the State of Washington, which pulled back its space and water heat pump mandate in 2023. Instead, states are using baselines and incentives funded at the state or with federal dollars, such as Oregon’s Heat Pump Incentive and California’s equity oriented TECH program, to drive electrification in the 9^th Circuit.

Consequently, in new construction it appears that the limit of EPCA preemption is specific to the expressed language of the EPCA where the type of energy use (e.g., natural gas) is relevant in the 9^th Circuit while the ability to require all-electric remains viable, pending the outcome of several district court cases and any appeals related to the litigation against the City of Denver, State of Colorado, City of New York, and State of New York. In existing buildings, requiring covered products in existing buildings that exceed federal energy conservation standards is preempted making existing buildings the hardest area to increase efficiency and decrease emissions.

The following will discuss other authority that is applicable to regulating emissions from buildings.

Regulating Building Level Emissions: How does the EPCA harmonize with the Clean Air Act authority delegated to state and local governments, existing state authority over GHG emissions and air quality, and local government authority over GHG and air quality

What is clear from the EPCA is that it was never intended to regulate or restrict the regulation of GHGs, toxics, or criteria pollutants at the federal, state, or local level. Because energy use is determinative of GHG emissions, where GHG regulation requires the use of a covered product that exceeds federal energy conservation standard there may be EPCA preemption. This suggests that there is a threshold that causes EPCA preemption in the regulation of GHGs.

In this area, the City of New York adopted a GHG specific emission limit for buildings under Local Law 97 that applies to buildings that exceed 25,000 square feet to reduce emissions by 40% by 2030 and net zero by 2050. Buildings are complying by reducing emissions through electrification and the use of building level carbon capture and storage of natural gas emissions. This suggests that this type of regulation, where it continues to allow natural gas covered products, does not create a EPCA preemption issue.

Additionally, the City of New York adopted Local Law 154 to require most new buildings over to reduce GHG, toxics, and criteria pollutants by prohibiting the onsite combustion of fuels that emit more than 25 kg CO2/MMBtu with applicability as follows:

• January 1, 2024: Group R-3 (1- and 2-family homes), and all occupancies less than 7 stories tall (excluding Service HW)
• December 31, 2024: NYC School Construction Authority projects
• December 31, 2025: Affordable Housing* less than 7-stories tall (excluding Service HW)
• July 2, 2027: All occupancies (includes Service HW)
• December 31, 2027: Affordable Housing* 7-stories or taller (includes Service HW)

This is the crux of the EPCA preemption litigation filed against the City of New York (See Association of Contracting Plumbers of the City of New York v. City of New York, 1:23-CV-11292, S.D.N.Y, Filed 12/29/23). The question is whether the 25 kg CO2/MMBtu limit equate to mandating a covered product for space and water heating that exceeds federal energy conservation standards. If it requires all-electric construction, then it may be problematic if a New York federal district court is persuaded by the same reasoning used in the 9^th Circuit Berkeley decision with regards to express preemption.

This case will need to determine whether the GHG emission limit is prohibited under the EPCA. To reach this conclusion, it will need to use similar reasoning to the 9^th Circuit that the EPCA preempts both direct and indirect regulation of covered products and their energy use if such regulations require the covered product to exceed the federal energy conservation standard. Because this limit likely requires all-electric construction, it may be preempted by the EPCA. However, the arguments differ from the Berkeley case because this is a GHG emission regulation and not a prohibition of natural gas plumbing nor is it specific to energy use. Additionally, there is no legislative history in the EPCA legislature record that addresses the regulation of GHG emissions in buildings.

At the state level, the State of California 2022 State Implementation Plan (SIP) calls for zero emission space and water heating regulation with implementation beginning in 2030. The authority for this future regulation is state authority that is independent but works in tandem with delegated federal Clean Air Act authority over toxics and criteria pollutants. Unlike the ECPA, the Clean Air Act does not preempt state authority but instead sets minimum standards for air quality. States and local governments can and do go beyond the Clean Air Act to set higher standards or to act where the state or local area is out of compliance with federal ambient air quality standards. There is nothing new or controversial here with many California air districts having set stricter NOx emission standards for water heaters for years or decades (See San Diego Air Pollution Control District Rule 69.5.1 Natural Gas-Fired Water Heaters from 2015).

In California, large parts of the state are out of compliance with ozone (O₃) and PM 2.5 standards. Because the combustion of natural gas results in the production of oxides of nitrogen (NOx) and NOx is a precursor for O₃, the state and local air districts continue to limit NOx emissions from buildings, including the setting of Zero NOx standards by the Bay Area Air Quality Management District Rule 9-4 and 9-6 for residential and commercial space and water heaters and South Coast Air Quality Management District Rule 1146.2 for residential and commercial water heaters. These rules are also in response to the inability to control transportation emissions that increase O₃ in these areas leaving little choice but to focus on other emission causes of ozone in the regions.

California air quality law authorizes these actions within the federalism framework of the Clean Air Act to provide additional tools for local and regional governments to regulate emissions from nonvehicle sources. California law authorizes local or regional authorities to adopt their own, stricter air quality rules under Health and Safety Code §§ 39002 and 41508 for nonvehicle sources such as buildings. Under this authority, there are two local governments acting to eliminate NOx emissions from buildings located in the Bay Area Air Quality Management District. The City of Los Altos Hills adopted on February 15, 2024, a Zero-NOx standard for new single family and multifamily construction as well as applicable additions and alterations (Access the Staff Report  and Ordinance). The City of Campbell adopted on August 20, 2024, a Zero-NOx standard for new residential, multifamily, and nonresidential construction as well as applicable additions or alterations (Access the Staff Report and Ordinance). (Access the California Energy Codes & Standards Adopted Ordinance Tracker here and search for Emission Based Ordinances)

The return of the Trump administration may create some resistance to these rules at the federal level, but the zero-emission space and water heating regulations are not dependent on federal delegated authority or U.S. EPA approval. Federal authority also does not create preemption over state and local action on air quality regulation. Additionally, there is no conflict between the EPCA and the Clean Air Act nor did Congress intend or adopt language that extends EPCA preemption of state and local air quality regulatory authority.  Nearly fifty years of Congressional legislation, federal regulation, state law, state regulation, and federal and state case law support the conclusion that air quality authority does not concern energy efficiency or energy use for EPCA purposes. However, this may change with the Republic Party controlling Congress and the Presidency given the dramatic regulatory changes proposed under the Trump platform. If implemented, these changes will alter or erase the regulatory mandates of the past fifty years. Whether this curtails state and local authority over clean air authority will depend on what legislation is introduced and adopted in the next two years.