In 2022, the Maryland General Assembly enacted the Climate Solutions Now Act of 2022 (CSNA). Included in this law is a requirement for the state to enact Building Energy Performance Standards (BEPS). Per the CSNA, these standards should be designed to help the state achieve the goal of net-zero building emissions by 2040. Since the passing of the law, the Maryland Department of the Environment (MDE) have been formulating language and generating versions of the regulations which they plan to enact this year.
MDE reissued these proposed rules on September 6, 2024. These proposed regulations would limit the amount of greenhouse gas (GHG) emissions allowed from buildings 35,000 square feet or larger, create new reporting requirements for building owners, and establish reduction targets that all building owners will be REQUIRED to achieve, or face alternative compliance fees. If your building falls into this category, ultimately you may be required to change your whole building’s energy source(s) to electricity to comply or face significant penalties from the state.
There are a number of provisions within the current proposed draft regulations that are of significant concern and should be reviewed by our members with buildings greater than 35,000sf. Building owners with plans to expand operations should also review the proposed standards. The regulations as drafted will apply to all existing and new construction projects in the state.
These new regulations will impose significant new requirements on building owners, and it is projected most covered buildings will require substantial renovations and upgrades to comply with the new requirements. Owners of the oldest buildings without an exemption will be the most seriously affected. Even on-site diesel generators will be factored into the BEPS reporting and emissions reduction targets.
Similar regulations by local governments within Maryland have historically carved out exemptions for hard to decarbonize industries, such as manufacturing. The proposed draft regulations have significantly narrowed the definition of manufacturing, and as such, member companies are encouraged to read the draft regulations and determine if they are now covered.
According to the MDE’s “Estimate of Economic Impact” to building owners on December 2023 and September 6, 2024, all covered buildings combined will spend an estimated $8.8 BILLON on efficiency measures and $6.4 BILLION on electrification measures to implement the BEPS regulations. Notably, MDE has not updated economic models based on new electric rates from the most recent PJM auction. Costs to comply with BEPS as proposed, added to the increased cost companies will face in increased electric rates, indicates companies will be facing significant hikes in energy utilization and charges.
Regulation Summary
Buildings Impacted
The proposed rules apply to “Covered Buildings” that are 35,000 square feet or larger, excluding: Historic buildings; public and nonpublic elementary and secondary schools; manufacturing buildings (please see the new definition of manufacturing buildings); buildings owned by the Federal Government; and agricultural buildings. However, under the proposed regulations, building owners must file for an exemption to the MDE.
Economic Impact
Between 2025 and 2040, if a building does not meet the BEPS standards, owners will be required to implement energy efficiency measures and/or electrification measures or pay alternative compliance fees. Non-compliance may result in significant administrative and civil fines.
Reporting Requirements
Beginning in 2025, building owners must collect and enter all required benchmarking information for the previous calendar year into a benchmarking tool. A benchmarking report shall be submitted to the MDE by June 1st of each year.
Performance Standards
The proposed regulation has interim net direct emission reduction standards/goals (for years 2030-34 and 2035-39) and final (2040 and beyond) net direct emissions reduction standards/goals of 0 (zero) emissions. These goals are based on your property type and are listed in section 26.28.03 of the document. Please use the document link below to access the table in section 26.28.03 to determine what standard/goal you may need to reach to be in compliance and avoid any penalties. You can also simply Google “26.28.03 Performance Standards and Compliance Demonstration” and then search on “Table 1”.
https://mgaleg.maryland.gov/pubs/committee/AELR/23-264P-Regulation.pdf
Alternative Compliance
For every metric ton of net direct emissions in excess of the net direct emissions standard in a given calendar year, the applicable alternative compliance fees shall be:
- $230 per metric ton in excess of the CO2e in 2020 dollars, adjusted for inflation, beginning in 2030;
- $270 per metric ton in excess of the CO2e in 2020 dollars, adjusted for inflation, beginning in 2040;
- The fee rate increases by $4 per metric ton of CO2e per calendar year in 2020 dollars, adjusted for inflation, in each calendar year following 2040.
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