The era of voluntary energy efficiency is ending. Across the United States, cities and states are implementing building performance standards that mandate emissions reductions with substantial financial penalties for non-compliance. These aren’t aspirational guidelines or future possibilities. They’re active regulations with real fines that started in 2024 and 2025.

If you own or manage commercial real estate, particularly large buildings over 25,000 or 50,000 square feet, these regulations likely already apply to your properties or will soon. The financial stakes are significant. Buildings that miss compliance targets face penalties ranging from hundreds to millions of dollars annually. Asset values are already being affected as buyers discount prices to account for potential fines.

The good news is that ENERGY STAR certification provides a proven pathway to compliance. Buildings that have maintained strong ENERGY STAR scores are far better positioned to meet these new requirements than properties that ignored energy performance. Understanding where these regulations exist, what they require, and how ENERGY STAR helps you comply is now essential to protecting asset value.

New York City: The Biggest and Most Aggressive

New York City’s Local Law 97, enacted in 2019 as part of the Climate Mobilization Act, represents the most ambitious building emissions law globally. The law applies to buildings over 25,000 square feet, covering properties that account for roughly 70% of building emissions in the city.

Local Law 97 establishes emissions intensity limits starting in 2024, with limits tightening every five years through 2050. Buildings must pay $268 annually for every metric ton of CO2 by which they exceed the emissions limits. For context, a sample office building of 2.3 million square feet could face over $50,000 in annual penalties based on 2019 emissions levels with modest improvements through KODE OS. Without improvements, penalties escalate dramatically.

The compliance periods break down as follows. The initial period from 2024-2029 affects approximately 11-20% of buildings if they take no action to improve performance. The second period from 2030-2034 flips those numbers. According to city estimates, approximately 63-75% of buildings will not comply with 2030 emission limits if owners take no action. The third period runs 2035-2039, and the fourth period covers 2040-2049, with limits converging at 1.4kg CO2e per square foot by 2050.

The first compliance report was due May 1, 2025, reflecting emissions in calendar year 2024. Buildings that exceeded their limits began incurring penalties immediately. The city does allow a 60-day grace period to file by June 30, but penalties accrue retroactively for each month of delay.

Buildings can demonstrate “good faith effort” to secure a two-year extension of the first deadline, but this requires substantial work including filing all required reports, complying with Local Law 84 benchmarking and Local Law 88 lighting upgrades and sub-metering, and providing a decarbonization plan by May 1, 2025, that brings the building into compliance no later than 2026.

Local Law 97 is already affecting real estate transactions. Asset values of NYC buildings are being discounted to cover or mitigate emissions fines. High-performing buildings with low emissions intensities and robust decarbonization plans are more attractive to investors, lenders, and tenants seeking to align with climate and ESG goals.

Colorado: Statewide Standards

Colorado adopted building performance standards through House Bill 21-1286 in 2021, with rules finalized by the Air Quality Control Commission in October 2023. The state’s Building Performance Colorado program applies to commercial, multifamily, and public buildings 50,000 square feet or larger, covering approximately 8,000 buildings statewide.

The program aims to reduce greenhouse gas emissions from covered buildings by 7% by 2026 and 20% by 2030 compared to 2021 baseline levels. These targets support Colorado’s broader goal of reducing statewide greenhouse gas emissions 50% by 2030 and 90% by 2050 compared to 2005 levels.

Building owners must submit annual benchmarking reports to the Colorado Energy Office by June 1 each year. The first enforcement period began in 2024. Penalties for failing to submit benchmarking reports start at $500 for the first violation and increase to $2,000 per year for each subsequent violation.

Performance standards take effect in 2026 and 2030. Buildings that fail to meet performance targets face fines up to $2,000 for a first violation and up to $5,000 per month for each subsequent violation. These fines apply monthly until the building owner complies. Building owners can request adjusted timelines or performance target adjustments, but applications must be submitted by December 31, 2025, for the 2026 target and by December 31, 2029, for the 2030 target.

Colorado offers multiple compliance pathways. The energy efficiency pathway requires percentage reductions in energy or GHG emissions of 5% by 2026 and 11% by 2030 for buildings starting below target thresholds. The renewable energy pathway allows buildings to demonstrate compliance through renewable energy credits. The customer-owned renewable pathway permits buildings to use RECs from their own distributed generation systems. The building electrification pathway focuses on substituting fossil fuel heating with heat pump technology.

Denver has its own additional requirements through Energize Denver, Bill 21-1310, passed in 2021. Denver’s ordinance uses a “trajectory approach” for buildings 25,000 square feet or larger, calculating individual interim targets for 2024 and 2027 based on each building’s 2019 baseline performance and its path to the 2030 standard. This approach gives owners certainty about where performance needs to be while preventing unnecessary delays. Denver includes fines between $0.30 to $0.70 per kBtu above performance targets for buildings that don’t meet prescribed targets in 2025.

Importantly, the state program does not supersede local requirements. Building owners in Denver must comply with both state and city standards.

Other Jurisdictions Implementing Standards

Boston adopted building emissions performance standards requiring buildings over 20,000 square feet to meet emissions intensity limits on a five-year cycle starting in 2025. Washington State has implemented the Clean Buildings Act requiring buildings over 50,000 square feet to meet energy use intensity targets or conduct energy audits and implement efficiency measures. Maryland, Massachusetts, and several California jurisdictions including Chula Vista have enacted or are developing building performance standards.

The pattern is clear. Building performance standards are spreading rapidly across the United States. More than 30 jurisdictions have adopted or are developing these policies. The trend shows no signs of slowing as cities and states pursue aggressive climate goals.

How ENERGY STAR Supports Compliance

Buildings with ENERGY STAR certification are substantially better positioned to meet building performance standards for several reasons.

First, ENERGY STAR certification demonstrates that a building already performs in the top 25% nationally for energy efficiency. This head start means ENERGY STAR buildings often meet initial compliance period requirements without additional work. According to New York City data, 89% of buildings are now on track to meet 2024 emissions reduction targets, and many of these are buildings that already maintained strong energy performance.

Second, ENERGY STAR Portfolio Manager serves as the foundation for most building performance standard programs. New York City bases Local Law 97 emissions limits on property types from Portfolio Manager. Colorado requires annual benchmarking reports through Portfolio Manager. Denver tracks compliance trajectories using Portfolio Manager. Buildings already benchmarking through Portfolio Manager have the data infrastructure needed for compliance reporting.

Third, ENERGY STAR certification requires annual reverification, which means buildings maintain energy performance year over year. This prevents the operational drift that causes buildings to gradually become less efficient. Buildings that let performance slide face much more expensive capital improvements when regulations force action.

Fourth, the verification process for ENERGY STAR certification by Professional Engineers or Registered Architects aligns with verification requirements in building performance standards. The discipline of annual third-party verification ensures data accuracy and building operations meet industry standards.

Fifth, ENERGY STAR buildings have typically already implemented many of the efficiency measures needed to meet performance standards: LED lighting, HVAC optimization, building automation systems, and envelope improvements. These investments don’t need to happen under regulatory pressure with compressed timelines and premium costs.

The Cost of Waiting

Property owners who delayed energy efficiency investments are now facing compressed timelines and substantial capital requirements. A deep energy retrofit can cost $25 to $150 per square foot according to the Rocky Mountain Institute. For a 100,000 square foot building, that represents $2.5 million to $15 million in capital expenditure, often needed within months rather than years to meet compliance deadlines.

These costs come on top of ongoing penalties. A New York building exceeding its emissions limit by 100 metric tons pays $26,800 annually. Over a 10-year hold period, that’s $268,000 in penalties, plus the capital cost of eventual improvements. Buildings that waited are paying twice—first in fines, then in rushed retrofits.

The regulatory environment continues tightening. The compliance periods that seem manageable today become substantially more stringent in 2030 and beyond. Buildings barely meeting 2024-2029 targets in New York will likely exceed 2030-2034 limits without significant additional improvements. Colorado buildings meeting 7% reductions by 2026 must reach 20% reductions by 2030.

Taking Action Now

Property owners should evaluate their current position relative to applicable building performance standards. Run your buildings through compliance calculators to understand your exposure. Buildings already scoring 75 or higher on ENERGY STAR have a significant advantage. Buildings scoring below 50 need immediate attention.

Develop decarbonization plans that map improvement timelines to compliance periods. Don’t wait for penalty notices to force action. Buildings that plan strategically can phase improvements over multiple years, align upgrades with planned renovations, and capture utility incentives that may not be available during emergency compliance situations.

For buildings not yet benchmarking, start immediately. You cannot improve what you don’t measure. For buildings benchmarking but not yet certified, pursue certification if your score is near 75. The credential provides value in leasing and sales while positioning you for compliance.

For buildings well below certification thresholds, prioritize improvements that move the needle on measured energy consumption: lighting retrofits with controls, HVAC optimization, and building automation systems. These deliver the best return on investment while improving compliance position.

The building performance standards era has arrived. Property owners who invested in energy efficiency and maintained ENERGY STAR certification are ahead. Those who waited now face uncomfortable choices between significant capital expenditure and substantial ongoing penalties. The gap between high-performing and poor-performing buildings will only widen as regulations tighten through 2030 and beyond.

ENERGY STAR certification isn’t just about a label anymore. It’s about regulatory compliance, penalty avoidance, and asset protection in an environment where building performance is becoming mandatory rather than voluntary.

Thank you to our ENERGY STAR Month sponsor Baker Engineering.

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