The New York Carbon City Property Tax Abatement Act (S5450/ A777)

Summary

The Carbon City PTA is legislation that will incentivize commercial and industrial building owners in NYC to adopt building- integrated carbontech solutions by accessing a multi-year property tax abatement that offsets capital costs of installation.

Main Policy Components

1. INCENTIVIZES BUILDING-INTEGRATED CARBONTECH IN NYC. The Carbon City PTA would establish a property tax credit (abatement) for commercial buildings that install qualified carbontech solutions onsite within the five boroughs. The maximum abatement would cover up to 20% of the capital costs of installation. 

2. LIMITS FISCAL IMPACT WITH SUNSET & CAP. The Carbon City PTA will expire in 2027 unless reauthorized through subsequent legislation. The maximum abatement that can be availed for a single property is $800,000, divided into annual increments over an 8 year period.

3. GRANTS NYC BROAD AUTHORITY TO DETERMINE ELIGIBILITY AND RULE-MAKING. NYC’s net-zero x 2050 commitment made into law in 2019 confirmed the City’s position as a global climate leader. The Carbon City PTA would further strengthen this position, while also ensuring that the City has authority to implement PTA rules and conditions that strengthen and advance existing climate objectives.

4. ENVIRONMENTAL JUSTICE PROVISIONS LIMIT ELIGIBILITY TERMS FOR CERTAIN CARBONTECH APPLICATIONS. PTA eligibility for carbontech applications that capture emissions from natural gas boilers onsite would be limited to properties located outside of designated NYC Environmental Justice Areas, and to properties in which natural gas boilers were placed in service between 2014 – 2019. 

Politics Note

The Carbon City Property Tax Abatement Act is first of kind legislation in the world, and the only proposal at the time of introduction that specifically aimed to support urban, property-integrated carbon removal, capture and utilization. While the eligible jurisdiction for the incentive proposed would be limited to the five boroughs of New York City, making it in effect a local policy, modifications to local property taxes of the sort proposed must be legislated at the state level through the New York State Legislature, and signed into law by the Governor.

The legislation was introduced in the New York State Assembly in January 2022 by Assemblymember Robert Carroll (Brooklyn), and shortly after in the State Senate by State Senator Robert Jackson (Manhattan). During the 2022 session, the legislation picked up 4 co-sponsors in the State Senate and passed through the Senate Cities Committee, but did not advance beyond the Finance Committee before the end of session. The Assembly bill did not advance through any committees.

A number of context-specific hooks were in place to give momentum and justification to this proposal, and some of these factors have only gained in potency since the bill was introduced, creating a broader lane for passage in and when the bill is introduced. These include:

1. A strong precedent in New York City for establishing property tax abatements to incentivize a whole host of private pro-social and environmental investments in the built environment. Most notably, since the early 2000s New York City has offered PTAs for rooftop solar, battery storage systems and green roofs. This legislation directly leverages the core design and terms of these earlier, successful incentives, as well as existing familiarity and generally high levels of support for such a mechanism among legislators.

2. A nascent but dynamic local carbontech sector that is distinguished by modular, building-scale solutions, can be mobilized to make the case and attest to the potential impact of the policy on economic development grounds.  These include companies such as Aircela, Air Company, CarbonQuest, Cedar Carbon, Global Thermostat, Thalo Labs, and Vycarb. Additionally, New York is home to two world-class carbontech accelerators, the Carbon to Value Initiative and Activate New York; and headquarters or an executive or operational presence of six major carbon removal advocacy or industry organizations organizations – Carbon180, the Carbon Removal Alliance, the Carbon Business Council, the Direct Air Capture Coalition, OpenAir and RMI. Columbia University is major research hub for carbon removal research, both in the technology and policy domains. New York State’s publicly funded Carbontech Development Initiative has a strong operating presence in the Manhattan office of the New York State Energy Research and Development Initiative (NYSERDA).

3. A local net-zero law on the books, which includes an aggressive building decarbonization component (Local Law 97). The law has led to substantial carbon accounting across New York’s building stock, and has revealed a clear need for carbontech to augment decarbonization pathways to achieve net zero. LL97’s compliance mandate includes fines for buildings that do not achieve increasingly stringent carbon reduction targets. However, post COVID, the appetite to be overly punitive for struggling commercial properties among the current Mayor has been limited. By including support for carbontech as an eligible technology type for compliance, another option can be introduced to building owners. Paired with a property-tax abatement to defray investment costs, emerging building carbontech solutions could provide non-compliant buildings that have exhausted affordable decarbonization investments with a more economically appealing option than a fine.

Replicability & Adaptation Potential

This form of policy is highly replicable in most major urban areas in the United States. However, the range of supporting background conditions present in New York City (listed above) are relatively unique. Other metros where conditions are also conducive include Boston, the San Francisco Bay Area, Seattle, and Denver.