California Air Resources Board

Why is a regulation being considered?

Commercial and residential buildings are responsible for approximately 10 percent of GHG emissions[1] in California due to fossil gas combustion. 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.

Is this potential regulation a ban on gas appliances? Can I still own a gas appliance after 2030 or will I need to replace it before then?

The concept for the regulation would not be a ban on gas appliances. This potential regulation would not limit use or repair of existing fossil gas space or water heaters. Existing gas appliances would not need to be replaced before 2030.  Instead, the concept for zero-emission standards for these appliances 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, gas appliances could remain in operation after 2030.

What is the scope of this potential regulation? Which appliances and equipment 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, comprising nearly 90 percent of all building-related fossil gas demand, contribute most to GHG and NOx emissions from fossil gas combustion in buildings. However, CARB may explore inclusion of other equipment and appliances as well.

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

No, a regulation has not been proposed or finalized. Stakeholder engagement regarding the future rulemaking process will begin in 2023. CARB staff plan to take a proposed regulation to the Board for consideration no later than 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 stakeholders to discuss regulatory concepts. To stay informed regarding this rulemaking, please sign up for updates via CARB’s “Building Decarbonization” listserve.

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 stakeholders. More details on the public engagement coming soon.

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 electrification throughout the country.[3] 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, among other electric appliances. 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 high-efficiency electric appliances. 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.

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.

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

The relative cost of energy, between electricity and fossil gas for space conditioning, water heating, and other appliances 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 appliances 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.[4] 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.[5]   

Supportive electric rate design will play an important role in building decarbonization and minimizing the potential cost burden of increased electricity consumption. 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, if justified, so as not to cause bill increases for customers switching from gas to electric appliances. Publicly owned utilities, Community Choice Aggregators (CCAs), and other small utilities will also need to develop energy rates supportive of building decarbonization.

Would this potential regulation apply to propane appliances and equipment as well?

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

Would this potential regulation apply to equipment and appliances for use in residential and/or commercial buildings?

As envisioned in the 2022 State SIP Strategy, the zero-emission standards would apply to new equipment and appliances 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.

How would this potential state regulation fit in with local air districts’ zero-emission appliance and equipment 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.

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 of electrification, 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[6] and more than 100 million square feet of commercial buildings[7] are newly constructed across California, there are about 14 million existing homes and over 7.5 billion square feet of existing commercial buildings[8] 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.

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

[4] 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.

[5] Ibid.

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

[7] 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….

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