Local Law 97 Compliance: NYSERDA Opens Tier 4 REC Sales to NYC Building Owners

Annual sale opens August 19, 2026, giving eligible owners a way to offset grid electricity emissions ahead of upcoming reporting periods

New York City’s Local Law 97 (LL97) was enacted as part of the city’s Climate Mobilization Act of 2019 and is one of the nation’s most ambitious building decarbonization programs. Codified in the New York City Administrative Code and implemented through regulations promulgated by the New York City Department of Buildings (DOB), LL97 establishes greenhouse gas emissions limits for most buildings greater than 25,000 square feet. It requires annual emissions reporting by covered properties. Building owners whose properties exceed applicable emissions limits may be subject to significant civil penalties ranging from tens of thousands to several million dollars annually, depending on building size, energy consumption, and the extent of noncompliance.

To comply with LL97, many New York City building owners have pursued energy-efficiency upgrades, electrification projects, HVAC modernization, building envelope improvements, and other emissions-reduction measures.  A significant new compliance option becomes available on August 19, 2026, when the New York State Energy Research and Development Authority (NYSERDA) opens its annual sale of Tier 4 Renewable Energy Credits (RECs). Eligible building owners may use these credits to reduce certain reportable emissions under LL97 and provide an additional compliance pathway for properties subject to the law.

Tier 4 Renewable Energy Credits and Local Law 97 Compliance

Tier 4 RECs are associated with renewable electricity delivered directly into New York City through the Champlain Hudson Power Express (CHPE) transmission line. According to NYSERDA, each REC represents the environmental attributes associated with one megawatt-hour of renewable electricity delivered into New York City (NYISO Zone J). The credits are verified and tracked through the New York Generation Attribute Tracking System (NYGATS).

Under DOB guidance, eligible Tier 4 RECs may be used to offset emissions attributable to electricity purchased from the grid when calculating compliance with LL97 emissions limits. As a result, the credits may provide valuable flexibility for owners whose buildings face near-term compliance challenges or whose emissions-reduction projects cannot be completed before upcoming reporting periods.

The availability of Tier 4 RECs may be especially beneficial for owners engaged in multi-year capital planning initiatives. Electrification projects, HVAC replacements, major energy-efficiency retrofits, and other building modernization efforts often require substantial planning, permitting, financing, and construction timelines. REC purchases may help bridge the gap while these longer-term improvements are being implemented. NYSERDA specifically identifies LL97 compliance as one of the intended uses of the Tier 4 REC program.

Important Limitations on REC Usage

Building owners should recognize that Tier 4 RECs are not a complete substitute for building-level decarbonization. DOB guidance expressly limits REC usage to emissions associated with utility-supplied electricity. The credits may not be used to offset on-site emissions from fossil fuel combustion, including emissions from natural gas boilers, fuel oil-fired heating systems, or other on-site combustion equipment. Consequently, many buildings will continue to require physical emissions-reduction measures to achieve long-term compliance, particularly as more stringent emissions limits take effect beginning in 2030.

Owners should also carefully evaluate how REC purchases interact with their chosen compliance pathway. According to DOB guidance, buildings that use the decarbonization-plan-based “good faith effort” pathway during the initial compliance period through 2029 may not use RECs for compliance purposes. Property owners should therefore review applicable regulatory requirements before incorporating RECs into their compliance strategy.

August 19 Sale and Participation Requirements

The August 19, 2026 offering represents NYSERDA’s annual summer pre-sale of Tier 4 RECs for the 2027 compliance year. To participate, interested entities must obtain an NYSERDA customer number, establish an account with NYGATS, and register as participants in the REC sales program. NYSERDA indicates that the program is available to a wide range of participants, including commercial property owners, cooperatives, condominiums, municipalities, and other organizations seeking compliance and sustainability benefits.

NYSERDA also notes that additional spring re-sale opportunities may occur if sufficient inventory remains available and market conditions warrant additional offerings. Building owners evaluating the use of Tier 4 RECs should consider conducting an early review of their projected emissions profile, anticipated LL97 obligations, and long-term capital planning objectives to determine whether REC purchases can play a role in a broader compliance strategy.

Conclusion

Scarinci Hollenbeck’s Environmental Law Group is monitoring the rollout of NYSERDA’s Tier 4 REC program and its evolving role within the LL97 compliance framework. Building owners considering REC purchases as part of a broader decarbonization strategy, or seeking to evaluate their projected emissions exposure ahead of upcoming reporting periods, should contact Daniel T. McKillop or their Scarinci Hollenbeck attorney.