Title
Resolution Recommending an Ordinance to Promote Energy Efficiency and Decarbonization in New Construction and Major Renovations Through a Carbon Pollution Impact Fee (Feb. 16, 2025 Revision)
Body
WHEREAS, in November 2019, Ann Arbor City Council unanimously adopted a Climate Emergency Declaration committing to a path to carbon neutrality by the year 2030;
WHEREAS, in June 2020, City Council unanimously adopted the A2ZERO Carbon Neutrality Plan, a document that lays out seven strategies for our community to achieve carbon neutrality;
WHEREAS, buildings account for 65% of Ann Arbor’s total emissions, with direct fossil gas combustion (scope 1 emissions) currently accounting for roughly half that amount, the other half consisting of indirect electricity generation (scope 2 emissions)i;
WHEREAS, Strategy 2, Action 1 of the A2ZERO plan includes the following assumption: “All new residential and commercial buildings are designed and built to operate without the use of natural gas, reducing the increased cost associated with retrofitting existing systems.”
WHEREAS, Strategy 3, action 2 of the A2ZERO plan includes the following assumption: “All new construction from 2022 through 2030 (and beyond) is built to net zero energy standards, which includes no natural gas consumption.”
WHEREAS, since A2ZERO plan adoption and despite the plan’s stated strategies, the city has approved 32 separate development projects using gas heating, totaling 2,971,525 square feet;
WHEREAS, these buildings, collectively, when complete, will emit from fossil gas combustion approximately 25,000 metric tons CO2e emissions annually;
WHEREAS, all these buildings will require future retrofitting to replace gas HVAC with electric, at a cost many times greater than any marginal cost difference for ground-up construction, for example with air or ground source heat pumps;
WHEREAS, there exist no statutory or administrative restrictions on new construction in Ann Arbor using fossil gas infrastructure;
WHEREAS, despite a trend towards all-electric multifamily construction in Ann Arbor, gas-burning buildings continue to be proposed and to receive city approval on a regular basis, including The Village apartments phase 2 (approved Dec. 19, 2023), Washtenaw Chick Fil-A (March 21, 2024), 711 Church apartments (May 6, 2024), and the Victory Inn Hotel (June 20, 2024);
WHEREAS, greenhouse gas emissions, both direct and indirect, from these buildings are not in any way factored into construction costs, with the atmosphere serving as an unregulated open sewer for these emissions;
WHEREAS, those costs, included but not limited to loss of income, well-being, and human life and health, and mass forced migration, are borne by those most impacted by the effects of global heating, predominantly low-income individuals and residents of the global South;
WHEREAS, gas appliances, including stoves and ovens, through incomplete combustion, produce nitrogen oxides, which can impair neurological, cognitive and lung function, and formaldehyde and small particulate matter, which can trigger asthma attacks and cause airway irritation and breathing difficulties. Gas appliances can also contribute to premature deaths of individuals with heart- or lung-related conditions;
WHEREAS, a fee on carbon pollution would encourage energy efficient and fossil fuel-free new construction and major renovation, while avoiding costly future retrofits;
WHEREAS, the 2021 IECC Zero Code Appendix sets out standardized energy use intensity (EUI) estimates for various building types according to climate zone;
WHEREAS, a conversion factor of 13kg CO23 per therm (100 kBtu) from fossil gas combustion is recommended by NASA climate scientist Peter Kalmusii, taking into account upstream losses from gas extraction, flaring and leakage as well as direct emissions from combustion;
WHEREAS, the social cost of carboniii is defined as the present value of all future impacts from an additional metric ton of CO2 emissions;
WHEREAS, the EPA in 2023 set the social cost of carbon dioxide emissions at $190 per tonv, taking into account recent scientific and methodological advances in estimating the collective societal burden of emissions;
WHEREAS, for a typical new apartment building, the fee would amount to slightly more than $1,000 per year per unitv;
WHEREAS, the per unit additional upfront cost of a high efficiency heat pump system for space conditioning and water heating, versus a standard forced air high efficiency gas furnace is approximately $4,400-$4500vi;
WHEREAS, a 2022 engineering analysisvi estimated that annual utility costs for a new Ann Arbor apartment complex would run $1,974 for a high efficiency gas furnace and $2,226 for a high efficiency electric heat pump;
WHEREAS, a $1,000 per year carbon fee per unit would be an effective incentive to instead make new construction all-electric;
WHEREAS, the Michigan Zoning Enabling Act, M.C.L. 125.3101 et seq., gives broad authority to municipalities to adopt and enforce zoning regulations, with very limited exceptions;
RESOLVED, that the Ann Arbor Energy Commission recommends that City Council approve, by ordinance, modification of City Code chapter 55, article V, Administrative Bodies and Procedures, by adding the following subsection to section 5.28.D (Fees):
The following fees are authorized by this chapter and shall be by resolution of the City Council upon the recommendation of the City Administrator adding the following subsection 5 to section 5.28.D (Fees):
5.28.D The following fees are authorized by this chapter and shall be by resolution of the City Council upon the recommendation of the City Administrator.
… …
5. Carbon Pollution Impact Fee
A fee reflecting the social cost of carbon shall be assessed for all newly approved buildings of at least 20,000 square feet with a connection to natural gas lines that serve the building’s primary heating system, and existing buildings of at least 20,000 square feet replacing a primary heating system with gas infrastructure.
A. The primary heating system shall include any space conditioning, domestic hot water, cooking, appliance or process heat, but shall exclude gas-powered electric generators.
B. The fee shall be calculated based on one of two methods:
1. Annual gas consumption as reported and documented by building owner; or
2. In the absence of such reporting, total building square footage according to building type energy use, as specified by table CC103.1 of the 2021 International Energy Conservation Code Zero Code Appendix (see table).
C. Building owners shall report gas consumption annually as required by section 8:454 of chapter 104 (“Energy and Water Benchmarking”).
D. The fee shall be assessed following receipt and review of each building’s benchmarking report.
E. Fee proceeds shall be used to implement and enforce this section, and to advance the city’s building electrification goals as determined by the Office of Sustainability & Innovations.
F. A conversion factor of 13kg CO2e (CO2 equivalents) per 100 kBtu shall be applied.
G. The fee shall be in the amount of $190 per metric ton CO2e (CO2 equivalent).
E. The fee shall be paid prior to the issuance of a certificate of occupancy, then each year on or before that date, in the absence of retrofitting to eliminate the gas connection for primary heating purposes.
H. The Department of Sustainability & Innovations may grant a fee waiver if the building owner documents net zero energy consumption.
I. This ordinance shall take effect for all buildings with site plans approved after [add date], and all existing buildings with new gas infrastructure installed after that date.
Table: IECC zero code appendix, building energy use intensity by building type and climate zone:
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i The Michigan Healthy Climate Plan mandates 100% renewable generation by 2040.
ii Kalmus, Peter, “Being the Change,” New Society Publishers, 2017, p.155. “Burning a therm of natural gas emits 5.3kg CO2; including the upstream emissions bumps this amount to 6.1kg CO2. To account for leakage, and since half of the gas consumed in the US is fracked, we can use the mean of the Howarth et al. ranges (5% methane leakage). This translates into an additional 6.5kg CO2 from methane leakage per therm of natural gas, for a total emissions of 13kg CO2e per therm. The average American emits 2,000 kg CO2e per year from residential natural gas.” 100 cubic feet (1 Ccf) of natural gas equals 103,800 Btu, or 1.038 therms.
iii Experts believe the existing literature underestimates the social cost of carbon (SCC). See Moore SF et al., “Synthesis of evidence yields high social cost of carbon due to structural model variation and uncertainties,” Proceedings of the National Academy of Sciences 2024: 121 (52) e2410733121. The authors combined evidence from the literature and an expert survey, producing a 2020 SCC distribution with a mean of $283 per ton of CO2 - higher than most official government estimates, including the EPA’s.
iv In November, 2023, the EPA released “Report on the Social Cost of Greenhouse Gases.” The report shows the cost increasing to $230 in 2030. The social cost of methane is estimated at $1,600 per metric ton, and nitrous oxide at $54,000 per metric ton.
v Village apartments, phase 2 (approved Dec. 18, 2023) is a recent example. The Village will be 120 apartments, 98,904 total square feet. The “Consumers Energy All-Electric Multifamily Design Guide” (October, 2021) cites a 52.9 kBTU per square foot energy from gas consumption average for new mid-Michigan low-rise multifamily buildings. Multiplied by our 98,904 square feet gives 5,232,022 kBTUs, or 52,332 therms. Multiply by 13kg per therm greenhouse gas conversion factor yields 680 metric tons CO2e annually. At $190 per metric ton, the annual fee would be $129,200, or slightly more than $1,000 per unit. The fee could be lower in proportion to the energy efficiency of the buildings.
vi Estimated by Bob Doil, senior vice president, Robertson Homes, at 9-27-22 meeting with Matt Grocoff, Sara Hammerschmidt, Jan Culbertson, Ken Garber and Doug Selby.
vii Anthony Amadio, PE, engineer with PE Load Calcs, P.C. Page 72 of the 8-29-22 Village of Ann Arbor response letter to Ann Arbor city planner Jeff Kahan from Tim Loughrin, director of land acquisition and development for Robertson Homes.