Listen: Five years later, looking back at the Berkeley gas ban

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Taylor Kuykendall:
Hello and welcome to Energy Evolution, the podcast that's bringing you insights and analysis on the energy sector from S&P Global Commodity Insights. I'm Taylor Kuykendall, and today I'm joined by Commodity Insights Senior Reporter, Tom DiChristopher, our very own in-house expert on the movement around the nation to ban new gas hookups or require all electric construction for new buildings and the subsequent backlash against those practices.
This month, we've reached the five-year anniversary of the ban, and we wanted to catch up on the effort to limit the use of gas in the bid to avert the planet-warming emissions associated with burning that gas.
Now recently, the City of Berkeley, California agreed to repeal its gas ban. It was the first of its kind in the nation, but the decision was announced as part of a legal settlement with the California Restaurant Association. Now Berkeley will no longer enforce the ban while it goes through the process of repealing it. The Federal Appeals Court opinion that led to that settlement has already prompted California and other West Coast policymakers to rescind their own building electrification policies.
Now, despite the repeal, many cities in California have adopted their own versions of gas bans, and there's still momentum to transition buildings away from natural gas in several states. Local areas are exploring options to strengthen building codes and encourage electrification without violating federal energy laws. But hey, that's just what I've read, so let's bring on Tom to hear more about what this all means for the energy transition.
Tom, it sounds like things have been pretty busy since we talked in the summer of 2022. Tell me a little bit about what's happening in this movement towards electrification.

Tom Dichristopher:
Yeah, thanks for having me on. That might be a bit of an understatement. It's been busy.
So yeah, I mean, to go back to two years ago when you and I spoke, I think the headline at that time was that there was all this momentum around this building electrification movement, but at that time, it was still really largely focused on the West Coast, right? We had about 58 California cities, towns, and counties that had enacted restrictions on gas use in new buildings or had passed some kind of all-electric requirement or preference for new buildings, and most of that was in the San Francisco Bay Area.
So up in Washington, they had passed the first statewide electric heat requirements at the state level in the United States, and they were working towards doing that in residential as well. Those were for a commercial. And then in Oregon, we saw Eugene, Oregon moving towards implementing a Berkeley-style gas ban, and other cities were looking at following their lead. And then over in Colorado, Denver had passed this kind of unique building decarbonization policy for existing buildings, and part of that would require buildings to replace their furnaces, their gas furnaces, with electric heat pumps when that furnace burned out under certain circumstances.
But what we were really waiting for, if you remember from that conversation, was to see if this movement was going to gain traction in Southern California and on the East Coast. To be sure, we did have some pretty big developments on the East Coast. I mean, New York City, the nation's biggest city, had passed a gas ban. In Massachusetts, they had finally figured out a way to let a few cities try out gas bans after years of hammering over how to move forward a building electrification movement. In Washington, D.C., building code officials had decided to integrate some all-electric construction requirements into the residential code. And Burlington, Vermont had this renewable heating ordinance that would require decarbonized heating in some new buildings, commercial buildings.
So after that conversation we had, what we expected did happen. Building electrification policy started to gain traction in Southern California. And Los Angeles, the big one we were waiting for, the nation's second-largest city, they adopted a Berkeley-style gas ban. Eugene, Oregon went ahead and adopted that gas ban, the first local gas ban in Oregon. Other cities started lining up behind them to do the same thing. Some communities in Colorado started passing local building electrification policies, including Denver for new buildings.
And then looking over at the East Coast, things really picked up after that conversation we had two years ago. The New York governor backed a statewide building gas ban for new construction, and that got passed the following year. Massachusetts passed this energy code that really clearly favored building electrification. In Maryland, we saw some counties start to pass building electrification codes, starting with Montgomery County, a very, very populous county. And then in New Jersey, we'd been waiting for New Jersey to pass something because they had said they wanted to do maximum electrification, and in early 2023, Governor Phil Murphy laid out this bold plan to essentially electrify like 10% of the existing and new building stock.
And then another big thing that happened, gas bans arrived in the Midwest, which was something that I think a lot of people had been holding their breath over. Ann Arbor, Michigan started talking about implementing a gas ban, and then some cities in the Chicago area, which is, again, one of the most populous parts of the United States, they started talking about implementing gas bans.
So there was all this momentum really building into early 2024 to expand and diversify this building electrification movement, and then April of 2024 rolled around, and I think it might be an overstatement to say that everything changed, but a whole lot changed. It was April 17th, it was a Monday. I was just coming in from my weekend, a lovely weekend, anniversary dinner with my wife, and the news drops. And that news is that the Ninth Circuit for the U.S. Appeals Court had basically overturned the Berkeley gas ban.

Taylor Kuykendall:
It doesn't sound like a fun way to spend an anniversary, but I know that you would've jumped right on top of that.
Can you give us a little bit more details about this decision for people that weren't following closely?

Tom Dichristopher:
Yeah. So looking back, it seems kind of crazy to me that you and I didn't talk about this in that 2022 discussion, but I think we can be forgiven for that because a year before that discussion we had, this case had been thrown out of a U.S. district court, and it was seen, I think, by a lot of people as a novel legal argument, maybe didn't have the best shot at persevering. But what has essentially happened was in 2019, the same year that Berkeley passed its gas ban, the California Restaurant Association sued.
So core to this legal argument by the CRA's lawyers was the Energy Policy and Conservation Act, which is affectionately referred to as EPCA. Now, this is a pretty simple law. It's the federal law that gives the U.S. Department of Energy the authority to set energy conservation standards for stoves, furnaces, fridges, all these appliances in our daily lives. And another part of EPCA says that those federal standards, they preempt any standards that might be put in place by states or local governments, and this is essentially to avoid creating a patchwork of energy efficiency standards across the United States that would make it very hard for appliance manufacturers to sell into all these different states that have these different energy efficiency standards.
So the basic argument was that Berkeley, in passing this gas ban, had created a rule or a regulation that concerned the energy use of appliances covered by EPCA, and so it basically conflicted with EPCA because EPCA covers the energy use and efficiency of appliances. Now, that district court I mentioned, the judge had said, "This is a really broad reading of EPCA. I don't think that this really should apply here," and she threw it out of court.
When you and I were talking in 2022, this was winding its way through the appeals court and we were following it, following the different arguments. But on that day in April, a three-judge panel for the Ninth Circuit, they basically agreed with the California Restaurant Association. They said, "Yeah, we think that this thing essentially regulates the energy use of EPCA-covered appliances, and that is a power reserved for the federal government."

Taylor Kuykendall:
Yeah. So obviously, I mean, this was a huge decision. Can you just tell me what was the immediate impact when this thing came out?

Tom Dichristopher:
Yeah, so the impact was pretty swift. We saw Eugene, Oregon repeal their gas ban just shortly after adopting it. We saw Washington State building code officials say they were going to claw back their statewide electric heat requirements and basically softened them to be able to comply with this ruling. And then in California, any cities, towns, or counties that were working on new building electrification policies basically put their pencils down, and a number of them actually, places that had already implemented their codes, they suspended them.
But a lot of places actually held their fire because it was widely believed that Berkeley was going to petition for a rehearing, which is basically where you ask a larger number of judges to review the decision by the three-judge panel. And Berkeley did go ahead and do that. But in January of this year, the Ninth Circuit decided that they were not going to revisit that decision and it would stand, and that's where we really saw a lot more cities start to suspend or roll back their policies.
Now, while some cities are doing that, cities are also trying to look at alternatives, similar to how Washington decided to change its state building code. So we're still cataloging how exactly cities are adapting because it's just a few months after that decision, but we do have some examples.
So the City of Los Altos Hills in California, they've adopted what's called a zero-NOx policy. And NOx, as some listeners may know, is a family of health-harming chemicals that are generally formed when fuel is burned at high heat. They can be irritants to respiratory systems and that sort of thing. So if you say that NOx are not allowed, then you're basically saying that fossil fuel combustion equipment is not allowed, so this essentially is a gas ban. We are also seeing over in Berkeley, they have introduced a carbon tax on buildings, which would create a fund to help decarbonize buildings, and that's on a ballot referendum in November.

Taylor Kuykendall:
So how is this impacting just the general building electrification policy movement in the rest of the United States?

Tom Dichristopher:
Yeah, so it's had an impact. So as you can imagine, after that win in Berkeley, some industry groups have decided to target other policies around the country. So actually, the legal team that was responsible for helping to take down the Berkeley ban has now filed a lawsuit over New York's statewide gas ban that is scheduled to go into effect when we update our building codes here in New York. There was a lawsuit filed over Colorado's building performance standards, which include some of those electrification requirements, Colorado and Denver's policy actually. And then in Washington, even though they went ahead and tried to change their policy to fit with that ruling, it still attracted a lawsuit.
The opinion has also had something of a chilling effect elsewhere in the country. The Ninth Circuit opinion really only applies to several states in the Western U.S., but earlier this year, the International Code Council, which is the organization that creates a model building code that states and cities all over the U.S. follow, it's basically a blueprint when they're updating their building codes, they had been on pace to include basically a voluntary all-electric code, which would essentially have been an appendix. If I'm a city and I wanted to pursue all-electric construction, I could have used this as basically a blueprint.
They actually decided to strip that out at the 11th hour and take that out, and they said they did this because of the Ninth Circuit opinion. They said that this basically would open up cities to legal risks. And then shortly after that, Illinois was looking at adopting a stretch code, and part of that would also be this voluntary all-electric code, and they stripped that out as well. So cities in Illinois will not have that model all-electric code to adopt if they want to adopt it.
Now, that said, the building decarbonization policy movement has continued to spread in the United States. So as an example, Burlington, Vermont added a carbon tax that they place on new buildings. Ann Arbor, Michigan has moved away from the gas ban idea, but what they're thinking about doing is renegotiating their gas franchise with their gas utility, DTE Energy, to basically replace their entire gas distribution system over the long term with something like a geothermal energy network. Rhode Island and Connecticut, lawmakers in those states, introduced state bills to ban gas in new construction. Those didn't go very far, but they were introduced. And New Jersey has started introducing policies to achieve this goal of electrifying a lot of their building stock.
And then probably one of the biggest ones though, is that Chicago, the nation's third-largest city, announced that they were going to pursue a gas ban that was modeled after New York City's. So this has really continued to grow and expand.

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Taylor Kuykendall:
So a lot of momentum still, it sounds like, but we also have these court challenges you mentioned in New York, Washington, and Colorado. Just wondering if you could pull out the crystal ball for a minute, what do you think happens if those are successful?

Tom Dichristopher:
Yeah, right. So if those are successful then in the district court level, then obviously they get struck down. If we get something like what happens in California where the district court judge dismisses it and then it's challenged, or really either party challenges the decision in the appeals court, if the appeals court strikes down the policy, then that decision will apply to a number of states within that circuit. So it would apply to states around New York, it would apply to states around Colorado, but it's not certain that one of these circuit courts would come to the same conclusion that the Ninth Circuit came to in the Berkeley case.
It's important to remember that one of the three judges who made that decision said that he only concurred because of precedent in the Ninth Circuit, and he said that the case law in this area is "troubling and confused." It's full of conflicts at the Supreme Court level and disagreements between the circuits. And when the Ninth Circuit decided not to grant Berkeley's petition for rehearing, there was a dissent by about a dozen judges. And the judge who wrote that dissent actually urged other circuit courts to not repeat what she said was the mistake that the Ninth Circuit had made in reading the EPCA so broadly.
So it remains to be seen what's going to happen. These court cases are unfurling right now.

Taylor Kuykendall:
And now, of course there was a pushback to try to ban the gas bans, right? So ban the bans is a fun way to put it, but can you tell me just a little bit more about that movement and what's going on there?

Tom Dichristopher:
Yeah, so when you and I spoke in 2022, it had seemed like it was plateauing, right? There were only a certain number of states where you had the sort of political environment that would support these. And you and I spoke about it. It's generally, what we've seen from looking at the data is that these are generally going to pass in states where there's Republican control of the legislature or Republicans can override the veto of a Democratic governor. We saw these grind to a halt in Virginia where the Democrats control the senate and the Republicans control the lower house. We've seen Democratic governors veto these.
But we have seen since then a few more states. If you think about a map of the United States, most of the center of the country states had outlawed gas bans, the South, but there was, in the Northwestern United States, those states hadn't really ruled on this. Since then, several of those states have adopted a ban on the ban, and Nebraska also adopted one this year. But I think we're back to where we maybe are, where there's just not a lot of states left that have a political environment that is willing to outlaw gas bans.
But I would note that the building electrification movement has really started to move beyond local gas bans and electrification mandates.

Taylor Kuykendall:
Can you tell me a little bit more about what you mean by that?

Tom Dichristopher:
Right. So there's been a number of different regulatory constructs that have developed and other means of phasing out gas use. So there's about a dozen states that we follow that have introduced what are generally called "future of gas proceedings," where regulators are essentially aiming to align the long-term gas system planning with state climate goals. These are generally states that have adopted goals to be net-zero by 2050 or cut their greenhouse gas emissions significantly. And these regulators are often updating regulations to discourage investments in the gas grid and requiring utilities to decarbonize their businesses by maybe doing energy efficiency measures, but often through building electrification programs. And we're really seeing in some of these states a preference for energy efficiency, demand response, building electrification over policies that gas utilities tend to prefer, like blending renewable natural gas or hydrogen into the gas grid.
States like Colorado and Vermont have also adopted clean heat standards, which require fossil fuel distributors and gas utilities to reduce their emissions tied to burning fossil fuels at the customer end. And a lot of times, you have to do that through energy efficiency or building electrification or blending these low-carbon fuels.
We're also seeing what's generally referred to as market transformation initiatives, and this is where states are collaborating to reorient their heating and cooling equipment markets towards heat pumps instead of installing standalone furnaces and air conditioners. We've seen, in one of these market transformation initiatives, the U.S. Climate Alliance, which is a group of 25 states, agreed to set a goal of installing 20 million heat pumps by 2030, which would basically be a quadrupling of the heat pumps that are installed in their states. A smaller group of them, nine states, after that, they agreed to take actions to basically make sure that heating and cooling equipment shipments in their state, so the equipment coming into their state, is basically dominated by heat pumps by 2030, and then increasing that by 2040. And then the DOE, the U.S. Department of Energy, also has a program, a public-private partnership to advance building decarbonization strategies and technologies in partnership with the companies that use these heating and cooling equipment.
So essentially, what we're talking about is moving the market by consumer education, by collaborating with manufacturers of heat pumps and the companies that distribute them to try to basically gather support in a way that's not regulation.

Taylor Kuykendall:
Now, so much of this has been state-based discussion. I'm just wondering how does the Biden administration fit into all this in terms of building electrification?

Tom Dichristopher:
Yeah, the Biden administration has been a pretty big booster of building electrification. So looking at the Inflation Reduction Act, as we all know, the biggest U.S. investment in clean energy in our history, there's $8.8 billion in home electrification and energy efficiency retrofit rebates in the IRA. Plus, there's funding to support states and local governments adopting tougher energy codes.
The DOE is also increasing energy efficiency standards for gas appliances, much to the chagrin of the gas industry. They've really pushed back on that. The EPA has also tightened the standards for gas furnaces to qualify for the Energy Star program, which is those blue stickers that you see on appliances that tell you, "This is a really energy-efficient appliance."
The Biden administration has put R&D money into cold climate heat pumps to make sure that equipment works really well in Northeastern states or northern states that have really cold climates. They've also used the Defense Production Act to support heat pump manufacturing. And then just recently, the Biden administration announced a new goal in April to cut the U.S. building sector's greenhouse gas emissions by 65% from 2005 levels by 2035, and 90% by 2050, and electrification is one of the four core pathways of achieving that goal.

Taylor Kuykendall:
When we talked two years ago, we were mostly discussing new buildings and how the gas ban was going to affect those, but it sounds like some of the things we've been talking about here also address existing buildings. What's going on in that space and how does that work?

Tom Dichristopher:
Right, yeah. So really most of the momentum was around electrifying the new building stock when you and I spoke, but those future of gas proceedings that I mentioned, a lot of the regulation that's coming out of those is going to help to retrofit existing buildings for electrification. Those renewable heat standards also address existing building energy use.
I talked about that zero-NOx standard that Los Altos Hills is adopting for new buildings. Well, the Bay Area's air quality regulator is moving forward regulations that would apply a zero-NOx standard to all heating equipment, space and water heating equipment, sold in the Bay Area. So essentially, when your furnace burns out, you won't be able to buy a new gas furnace because those aren't allowed to be sold because they can't meet a zero-NOx standard, so that would have a big impact where those policies are implemented.
And then we've also seen building performance standards becoming more popular. These are policies that require building owners to take steps to either reduce the greenhouse gas emissions of their building or to increase the energy efficiency of their buildings.
And then I think more broadly, there's just been a movement towards requiring buildings to install heat bumps instead of air conditioners. So when you and I spoke two years ago, there was this thinking that in order to get at those existing buildings, we were going to require people to replace their fossil fuel furnace with a heat pump when that furnace burnt out, but I think what people realize is that there's a big price difference between replacing your gas furnace with a new gas furnace and replacing your old gas furnace with a heat pump.
So what I think policymakers have found is that there's much more of a price parity between putting in an air conditioner and putting in a heat pump, so a lot of the momentum has been towards, instead of installing a new air conditioner, we're going to have you install a heat pump. And what that does is it allows you to use your existing furnace as basically backup. It relegates your gas furnace to backup status. And we're seeing a lot more places around the United States try to encourage people to install cooling equipment because as we all know, temperatures are rising, so they're really trying to make sure that heat pumps are installed instead of air conditioners.

Taylor Kuykendall:
Well, we are very lucky here at S&P Global Commodity Insights to have you so on top of this. I know even if it does mean it's going to interrupt your anniversary celebration with your wife, but I'm wondering how are you going to celebrate the Berkeley gas ban anniversary?

Tom Dichristopher:
Yeah, so we've got a lot of stuff planned. We'll be looking at where we were five years ago versus where we are today in a curtain-raiser. We're going to be looking at how California cities are adapting to this. We're going to be looking at doing a deep dive on Colorado because there's been a lot of really interesting policy movement there. One of the things we're going to be looking at as well is in these states that have outlawed gas bans, how are cities that are trying to decarbonize their building stock, how are they moving forward? What pathways do they have to move forward?
Those are just a few of the things that we'll be looking at this summer as we commemorate the fifth anniversary of the Berkeley gas ban and where we've been and where we're going.

Taylor Kuykendall:
Excellent. Well, I know I'll be watching your reporting closely and hope the rest of our listeners will too. Thank you so much for joining us today.

Tom Dichristopher:
Thanks for having me.

Taylor Kuykendall:
All right, listeners, thank you so much for listening to the latest episode of Energy Evolution. I want to give a special shout out to our incredible podcast team members. I am, once again, Taylor Kuykendall, but other people behind this podcast include Dan Testa, Camilla Naschert, Camellia Moors, Christopher Coats, Karen Willenbrecht, and our wonderful agency partner, The 199.
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