Avoiding Albuquerque: How Incentive-Based Green Building Codes May Regulate Appliance Efficiency Standards and Avoid Federal Preemption

By: Elliot Harvey Schatmeier

19th December 2012



The rise in building energy consumption is a growing problem.  Today, buildings make up roughly 40% of total U.S. energy consumption.[1]  Some state and local legislatures have responded by enacting residential and commercial green building codes, which they hope will make buildings more sustainable and more energy efficient.[2]  Recently, however, a federal court voided the City of Albuquerque’s green building code because federal law preempted its appliance efficiency standards.[3]  This is problematic because energy efficient appliances are a key component to energy use reduction strategies in green building codes.[4]  Further, current federal standards are inadequate because they are out-of-date[5] and do not address regional climate diversity.[6]  Federal reform is also unlikely.[7]  Accordingly, this field report will explore the limits the Albuquerque decision places on non-federal regulation and will argue that market-based incentive codes (MBI Codes) can nonetheless effectively improve appliance efficiency standards without violating federal law.

  1. Green Building Codes

Green building is composed of two practices:  “(1) increasing the efficiency with which buildings and their sites use energy, water, materials, and (2) reducing building impacts on human health and the environment . . . .”[8]  States and municipalities have codified these practices into what are referred to as green building codes.[9]  Virtually all jurisdictions base their green building code on a third party standard called the Leadership in Energy and Environmental Design (LEED) Green Building Rating System.[10]

LEED is a point-based system that awards points to buildings that institute green practices in six categories:  sustainable siting, water efficiency, energy and atmosphere, material and resources, indoor environmental quality, and innovation in the design process.[11]  Under LEED, a new building attains a desired level of certification (certified, silver, gold, or platinum) by achieving a certain number of points.[12]  Some state and local codes mandate a certain LEED standard for developers, for example requiring that all new construction must be LEED Silver accredited or better,[13] while others incentivize developers to meet LEED standards.[14]  A recent decision from New Mexico, however, may threaten the ability for state and local actors to use such codes because they violate federal energy standards.[15]

  1. Federal Preemption of Municipal Green Building Codes
  2. Federal Energy Law and Preemption

Under the U.S. Constitution, provisions in acts of Congress or in federal regulations take precedence over conflicting provisions in state and local statutes.[16]  Federal preemption can occur when Congress, in enacting a federal statute, “expresses clear intent to preempt state law,” when there is a conflict between state and federal law, or when Congress has “legislated comprehensively and thus has occupied the entire field of regulation . . . .”[17]

In 1975, Congress enacted the Energy Policy and Conservation Act (EPCA) to reduce U.S. domestic energy consumption.[18]  Subsequent amendments encouraged states to develop green building codes and established federal energy efficiency standards for certain appliances.[19]  The EPCA establishes a consensus national standard, now updated every three years, to regulate appliance efficiency.[20]  The EPCA also contains a broad preemption provision that prohibits any “State regulation concerning the energy efficiency, energy use, or water use” of a “covered product” (also known as covered appliances).[21]  The provision reflects Congress’ desire to reduce energy consumption as well as to “reduce the regulatory and economic burdens on the appliance manufacturing industry.”[22]

The breadth of this preemption provision is expansive.  The term “concerning” refers to any state regulation that has a connection with, or relates to, energy efficiency, energy use, or water use of a covered appliance, effectively preempting any regulation in this area.[23]  The legislative history indicates that Congress wanted to confront “a growing patchwork of differing state regulation which would increasingly complicate[] design, production, and marketing plans [of covered appliances].”[24]  The Department of Energy may only exempt laws from federal preemption in special circumstances.[25]  Consequently, state and local legislation can only regulate appliance efficiency standards under the preemption provision’s building code exception for new construction.[26]  To meet the new construction exception, a building code must (1) set an attainable energy conservation standard for developers, (2) not set appliance efficiency standards above the federal level, (3) in a point system, base the points on a one-to-one energy efficiency or cost basis, (4) specify points in terms of total estimated energy consumption, and (5) calculate energy used by covered products using the testing procedures set out by 42 U.S.C. § 6293.[27]

  1. Federal Preemption in Albuquerque

In 2007, the City of Albuquerque adopted a progressive green building code stating that, inter alia, developers must install covered appliances 30% more energy efficient than federal standards for new commercial construction.[28]  Under the code, developers may receive points for installing similarly energy efficient appliances in new residential construction to meet mandatory LEED compliance.[29]  Appliance industry stakeholders sued for injunctive relief before the code went into effect, claiming the City’s code violated federal law governing covered appliance efficiency standards.[30]  The court granted plaintiff’s motion for a preliminary injunction, finding that the preemption provision applied and that the code was not excepted because the prescriptive sections required developers to install covered appliances 30% more energy efficient than the federal standard.[31]  When the court eventually struck down the statute, it never reached the preemption question for the incentive-based provisions because the invalid prescriptive provisions were not severable.[32]

III. Avoiding Albuquerque:  The Power of Market Incentive-Based Codes

  1.    How Market Incentive-Based Codes Avoid Albuquerque

Much has been made of the Albuquerque decision,[33] but ultimately, the court decided little:  federal law preempts state and local provisions that mandate appliance efficiency standards stricter than the federal standard, a fact apparent from the EPCA’s text.[34]  A subsequent decision suggests that federal law does not preempt a state green building code that allows developers to earn points for installing the most energy efficient appliances to meet mandatory LEED accreditation standards in certain circumstances.[35]  That code is an example of market incentive regulation, whereby the state sets an overall environmental goal and enumerates a variety environmental practices for achieving that goal, but lets the market price for each practice guide how the regulated party attains compliance.[36]  Market-based incentive building codes (MBI codes) can lower energy consumption across jurisdictions with varying climate needs.  They can do this with less disruption than a national code because MBI codes give developers the flexibility to meet LEED standards with the most accessible and inexpensive options, which will vary by jurisdiction.[37]  In the context of appliance efficiency preemption, where federal regulation bars stricter state standards, MBI codes can effectively improve appliance efficiency by mandating LEED accreditation standards for new construction, carefully selecting options to attain point requirements in a jurisdiction, and basing those options on energy savings.  Given the problems with a federal solution,[38] this is an immediate, regionally tailored, and effective environmental solution that does not violate federal law.

  1. Three Options for Creating a Valid Market-Based Incentive Code

According to federal law and subsequent readings by federal courts an MBI code may improve building energy efficiency by requiring that all new construction meet a LEED standard, for example, LEED Silver (50 points). [39]  That LEED standard may provide developers with options to obtain the points necessary to reach LEED Silver, some of which include installing the most energy efficient appliances.  This method does not violate the EPCA because a developer voluntarily chooses to install the energy efficient appliance instead of another energy efficient practice to meet the LEED requirement.[40]

Second, MBI codes can increase the number of new buildings using the most energy efficient appliances by carefully selecting the options for obtaining LEED points.  If a developer must obtain one point to meet the LEED Silver standard and the energy efficient appliance is cheapest among the available options, the developer will most likely elect to install the energy efficient appliance.[41]  Legislatures may purposefully choose other expensive alternatives to energy efficient appliances so long as the other alternatives are regionally feasible, not prohibitively expensive, and are available through distributors.[42]  When energy efficient appliances are less expensive and more easily purchased by developers, however, an MBI code can function as effectively as a mandatory code within the green building exception.

Lastly, an MBI code can force developers to install energy efficient appliances by basing the point system on energy use. A point system must weigh the credits based on energy savings or cost.[43]  This requirement ensures that the points assigned to certain options are either based on cost or energy use, and not a way to coerce developers into complying with higher efficiency appliance standards.[44]  Because federal standards for energy efficiency are so low, however, installing the most energy efficient appliances likely saves more energy than other options and will earn developers more LEED points.[45]  In conjunction with point requirements and the ability for legislatures to select the options for earning points, basing points on energy savings provides large incentive for individuals to install inexpensive, energy efficient, appliances rather than obtaining compliance through other means.[46]  In sum, MBI codes can strongly persuade, but not impermissibly coerce, developers into installing more energy efficient appliances without facing the same fate as Albuquerque’s code.

  1. Conclusion

Energy efficiency in buildings is a major environmental issue, and the Albuquerque decision appears to cut off one potential non-federal solution.  The decision’s reach, however, simply reiterates the prohibition on certain prescriptive codes.  The green building code exception to federal preemption provides local and state governments with adequate power to enact MBI codes that will achieve substantially the same results as mandatory codes.  State legislatures would be wise to adopt MBI codes rather than await federal reform.

[1].  This represents a 10% increase from the 1973 energy share percentages.  See U.S. Dep’t of Energy, U.S. Energy Info. Admin.,  DOE/EIA-0035(2012/10), October 2012:  Monthly Energy Review 23 tbl.2.1 (2012), available at

[2].  U.S. Dep’t of Energy, Energy Efficiency Trends in Residential and Commercial Buildings 17, 24 (2008) (surveying states with residential or commercial energy codes), available at http://apps1.eere.energy.gov/buildings/publications/pdfs/corporate/bt_stateindustry.pdf; see, e.g., J. Cullen Howe, Town of New Castle Adopts Green Building Law, Green Building L. Update Service (Dec. 21, 2011), http://blogs.law.columbia.edu/greenbuildinglaw/2011/12/21/town-of-new-castle-adopts-green-building-law/.

[3]Air Conditioning, Heating & Refrigeration Inst. v. City of Albuquerque, 835 F. Supp. 2d 1133, 1134–40 (D.N.M. 2010).

[4]See Int’l Energy Agency, Technology Roadmap, Energy-efficient Buildings:  Heating and Cooling Equipment 5 (2011), available at http://www.iea.org/publications/freepublications/publication/buildings_roadmap.pdf.

[5]See Alexandra B. Klass, State Standards for Nationwide Products Revisited:  Federalism, Green Building Codes, and Appliance Efficiency Standards, 34 Harv. Envtl. L. Rev. 335, 349–51 (2010) (explaining that the Department of Energy has failed its rulemaking obligations due to a lack of agency resources and regulatory ossification).

[6].  Sarah B. Schindler, Following Industry’s LEED:  Municipal Adoption of Private Green Building Standards, 62 Fla. L. Rev. 285, 293 (2010).

  1. 7.   See, e.g., Klass, supra note 6, at 357–67 (advocating for a new approach under the assumption that federal reform is unlikely).

[8].  Office of the Fed. Envtl. Exec., The Federal Commitment to Green Building:  Experiences and Expectations 8 (n.d.), available at http://www.ofee.gov/Resources/Guidance_reports/Guidance_reports_archives/fgb_report.pdf.

[9].  At the federal level, most new construction and large renovations must meet certain green building standards.  The federal government also promulgates incentive-based building regulation for states to adopt.  See The Law of Green Buildings:  Regulatory and Legal Issues in Design, Construction, Operations, and Financing 45–61 (J. Cullen Howe & Michael B. Gerrard eds., 2010).

[10].  A non-profit group called the U.S. Green Building Council developed this rating system.  Other prominent rating systems include Green Globes and Energy Star.  Id. at 25–31.

[11]See How to certify a building project, U.S. Green Building Council, http://www.usgbc.org/DisplayPage.aspx?CMSPageID=1991 (last visited Nov. 8, 2012).

[12].  For example, new construction and major renovation projects may obtain LEED silver accreditation by earning between 50–59 points. U.S. Green Bldg. Council, LEED 2009 for New Construction and Major Renvoations vii (2012), https://new.usgbc.org/sites/default/files/LEED%202009%20Rating_NC-GLOBAL_07-2012_8c.pdf.  A building may also attain credits for installing large energy efficient appliances such as heating, ventilation, and air conditioning (HVAC) units and showerheads and faucets.  Id. at 25, 33, 38–40, 46–47, 74–75, 90.

[13]See CALGreen, Cal. Code Regs. tit. 24, § 11 (2012).

[14].  Voluntary programs include monetary incentives (for example, taxes and rebates) and intangible incentives (for example, expedited permitting and publicity).  See Anne Marie Pippin, Univ. of Ga. Sch. of Law & Coll. of Env’t & Design, Survey of Local Government Green Building Incentive Programs for Private Development 3–9 (2009), available at http://www.law.uga.edu/landuseclinic/research/leed_pippin.pdf.

[15].  Air Conditioning, Heating & Refrigeration Inst. v. City of Albuquerque, 835 F. Supp. 2d 1133, 1134–40 (D.N.M. 2010).

[16].  U.S. Const. art. VI, cl. 2.

[17].  2 Norman J. Singer & J.D. Shambie Singer, Statutes and Statutory Construction § 36:8 (7th ed. 2009); see also English v. Gen. Elec. Co., 496 U.S. 72, 78–79 (1990).

[18].  Energy Policy and Conservation Act, Pub. L. No. 94–163, 89 Stat. 871 (1975) (current version at 42 U.S.C. §§ 6201–6422 (2006)).

[19].  National Appliance Conservation Act of 1987, Pub. L. No. 100-12, 101 stat. 103 (1987); Energy Policy Act of 1992 §§ 121–28, Pub. L. No. 102–486, 106 Stat. 2776 (1992).  Later amendments also include The Energy Policy Act of 2005, Pub. L. No. 109–58, 118 Stat. 594 (2005), and the Energy Independence and Security Act of 2007, Pub. L. No. 110–140, 121 Stat. 1492 (2007).

[20].  42 U.S.C. § 6316(b) (2006).  The American Society of Heating, Refrigeration and Air Condition (ASHRAE) 90.1 standard is updated every three years, but its adoption lags, e.g., the 2004 standard became federal law in 2010.

[21].  42 U.S.C. § 6297 (2006).  Covered products include refrigerators, air conditioners, central air conditioners, heating pumps, water heaters, pool heaters and direct heating equipment, furnaces and boilers, dishwashers, clothes washers and dryers, fluorescent lamp ballasts, kitchen ranges and ovens, lamps, and shower heads and faucets. 42 U.S.C. § 6295 (2006).

[22].  S. Rep. No. 100-6, at 12 (1987), reprinted in 1987 U.S.C.C.A.N. 52, 63.

[23].  Air Conditioning, Heating & Refrigeration Inst. v. City of Albuquerque, Civ. No. 08–633 MV/RLP, 2008 WL 5586316, at *7 (D.N.M. Oct. 3, 2008); cf. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985).

[24].  S. Rep. No. 100–6, supra note 23, at 4.

[25].  42. U.S.C. § 6297(d) (2006).  The text of waiver provision is extremely restrictive and has never been successfully obtained.  Klass, supra note 6, at 348–49.

[26].  42 U.S.C. § 6297(c)(3) (2006).

[27].  § 6297(f)(3)(A)–(C), (F)–(G).  If the code uses baseline designs that meet the energy efficiency or consumption goal, at least one design must not use covered products that exceed the federal standard.  § 6297(f)(3)(D).  If the code contains optional combination of items that can be used to meet the energy efficiency or consumption goal that includes covered products, there shall be the same number of combinations where the covered products used do not exceed the federal standard by more than 5% and one optional combination where the covered products do not exceed the federal standard at all.  § 6297(f)(3)(E).

[28].  ASHRAE 90.1-2001 was the current federal standard for covered appliance and the green building code required ASHRAE 90.1-2004 standards, which would not become federally mandated until Jan. 1, 2010.  Albuquerque, N.M., The Albuquerque Energy Conservation Code Vol. I (Sept. 27, 2007), available at http://www.cabq.gov/obsolete/sustainability/pdf/volumeI.pdf.

[29].  Albuquerque, N.M., The Albuquerque Energy Conservation Code Vol. II (Sept. 27, 2007), available at http://www.cabq.gov/obsolete/sustainability/pdf/volumeII.pdf.

[30]See Air Conditioning, Heating and Refrigeration Institute v. City of Albuquerque, Civ. No. 08–633 MV/RLP, 2008 WL 5586316, at *1 (D.N.M. Oct. 3, 2008).

[31]See id. at *8–9.  The court noted that the code was drafted without regard to the federal exception.  Id. at *8–11.  Indeed, it isn’t surprising that the code failed the exception given that the city council did not know about the federal preemption issue and the city’s attorneys failed to bring it to their attention.  Id. at *2.

[32]See Memorandum Opinion & Order at 5–7 Air Conditioning, Heating and Refrigeration Institute v. City of Albuquerque, 835 F. Supp. 2d 1133 (D.N.M. 2010) (Civ. No. 08-633 MV/KBM) (on file with author).

[33]See, e.g., Klass, supra note 6.

[34].  42 U.S.C. § 6316(b)(2) (2006).

[35]See Bldg. Indus. Ass’n of Wash. v. Wash. State Bldg. Code Council, No. 3:10-cv-05373-RJB, 2011 WL 485895, at *15 (W.D. Wash. Feb. 7, 2011).

[36]See Lauren E. Glesby, Note, Fitting the Bill:  Proposed Regulatory and Non-Regulatory Approaches to Advancing Green Building Technologies, 21 Fordham Envtl. L. Rev. 637, 650 (2010).

[37]See id. at 648–62 (noting that market-based incentive regulation are well suited for adopting technology in varied jurisdictions).

[38]See, e.g., Klass, supra note 6, at 357–67; Thomas Hutton, Note, Toward Better and More Uniform Building Efficiency Codes, 28 Va. Envtl. L.J. 121, 132–44 (2010).

[39].  42 U.S.C. § 6297(f)(3)(B) (2007); Bldg. Indus. Ass’n of Wash., 2011 WL485895, at *15; see also Wash. Admin. Code § 51-11-0101 (2009).  A developer, however, must be able to satisfy the requirement without installing a covered product more energy efficient than the federal standard.  42 U.S.C. § 6297(f)(3)(A).

[40].  42 U.S.C. § 6297(f)(3)(B) (2007).  See Bldg. Indus. Ass’n of Wash., 2011 WL 485895, at *15.

[41].  For example, a code may require a developer to earn one credit to meet statutory requirements, and requires the developer to earn the credit either installing a high efficiency HVAC system, a covered product that costs around $1,000, or a variety of other options that are two to three times more expensive.

[42]See Bldg. Indus. Ass’n of Wash., 2011 WL 485895, at *10–11.  Such a code, however, must provide at least as many non-preempted options for obtaining the credit as preempted ones.  42 U.S.C. § 6297(f)(3)(E) (2007).  Many current codes already do this by assigning credits proportional to the energy savings.

[43].  42 U.S.C. § 6297(f)(3)(C) (2007).

[44]See S. Rep. No. 100-6, at 12 (1987), reprinted in 1987 U.S.C.C.A.N. 52, 63.

[45]. For example, a code that weights credits based on energy savings can assign more credits for installing an energy efficient water heater, a covered product, than it would to another expensive option such as reducing dwelling size.  See Wash. Admin. Code § 51-11-1401, Figure 14A (2009) (detailing one iteration of this process).

[46]See Glesby, supra note 38, at 648–62.