California Air Resources Board

Last updated May 30, 2023.

Motivation

Why is a regulation being considered?

Commercial and residential buildings are responsible for approximately 10 percent of GHG emissions[1] in California. Zero-emission standards for new space and water heaters sold in California would decrease GHG emissions from buildings to help the state meet its climate goal of achieving carbon neutrality by 2045 or earlier, and are part of California’s climate strategy as laid out in the 2022 Scoping Plan. Buildings also emit about 66 tons per day (tpd) of NOx[2] to the ambient air, about four times the emissions from electric utilities and nearly two-thirds the emissions from light-duty vehicles statewide. Therefore, a potential regulation would reduce NOx emissions as outlined in the 2022 State SIP Strategy to assist with meeting state and federal air quality standards and achieving public health benefits.

Concept for Regulation

Is this potential regulation a ban on non-zero-emission space and water heaters? Can I still own a non-zero-emission space and water heater after 2030 or will I need to replace it before then?

The concept for the regulation would not be a ban on non-zero-emission space and water heaters. This potential regulation would not limit use or repair of existing non-zero-emission space or water heaters. Existing non-zero-emission space and water heaters would not need to be replaced before 2030.  Instead, the concept for zero-emission standards for these would mean that any time a person or business purchases a new space or water heater (whether for new construction or to replace in existing buildings), they would only be able to purchase zero-emission units. Therefore, non-zero-emission space and water heaters could remain in operation after 2030.

Defining Zero-Emission

What do you mean by a zero-greenhouse gas standard? What greenhouse gas emissions would be regulated? Are zero-emissions considering NOx and CO as well?

At this point, CARB staff are considering a definition focused on zero greenhouse gases (GHG) emitted during operation. CARB staff expect that heat pumps and/or electric resistance technologies could be considered zero-emission. California’s electric grid will be powered with 60 percent renewables by 2030, and 100 percent zero-carbon resources by 2045.

CARB staff expect that the regulation would be focused on reducing carbon dioxide equivalent (CO₂e) emissions, which primarily includes carbon dioxide (CO₂), nitrous oxide (N₂O), and methane (CH₄) associated with non-zero emission space and water heating.

CARB staff may also explore a separate regulation focused on reducing hydrofluorocarbons (HFCs) emissions (in CO₂e) associated with refrigerants used in water heaters and other heat pump applications. CARB has a regulation already in place to restrict the global warming potential (GWP) of refrigerants in space conditioning equipment. CARB may consider regulating the GWP of refrigerants in other heat pumps. CARB staff will consider other overarching directives, such as carbon neutrality and Senate Bill 1206[3], in making that determination. 

Zero-emission standards will be focused on zero GHG emissions. However, CARB staff will quantify the air quality co-benefits of reducing criteria pollutants such as smog-forming oxides of nitrogen (NOx), carbon monoxide (CO), and toxic air contaminant emissions to meet air quality standards and improve public health, safety, and quality of life for all.

Scope of the Regulation

What is the scope of this potential regulation? Which space and water heaters would this regulation apply to?

The primary goal of this potential regulation is to reduce emissions from new residential and commercial space and water heaters sold in California. Space and water heaters contribute most to building-related GHG and NOx emissions.

Would this potential regulation apply to propane space and water heaters as well?

CARB staff plan to explore whether this potential regulation would apply to propane space and water heaters, as well as evaluate alternatives and feasibility, during the rulemaking process.

Would this potential regulation apply to space and water heaters for use in residential and/or commercial buildings?

As envisioned in the 2022 State SIP Strategy, the zero-emission standards would apply to new space and water heaters sold for use in both residential and commercial buildings. Whether there are any exemptions or flexibilities for specific building types will be evaluated during the rulemaking process.

Would this potential regulation apply to multi-family unit housing and high-rise condominiums?

As envisioned in the 2022 State SIP Strategy, the zero-emission standards would apply to both single family and multi-family residential buildings as well as high-rise condominiums. Whether or not there are any exemptions or flexibilities for specific building types would be evaluated during the rulemaking process.

Would there be any exceptions to this measure such as income, geographic location, and climate zone?

During the rulemaking process, CARB staff plans to carry out a regional assessment looking at factors such as grid capacity, access to electricity, and building retrofit costs to determine readiness and whether any exemptions or flexibilities are needed based on income, geographic location, and climate zone.

Timing for the Regulation

Is the regulation finalized? Can the public comment on this process?

The regulation has not been proposed or finalized. Public engagement regarding the future rulemaking process will begin in 2023. CARB staff plan to take a proposed regulation to the Board for consideration in 2025 with any implementation beginning in 2030. The public will be able, and is encouraged, to comment during the rulemaking process. There will be multiple public workshops and focused meetings with interested parties to discuss regulatory concepts. To stay informed regarding this rulemaking, please sign up for updates via CARB’s “Building Decarbonization” listserve.

Is an accelerated timeline something that CARB will consider?

CARB staff aim to develop the regulation in line with market, technology, building, and grid readiness. CARB staff are planning to understand and consider cost impacts across multiple dimensions such as socioeconomic status, building type, and climate zones, with the goal of designing the regulation to optimize cost savings while considering availability of incentive funding and related programs to assist all, especially the most vulnerable communities, to avoid leaving anyone behind. CARB staff will assess a potential implementation timeframe around 2030 and whether an accelerated timeline may be appropriate for specific circumstances depending on the findings from the staff analysis work planned and during the rulemaking process.

Has CARB considered the idea of passing rules that would set gradually increasing market share requirements for zero-emission space and water heaters, eventually reaching 100% of new sales over a few years?

Whether or not there would be any gradually increasing market share requirements for zero-emission space and water heaters is something that CARB staff will determine during the rulemaking process.

Public Engagement Process

What is the process for public engagement in this regulation?

Public engagement will be a critical aspect of the entire process. Staff are working to build a clear process for public engagement. Before initiating a rulemaking, staff are collecting information and feedback to craft a process that will support productive deliberations, informed by the best available scientific research and expertise from public and community members. More details on the public engagement coming soon.

Complementary Policies

How would this potential regulation fit in with the broader array of building decarbonization policies moving forward in California?

The potential regulation is a key component of a broader portfolio of strategies to advance equitable building decarbonization in California. CARB understands that this regulation needs to be part of a suite of equity-promoting and complementary building decarbonization policies deeply informed by public processes that include scaling back fossil gas infrastructure, expanding new construction of zero-emission buildings, and building a sustainable market by increasing affordability and accessibility through expanding incentive programs, ensuring utility rates are supportive developing the workforce, and increasing consumer education.

Why is this regulation needed instead of focusing on new construction codes?

While each year about 120,000 new homes[4] and more than 100 million square feet of commercial buildings[5] are newly constructed across California, there are about 14 million existing homes and over 7.5 billion square feet of existing commercial buildings[6] in the state. CARB supports new construction codes, however, to help the state meet its climate goal of achieving carbon neutrality by 2045 or earlier, California’s climate strategy as laid out in the 2022 Scoping Plan, and the federal air quality standards set by the US EPA, emissions from existing buildings must also be addressed.

Upfront Costs

Who would pay for the cost of equipment? Who would pay for the cost of upgrading electric service panels and electric service capacity? Who would pay for the cost of upgrading electric infrastructure outside of buildings (e.g., distribution infrastructure?)

Typically, the building owner would pay for the cost of equipment and electric service upgrades in that building. However, there are several federal, state, local, and utility incentive programs that may be used to defray upfront costs. For example, the federal Inflation Reduction Act (IRA) has set aside $9 billion for residential decarbonization throughout the country.[7] Through the IRA, low- and moderate-income households are eligible to receive direct rebates ranging in the thousands of dollars for the installation of heat pumps, heat pump water heaters, and the necessary electrical panel and wiring upgrades. New tax credits up to 30% will also be available to a broader range of income households. Additional incentives and tax credits are also available to retrofit public buildings and non-profit commercial buildings.

California has set aside over $800 million for a new statewide Equitable Building Decarbonization Program. The program will offer both a direct install decarbonization program for low- and moderate-income households and an incentive program to advance the installation of space and water heaters. Another statewide program, the Technology and Equipment for Clean Heating (TECH) Clean California initiative, provides incentives to manufacturers, distributors, and vendors through consumer education and contractor training programs. The Self Generation Incentive Program (SGIP) Heat Pump Water Heater program offers incentives for installing heat pump water heaters. About half of the budget is dedicated to residential low-income customers. Incentives for the SGIP can be used to pay for electrical panel upgrades if they are needed to install a heat pump water heater.

“The Switch is On” website provides a list of other incentive programs throughout the state.

Energy Bill Costs

How would this potential regulation impact, and be impacted by, energy bill costs?

The relative cost of energy, between electricity and non-zero emission space conditioning and water heating used in buildings, is a major consideration that could impact long-run energy bill costs. CARB staff will be carefully considering these dynamics and evaluating potential changes in energy bill costs in the rulemaking technical analysis.

Currently, while the cost of electricity tends to be much higher on a per unit energy basis as compared to fossil gas, the relative efficiency of electric-powered space and water heaters means that energy bill costs could stay level, and in some cases go down (for instance, if a less-efficient heating, ventilation, and air conditioning (HVAC) system is replaced with a heat pump). However, energy bill costs are also dependent on changes in energy rates. Average residential gas bills in California were dramatically up between 30 percent and 240 percent in early 2023.[8] Several factors affected higher gas prices including much colder temperatures causing unusually large demand for gas, reduced gas storage, and pipelines closed for unplanned maintenance resulting in limited supply to California.[9]  

Supportive rate design will play an important role in building decarbonization. The California Public Utilities Commission (CPUC) is addressing energy rates in Phase II of its building decarbonization rulemaking (R.19.01-011), which required California’s three largest electric Investor-Owned Utilities (IOUs) to study bill impacts associated with heat pump water heater adoption and propose rate adjustments. Publicly owned utilities, Community Choice Aggregators (CCAs), and other small utilities will also need to develop energy rates supportive of building decarbonization.

If we dramatically reduce gas usage for water and space heating, do you expect gas prices to increase for those still using gas?

CARB staff plan to analyze the economic impacts for households and businesses, including utility bill changes. CARB staff are also coordinating with the California Public Utilities Commission on programs they are implementing to update energy rate design programs to encourage building decarbonization. It is uncertain at this point in time how gas prices are expected to change over time and how energy bill costs may change for those customers still using gas.

Incentive Programs

Does CARB plan to develop programs to help low-income homes acquire zero-emission technology?

There are many incentive programs available in Californiaoffered by utilities, air districts, and state agencies such as the California Energy Commission and California Public Utilities Commission. California Climate Investments, which are funded by Cap‑and‑Trade auction proceeds deposited into the Greenhouse Gas Reduction Fund, provide a wide range of incentive programs, including two administered by the California Department of Community Services and Development (CSD) that offer technical assistance and incentives for installation of zero-emission technology in low-income multi-family dwellings,[10] and no-cost direct installations of zero-emission technology in farmworker dwellings.[11] An increasing number of incentive programs are aimed at low-income households to help offset upfront costs. CARB staff will continue to rely on public agency partners to manage equitable incentive programs to assist low-income households with purchasing and installing zero-emission space and water heater.

Will CARB consider incentive programs to help cover structural costs of retrofitting such as upgrading or replacing old ductwork or intake vents in homes that are either aging/leaking or do not work well with modern heat pump systems?

CARB will evaluate the level of funding set aside for incentive programs as part of the overall staff analysis work planned related to costs and affordability. CARB staff plan to investigate which incentive programs include funding for measures such as replacing old ductwork or intake vents as well as building envelope and weatherization improvements. 

Grid Capacity

What if the electric infrastructure in my building or neighborhood are not upgraded by 2030?

During the rulemaking, CARB staff plan to investigate several readiness factors, including electric distribution service, service panel capacity, and grid readiness. Whether or not there are any exceptions for existing buildings due to electric infrastructure limitations is something that CARB staff will explore and seek input on during the rulemaking process.

Will CARB establish any minimum grid standards or prerequisites (e.g. stress test, etc.) to ensure grid readiness?  How can CARB ensure the grid will be ready prior to the increased electrical demand?  How will this timing work?

CARB does not plan to establish any minimum grid standards associated with this rulemaking effort, though whether or not there are any exceptions for grid readiness or electric infrastructure limitations is something that CARB staff will explore and seek input on during the rulemaking process. CARB staff plan to work with partner energy agencies that deal with grid planning to make sure they are forecasting load growth adequately to support anticipated increased adoption of zero-emission space and water heaters. As indicated in the 2022 Scoping Plan, a broader effort is underway to ensure the electricity grid can grow at unprecedented rates and ensure reliability, affordability, and resiliency over the next two decades and beyond.

I recently learned that in my community part of the newer developments have underground wiring and the connections to their homes maybe have difficulty accommodating additional load.  Is there a way to address this?

Underground wiring should not impact the ability for newer developments to accommodate additional electrical load. In fact, most newer developments are constructed with sufficient wiring, service connections, and panel capacity to accommodate added load from converting gas equipment to electric. Since 2015, most new single-family homes built in California have been constructed with a 200-amp electrical service panel as standard practice. The 2022 Energy Code requires the main electrical service panel in single-family residences to have a minimum busbar rating of 200 amps. The 2022 Energy Code also includes “electric ready” building standards for new single-family and multifamily residential buildings. It requires wiring and a reserved space at the main electrical service panel to accommodate future building decarbonization.

In the cases where there may not be adequate wiring, service connections, and panel capacity in existing buildings, there are innovative approaches such as smart panels, automated load management, and power sharing devices to support the transition to zero-emission space and water heaters without requiring any upgrades to wiring, service connections, and electrical panels.  

Local and Regional Efforts Underway

How would this potential state regulation fit in with local air districts’ zero-emission space and water heater standards?

This potential regulation would be complementary to local air district efforts. For example, the Bay Area Air Quality Management District proposed amendments to Rules 9-4 and 9-6, which are structured as point-of-sale rules, would require that new equipment sold meet NOx emission limits. In order to be sold in the Bay Area, smaller residential and commercial water heaters manufactured on or after January 1, 2027 would need to meet zero-NOx emission limits, and all space heaters manufactured on or after January 1, 2029 would meet zero-NOx emission limits.

The South Coast Air Quality Management District adopted their Final 2022 Air Quality Management Plan which includes targeted implementation of zero-emission technologies by 2029 for half of the applicable sources and allowing for low-NOx technologies for the remaining 50 percent of sources as a transitional alternative when zero-emission is determined to be infeasible.

South Coast Air Quality Management District (SCAQMD) has the strictest regulation on residential water heaters (Rule 1121). Do we consider these water heaters as zero emission?

CARB staff would not consider the SCAQMD low-NOx emission limit of 10 ng NOx/J to be zero-GHG emission. However, the Bay Area Air Quality Management District recently adopted a zero NOx emission limit for water heating (Rule 9-6) that will go into effect in 2027. In some cases, CARB staff anticipate that zero-NOx water heaters could possibly also result in zero-GHG emissions.

[1] CARB. 2022. Scoping Plan Update (ca.gov) – Figure 1-8, Page 56.

[2] CARB’s Criteria Emission Inventory CEPAM: 2022 Version 1.01 – Standard Emission Tool. NOx emission estimates are based on annual average daily emissions.

[3] Senate Bill 1206 has tasked CARB with conducting an assessment to transition to the California economy away from higher-GWP hydrofluorocarbons to ultra-low-GWP, defined as GWP < 10, and no-GWP alternatives no later than 2035.

[4] Construction Industry Research Board. 2018. Annual Building Permit Summary. http://www.cirbreport.org

[5] Delforge, Pierre. August 11, 2021. California Forging Ahead on Zero Emission Buildings. Blog. NRDC. https://www.nrdc.org/experts/pierre-delforge/california-forging-ahead-z….

[6]CEC. 2021. California Building Decarbonization Assessment. Available at: https://efiling.energy.ca.gov/GetDocument.aspx?tn=239311&DocumentConten….

[7]The IRAs Impact on Building Efficiency and Decarbonization Markets (guidehouseinsights.com)

[8] The New York Times. February 16, 2023. “What’s Fueling California’s High Natural Gas Prices.” Available at: https://www.nytimes.com/2023/02/16/us/california-natural-gas-prices.html.

[9] Ibid.

[10] California Climate Investments. Accessed on 26 May 2023. Multi-Family Energy Efficiency and Renewables. Available at: https://www.caclimateinvestments.ca.gov/multifamily-energy-efficiency-renewables

[11] California Climate Investments. Accessed on 26 May 2023. Farmworker Housing Single-Family Energy Efficiency and Solar Photovoltaics. Available at: https://www.caclimateinvestments.ca.gov/farmworker-housing-singlefamily-energy-efficiency-solar-photovoltaics