Where We Go From Here: Local and State Efforts to Decarbonize Buildings After California Restaurant Association v. City of Berkeley

November 22, 2024

In May, the Ninth Circuit denied rehearing in California Restaurant Association v. City of Berkeley (9th Cir. 2024) 89 F.4th 1094 (“CRA”), thereby making its 2023 decision in that case final. In that decision, the court struck down Berkeley’s ordinance that prohibited natural gas infrastructure in new buildings. The Ninth Circuit found this ordinance was preempted by the federal Energy Policy and Conservation Act (EPCA). In the court’s view, because EPCA preempts states and local governments from adopting measures concerning the energy use of appliances, it therefore preempts Berkeley’s measure that prohibited the use of natural gas piping, thereby requiring that appliances use no natural gas.

In the wake of this decision, local governments around California are reconsidering their approaches to address carbon emissions from buildings. As discussed in earlier editions of In the Public Interest, the use of natural gas in buildings to power appliances and provide heat, along with the transport of natural gas to buildings, is a significant source of greenhouse gas emissions.  Many local governments had adopted decarbonization measures similar to Berkeley’s, and since the CRA decision, many have either suspended enforcement of their all-electric ordinances or repealed those ordinances altogether. In this article, we will provide a high-level view of the alternative strategies local governments have considered and adopted in the months following the CRA decision. We will also briefly address the decarbonization measures adopted by the State Energy Commission for its triannual building code update.

Some local governments are adopting NOx emissions ordinances

In an effort to continue addressing the greenhouse gas emissions from buildings, while avoiding the preemption arguments raised in CRA, some local governments are regulating the emissions of nitrous oxides (NOx) from appliances. Under this approach, cities and counties may require that new buildings or those undergoing substantial alterations contain no NOx-emitting equipment for space heating, water heating, cooking, appliances, and clothes drying. Such an approach does not address the energy use of appliances at all, but instead is focused on their emissions of air pollutants. Local governments adopting such measures are exercising their traditional regulatory control over air quality: Under California law, cities and counties may establish stricter air pollution standards than those adopted at the state and federal levels.

Cities that have adopted such an emissions-based approach include Los Altos Hills and Campbell. Berkeley is also considering such a measure.

Other local governments have adopted source energy code ordinances

Another option to encourage electrification of buildings is referred to as a “source energy code” ordinance. After every triannual building code update, local governments adopt the state codes and may modify them to accommodate local conditions. A source energy code ordinance modifies the California Energy Code to require that buildings meet a lower “source energy” compliance margin, thereby effectively requiring buildings to reduce the greenhouse gas emissions associated with supplying electricity.

The easiest way to meet the more stringent source energy standard is to use electric appliances. However, buildings could satisfy the standard while relying on gas appliances, but would be required to add efficiency improvements such as insulation, solar PV, or a battery. As a result, a source energy code ordinance provides builders with flexibility: They will be encouraged to use electric appliances, but may choose to use natural gas appliances along with additional efficiency measures.

California cities that have recently adopted such ordinances include Santa Monica, San Luis Obispo, Santa Cruz, San Jose, Brisbane, East Palo Alto, and Encinitas.

The State’s triannual building code update will also promote decarbonization

Cities and counties should also be aware of updates to the state Energy Code and Green Building Standards Code that will encourage building decarbonization. Every three years, state agencies adopt, and the State Building Standards Commission approves, updates to the building codes codified in Title 24 of the California Code of Regulations. (See our previous article describing the State’s previous round of updates.) State agencies are currently going through the code update process, and those changes will become effective statewide in January, 2026.

The California Energy Commission (CEC) adopted proposed changes to the Energy Code in September, 2024, which will become effective in 2026. See 2025 Building Energy Efficiency Standards (2025 BEES). These changes encourage building electrification, but do not require it. As in years past, the updated Energy Code allows builders to comply prescriptively—by installing baseline designs and technologies that satisfy a list of prescriptive requirements—or via a performance path, which requires buildings to meet an overall energy budget, regardless of the types of appliances installed. The energy budget for a building complying with the performance path is determined by applying the Code’s prescriptive requirements to a “standard design” building, which generates the baseline against which the proposed building’s energy use is compared.

CEC’s changes in the 2025 BEES include expanding the use of heat pumps for space and water heating in newly constructed single-family, multifamily, and select nonresidential buildings. The Code will now require the use of heat pumps for both space and water heating as the prescriptive technology for residential buildings. For nonresidential buildings, the CEC also expanded on the single zone heat pump baselines from the previous Code. And for low-rise multifamily buildings with individual water heaters in dwelling units, the Code update will require the use of a heat pump water heater in the prescriptive path, whereas the previous Code allowed the use of gas or propane water heaters to serve as the baseline.

Local governments must adopt the Energy Code by reference and enforce it, so these and other state-level changes will be relevant to cities and counties that are considering adopting building decarbonization measures. Additionally, local governments may modify the Code to set stronger local standards known as “reach codes,” so long as they file their changes with the CEC and obtain its approval.

For advice or assistance navigating the changing legal landscape in the wake of the CRA decision, contact SMW attorneys Ellison Folk or Lauren Tarpey.