Market Based Incentives for Net Zero New Construction: Encouraging Increased Building Energy Performance for New Construction in Cambridge, MA

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1 Market Based Incentives for Net Zero New Construction: Encouraging Increased Building Energy Performance for New Construction in Cambridge, MA Caroline Lauer July 2018

2 2 Introduction The Cambridge City Council adopted the Net Zero Action Plan on June 22, 2015 as the result of two years of work of the Getting to Net Zero Task Force, which was convened in 2013 to foster a deep conversation among stakeholders to advance the goal of setting Cambridge on a trajectory to becoming a net zero community, with a focus on carbon emissions from building operations. 1 The plan s primary goal was net zero annual emissions from buildings citywide, and it identified and detailed a series of proposed actions to implement from that would result in an estimated 70% reduction in emissions. This report addresses one of the five key action areas of the Net Zero Action Plan: net zero new construction. Specifically, this report responds to the Net Zero Action Plan s call for a market based incentive program that can accelerate the adoption of net zero buildings within the Cambridge community (Action 2.2.1). 2 The project proceeded in four steps to conduct preliminary research on the feasibility of a market based incentive program: 1. Establish a working definition of a market based incentive program. A review of literature was conducted to define a market based incentive and set parameters for the types of incentive programs that could apply in the Cambridge setting. 2. Understand the efforts of other municipalities to incentivize high performance building beyond baseline requirements. Other municipalities efforts to encourage high performance building beyond energy performance baseline requirements were researched and catalogued. 3. Understand the barriers to and opportunities for net zero new construction, specifically in Cambridge. Interviews were conducted with representatives from the local building and developer community in Cambridge to articulate specific barriers facing Cambridge and to better understand the appropriate level of incentive that is needed to overcome those barriers. 4. Investigate possible incentives for further development. Using the information gathered in the previous three steps, several possible incentives were identified for further consideration. The potential development of these incentives is dependent upon opportunities in the Cambridge zoning, permitting, and assessment processes to provide these incentives. Introduction to Market Based Incentives Market based incentives rely on market forces to correct for producer and consumer behavior. They complement regulatory requirements, also known as command-and-control, which are techniques 1 Net Zero Action Plan Executive Summary, 9: 2 See Net Zero Action Plan, Action for more information.

3 3 used to mandate certain levels of performance or the adoption of new technology. Market-based incentives provide motivation for the private sector to incorporate the goal of the policy makers (e.g., pollution or CO 2 abatement) into their decision-making processes and to innovate, continuously searching for lesser cost methods to achieve abatement. Environmental economists prefer marketbased incentives over command-and control approaches because they minimize cost, provide greater flexibility, and encourage innovation. 3 In this case, market incentives would be used to accelerate the adoption of net zero emissions buildings in advance of the target dates identified by the Cambridge Net Zero Action Plan. 4 There are four major types of market-based incentives Marketable permit systems (e.g., cap and trade, project-based trading systems) 2. Emission taxes, fees, and charges (e.g., carbon tax) 3. Environmental subsidies (e.g., grants, low interest loans, and tax incentives) 4. Tax-subsidy combinations (e.g., bottle deposit, fee-rebate program) Both emissions taxes and environmental subsidies are primarily unilateral transactions. A developer pays a fee if their building pollutes in the case of emission taxes, and a government or utility provides funding to limit pollution in the case of a subsidy. Marketable permit systems, or trading programs, allow for multiple interactions between various entities within the system, and they provide flexibility for the firms involved. They are cost-effective approaches with a record of success, such as the U.S. Acid Rain Program. A tax-subsidy combination leverages a tax at the point of creation or point of purchase, and it provides a subsidy when the item is disposed of properly or the goal is achieved. The most common tax-subsidy combination programs is the bottle deposit system for glass and plastic bottles, and these programs are most successful when they are tied to a market transaction. Market Based Incentives in the Cambridge Context The Net Zero Action Plan and conversations with city staff indicated that there are three driving goals for the new construction market-based incentives: 1. Encourage innovation According to Action 2.2 of the Net Zero Action Plan, the purpose of the compelling incentive package is to drive developers to achieve net zero in advance of when net zero new construction requirements are phased in by sector between Economic Incentives, United States Environmental Protection Agency, 4 See Net Zero Action Plan, Action for more information. 5 Economic Incentives, United States Environmental Protection Agency, 6 Net Zero Action Plan, Appendix G, p. 9.

4 4 2. Respect the City s current requirements Incentives should be structured in such a way that buildings that meet the City s current and future LEED Building requirements are not penalized. For example, a performance fee and rebate model that calibrates fees and refunds according to a building s performance has the potential to penalize buildings that meet current requirements but do not go beyond them towards net zero construction. 3. Maintain revenue neutrality The incentive package should be revenue neutral and avoid a direct transfer of municipal funds to developers. Market Based Incentive Precedents for High Performance Buildings A national scan of existing municipal efforts, with assistance from pre-existing databases from the city of Fort Collins, Colorado and the International Living Future Institute, resulted in 36 existing incentive programs, spanning five categories, to encourage new construction to go beyond baseline energy performance requirements. Development Incentives 24 precedents Development incentives included increased density (additional Floor Area Ratio), relaxed height restrictions, expedited review, and reduced or waived permitting fees. They were the most common type of incentive found in the review of incentives. Profile: Arlington, Virginia Arlington offers a tiered level of incentives for buildings that achieve LEED silver, gold, or platinum, and each tier can be increased by achieving one or two of the Arlington priority credits. Priority credits are certain credits of the LEED certification process that the City prioritized, and each priority credit can increase FAR by.025, with a maximum increase of Arlington s priority credits include the following: residential ENERGY STAR certification with a score of 75 or higher within 4 years of occupancy, optimized energy performance (either 9% or 12% improvement above the LEED baseline), envelope commissioning, renewable energy production, on-site habitat restoration, light pollution reduction and bird friendly facades, and building reuse and materials salvage. For more on priority credits in Arlington, please see: Priority-Credits.pdf

5 5 TABLE 1: ARLINGTON S TIERED GREEN BUILDING DENSITY BONUS STRUCTURE LEED version 4 Office 8 or Residential Priority Credit Bonus (+.025 for one, +.05 for two) Total Bonus FAR Available Silver Gold Platinum A project that achieves at least LEED Gold certification, 2 Arlington priority credits, and Net Zero Energy Building certification from the International Living Future Institute may apply for a bonus density above.55 FAR Property Tax Abatement Incentives 6 precedents Tax abatement rebate programs in Cincinnati, Ohio, Baltimore County, Maryland, and Houston, Texas offer a rebate as a percentage of tax assessed value depending on the performance of the building for a certain number of years. 11 Profile: Cincinnati, Ohio Cincinnati offers a tax abatement rebate on the improved value of a building for new construction and retrofits within their Community Reinvestment Area (CRA). CRAs are the geographic boundaries of an economic development program designed to encourage investment, revitalize the existing building stock, and develop new structures. For buildings meeting certain energy performance levels, the terms of the abatement are extended for longer periods of time and the cap on the maximum amount is raised. New buildings qualify for 15 years of tax abatements and renovated buildings qualify for ten years of tax abatements. The amount of the abatement is determined by the County Auditor s office, which specifies the increased value due to the qualifying improvements. For a new building, its tax payment is calculated on the building s value before it was built (the land value). For a renovated building, its tax payment is calculated on the building s value before energy improvements were made. The cap on tax abatements depends on the performance level (LBC Living, Petal, and LEED Platinum 8 Commercial office buildings must also agree to earn ENERGY STAR building certification within four years of occupancy The Net Zero Energy Construction definition requires the building to generate as much clean energy onsite as is used by the building over the course of the year. 11 Residential Tax Abatements, City of Cincinnati, Ohio, Development/Homebuyers/Residential-Tax-Abatements.aspx. High Performance Buildings Tax Credit, Baltimore County Government, buildings.html. City of Houston Property Tax Abatement for Green Commercial Buildings, North Carolina Clean Energy Technology Center,

6 6 have a 100% tax abatement with no cap, whereas LEED Certified is capped at $275,000). They offer a similar incentive for visitability and accessibility. The length of time and the cap on the property tax abatement depends on the building s performance. 12 Utility Connection Incentives 4 precedents These incentives offer an expedited service connection process and fee reduction for utility (both energy and water) connections. Profile: Lincoln County, North Carolina Lincoln County, North Carolina offers a suite of incentives for new commercial or industrial buildings worth more than $2 million. In addition to a tax rebate, buildings can qualify for up to 95% fee discount of water and sewer connection fees if they are LEED certified, LEED Silver, LEED Gold, or LEED Platinum. The connection fees are discounted on a tiered scale depending on the performance of the building. Tax-Subsidy Incentives or Feebates 1 precedent Tax-subsidy combinations incentivize high performance buildings and discourage inefficient buildings by rewarding projects on a sliding scale depending on performance. The fees paid by poor performing buildings fund the rewards given to high performing buildings. Profile: Miami Beach, Florida Miami Beach, Florida offers a one-time cash rebate to projects that meet certain performance requirements. The cash rebates are funded by the Sustainability Fund, which was created through Miami Beach s Sustainability and Resiliency ordinance. Developers must contribute 5% of the total construction valuation of the building permit to the Sustainability Fund to obtain a Temporary Certificate of Occupancy, Certificate of Occupancy, or Certificate of Completion. The better the building performs, the greater percentage of the sustainability fee that is recovered. The highest possible refund is 100% of the initial fee. 13 Carbon Cap and Trade Market 1 precedent The final type of incentive was a carbon cap and trade program. In this type of program, a greenhouse gas emission allowance is determined, and transactions (purchases or sales) between emitters occur on a carbon market. Emitters who are in excess of their allowance must purchase offsets, sold by emitters who are below their allowance, on the carbon market. 12 Residential Tax Abatements, City of Cincinnati, Ohio, Development/Homebuyers/Residential-Tax-Abatements.aspx. 13 Ordinance No , February 10, 2016,

7 7 Structure of Carbon Cap-and-Trade Market 14 Profile: Tokyo, Japan The Tokyo Metropolitan Government launched the Tokyo Cap-and-Trade Program in 2010 to reduce the amount of energy consumed by office buildings and other large-scale commercial facilities, which account for 40% of the city s energy consumption. The program was the first urban cap-and-trade program in the world and remains the only municipal program to date. Any facility that consumes more energy than 8,000 MMBtu of energy per year must participate, and thus far there have been two compliance periods (FY and FY ). The compliance period for emissions reductions began at 8% reduction for office buildings during the first period and was increased to 17% reduction for office buildings during the second period. Thus far, the program has been extremely successful and has achieved a 25% reduction from baseline CO2e emissions over the past five years. 15 High Performance Building Barriers and Opportunities A review of the existing literature identified the following four potential barriers to greater adoption of high performance building beyond code requirements. High Additional Cost A common theme throughout the existing literature was developers hesitancy to justify the additional capital cost of net zero construction, with a particular emphasis on the cost of including renewable energy generation. A 2015 report by Efficiency Vermont found a cost premium of 6 16% for 14 Shawn McGarrity, Cap and Trade in Ontario, Efficiency Engineering, July 31, 2017, 15 Tokyo Cap-and-Trade Program, Tokyo Metropolitan Government,

8 8 net zero construction, though this premium does not include savings on operations and maintenance. 16 A Better City was encouraged by these results and wrote that costs are rapidly evolving and coming closer to business as usual cost parameters. 17 The higher cost has affected who has built net zero buildings thus far: they are typically owner-occupied buildings or developed by mission-driven organizations. However, cost estimates vary widely. Perception While net zero construction does require more initial capital, the perception of costs (for both renewables and net zero construction techniques) is higher than the actual costs. There is also a perception that net zero energy is not possible in colder climates such as New England, especially in intensive energy use buildings, such as laboratories. 18 The feasibility perception extends to grid integration of renewable energy, and developers worry that it is not possible or will be extremely difficult to do so. Additionally, there is a perception of high risk in these projects. Developers are anxious about trying new techniques with uncertain returns on investment. A master s thesis on net zero construction in Seattle found that, most developers do not want to be the first to try different ways of constructing buildings as the development process itself involves high levels of risk and volatility, but they are relatively open to new construction methods as long as the return on investment is justified. 19 Education and Training Related to perception issues is the need for education and training in the construction, design, and building operation industries. As stated in a Pike Research 2016 report, Educating all parties from the designers to contractors to occupants on the core concepts is imperative to achieving net zero energy. 20 Architects and contractors who are well versed in net zero energy will be able to more clearly articulate the benefits to developers and advocate for net zero energy construction. Additionally, net zero buildings will need to operate at high performance levels, and this will require highly skilled and continuously educated workers for managing and operating the building. Financing Finally, the lack of financial lenders who understand the value of net zero energy has also been identified as a barrier. Developing unique financial products could boost net zero energy adoption Maclay Architects Net Zero Energy Feasibility Study: Summary Report. Efficiency Vermont The Commercial Net Zero Energy Building Market in Boston, by A Better City, May Ibid. 19 Daniel Koh An Analysis of Market, Financing, Regulatory and Geographic Barriers to Zero Energy Buildings, Eric Bloom and Clint Wheelock Zero Energy Buildings: Global Market, Regulatory, and Technology Analysis for Energy Efficiency and Renewable Energy in Commercial and Residential Buildings. Pike Research The Commercial Net Zero Energy Building Market in Boston, by A Better City, May

9 9 High Performance Building Barriers and Opportunities in Cambridge, MA The review of literature on national barriers to net zero construction was supplemented with a Cambridge-specific perspective through interviews with design and developer professionals. Interview Structure Four, 30-minute, semi-structured interviews were conducted with four city contacts within the design profession, including: Tom Chase: Project Manager for New Ecology Christopher Nielson: Green Design Consultant Connor McGuire: Director of Sustainability for Columbia Construction Jacob Knowles: Director of Sustainable Design for BR+A Over the course of the interviews, we began by discussing high performance buildings that the interviewee had worked on and the barriers they faced to increasing energy performance beyond baseline requirements. Respondents detailed the various barriers facing high performance and net zero new construction, as well as incentives that they believed would have helped them to overcome the barrier. We also discussed non-financial measures that could accelerate net zero buildings, such as educational campaigns or access to trainings, and their utility in advancing the adoption of net zero building technology. Findings The conversations ranged widely, but four themes emerged during the interviews. Overwhelming support for development incentives such as density bonuses, relaxed height restrictions, and reduction in parking requirements. Every interviewee responded that the opportunity for increased density would be the most compelling incentive. They referred to it as the most efficient way for a developer to increase the project s value. It was also praised for being an easy incentive to explain and something that developers were familiar with from previous projects. Perception of cost is a major barrier. An interesting point of discussion during the interviews, some definitively said that cost was a major barrier for high performance buildings, while others said that high performance buildings is cost competitive when analyzing the entire package (rather than a measure by measure comparison). While there was not agreement on this aspect, everyone agreed that the perception of net zero building technology is that it is expensive and complicated, so it results in a cost addition in the developer s calculations. No one was able to offer a precise percentage for the cost addition. Financial incentives would likely need to pay for the entire cost of the improvement. The interviewees emphasized that the cost to go from business as usual to a net zero project varies widely from project to project, so there was support for the density bonus because of the flexibility it gives to developers. Unless the increased density is comparable with the cost of the energy performance investment, developers will not be interested.

10 10 Mixed opinions on the value of educational materials or facilitated training. One respondent acknowledged a learning curve in the design field for net zero buildings and that some design firms are still trying to figure out the best approach, also noting that developers were afraid of net zero and that educational materials may ease their concerns. The other three respondents, however, doubted the value of the City providing educational resources. They stated that the design field was already saturated with educational opportunities, and they thought that developers and contractors would view educational resources as a cost because it was time spent not working on a specific project. One suggestion was to use a lighter touch that hints at education by asking if anyone on the team is Passive House certified during the permitting process, but not requiring the certification. CHART 1: BARRIERS AND OPPORTUNITIES FOR MARKET BASED INCENTIVES IN CAMBRIDGE, MA Barriers incentive Potential Market Based Incentives for Net Zero Construction in Cambridge, MA The working definition of a market based incentive established in the beginning of this report set a series of parameters for potential net zero new construction incentive programs in Cambridge, including the encouragement of innovation within the building sector, respect for the City s current requirements (e.g., not punishing buildings that meet baseline requirements), and revenue neutrality. While this working definition constrains possible structures, the incentive must also respond to the barriers and opportunities within the Cambridge market that have been elucidated in the review of literature and interview processes. Five possible incentive structures are presented below and could be developed to encourage net zero new construction in Cambridge. They align with the working definition of a market based incentive to varying degrees and are informed by precedents of other municipalities that have incentivized high performance building. Presented in order of their potential, each incentive begins with a simple

11 11 evaluation chart before offering a brief discussion of its structure, strengths, and weaknesses, such as how well it responds to current opportunities to advance net zero new construction. At the conclusion of this section, each incentive s evaluation chart is combined to form a summary matrix that illustrates the strengths and weaknesses of the approaches in comparison to one another. 1. Development Incentives: Density Bonuses (Increased Floor Area Ratio and Height) TABLE 2: EVALUATION OF DENSITY BONUS INCENTIVE Incentive Encourages Innovation Respects Requirements Revenue Neutrality Political Support Summary Score Density Bonus Density bonuses, or increased Floor Area Ratio (FAR) and height, would allow developers to build at a higher density or height in exchange for higher building performance. The potential to build at higher densities and earn greater profits encourages innovation because developers will try to access the density bonus in the most efficient manner possible. It respects existing baseline performance requirements because it is voluntary and does not punish business as usual buildings, and it is revenue neutral because the City will not be providing any direct financial funding to create the incentive. The administrative and enforcement process, however, will likely require staff support if it were to be implemented. The primary weakness of the density bonus is the competing interests that also leverage density bonuses to achieve public goods, such as density bonuses for projects that provide affordable housing. The Envision Cambridge 22 process will provide greater detail on the willingness of the community to support density bonuses for net zero new construction. The political support from the developer and design profession is strong, and this was the most popular incentive mentioned in interviews. It is considered simple, easily understood, and extremely attractive to those who are building in Cambridge. Further analysis and research is needed to understand the amount of additional density that the Cambridge market can support and that residents are willing to tolerate, the appropriate amount of the bonus that will make it an attractive incentive, and how the incentive will relate to other density bonuses already in place to support the development of affordable housing. More information on the next steps for this research is included in the Future Research and Next Steps portion of this report. 22

12 12 2. Carbon Cap-and-Trade Program TABLE 3: EVALUATION OF CARBON CAP-AND-TRADE INCENTIVE Incentive Encourages Innovation Respects Requirements Revenue Neutrality Political Support Summary Score Cap & Trade * * assuming new and existing buildings are included in program Tokyo s success is a fascinating case study of the possibilities for a city implementing a cap-andtrade program, and similar programs for acid rain have proven to be extremely successful in encouraging innovation and accelerating pollution reduction. While it is an efficient way to reduce emissions, it violates the condition that the incentive should not penalize business as usual buildings that meet existing requirements. In order to move beyond baseline emissions, the cap will need to be set at levels below current emission trajectories, which will penalize buildings that meet existing code. Additionally, cap-and-trade would extend beyond new buildings to encompass both new and existing buildings. Aside from administration and set-up costs, the incentive would be revenue neutral and not require a transfer of funds from the City to developer. Political support is temperate given the uncertainty of establishing such a program at a municipal level and the multitude of questions it raises about including both new and existing buildings, establishing a cap-and-trade program within the Regional Greenhouse Gas Initiative (RGGI) territory, and its relationship with a potential Local Carbon Offset Fund in Cambridge. Cap-and-trade currently poses a series of difficult questions and would require a thoughtful education campaign, but it may be a worthwhile option in the future. 3. Sustainability Feebate TABLE 4: EVALUATION OF SUSTAINABILITY FEEBATE INCENTIVE Incentive Encourages Innovation Respects Requirements Revenue Neutrality Political Support Summary Score Feebate The Feebate was originally suggested in the initial Net Zero working group efforts, and the precedent from Miami Beach, Florida avoids the possibility of negative revenue between the city and developers and attempts to avoid punishing buildings that meet existing requirements. Following the Miami Beach model, all new buildings would contribute to a Sustainability Fund because they contribute to the City s costs of reducing its carbon footprint and they are contributing to the overall square footage. This contribution would be a percentage of the total construction valuation, and it would be calibrated to an amount that would be on par with net zero new construction. If the project were to meet net zero benchmarks, it would receive a rebate from the original Sustainability Fee. The maximum rebate would be 100% of the Sustainability Fee, and it has the possibility of being revenue positive if a building is ineligible to recoup its entire initial fee. This construction of the Feebate

13 13 ensures the City doesn t pay more than it has, but there is the possibility of a revenue surplus, which could be legally problematic. If calibrated correctly, a sustainability fee that is competitive with the cost of moving from business as usual to net zero construction, the appeal of recovering the fee will encourage innovation in new building projects. The Sustainability Fee imposes the fee on all new buildings unconditionally, but it penalizes buildings that meet the minimum code requirements because they will not receive the rebate. This may pose communication and perception challenges. If the fee is large enough to spur net zero new construction, then it will likely be onerous on the buildings that opt to meet baseline requirements. Finally, the political support for imposing a new fee on development is also unpopular at this moment, leading to a mediocre overall score for the incentive. 4. Low Interest Revolving Loan Fund TABLE 5: EVALUATION OF LOW INTEREST REVOLVING LOAN FUND INCENTIVE Incentive Encourages Innovation Respects Requirements Revenue Neutrality Political Support Summary Score Revolving Loan A revolving low interest loan fund that provides low-interest access to capital for buildings pursuing net zero new construction is not a competitive incentive option at this time. Given the findings from the developer interviews, conversations with City staff, and the current financial landscape, there is limited evidence that access to capital is enticing enough to encourage innovation for net zero construction. Traditional financing is satisfactory, and developers are not interested in seeking out different forms of financing for their projects. For these reasons, there is little political support for developing a revolving loan fund. Instead, resources should be directed towards initiatives that will drive down emissions from buildings. If access to capital were to become more difficult in the future, the loan fund may be more viable. It does respect existing requirements as it is voluntary and would not punish a building that is not pursuing net zero new construction. It would require an initial source of funding to capitalize the fund and have administrative costs, but it would be revenue neutral after this initial seed funding. The two key components that lead to this incentive s negative score, encourages innovation and political support, may change in the future and dramatically change the summary score, so this option should be reserved for future consideration. 5. Property Tax Abatement TABLE 6: EVALUATION OF PROPERTY TAX ABATEMENT INCENTIVE Incentive Encourages Innovation Respects Requirements Revenue Neutrality Political Support Summary Score Tax Abatement

14 14 A property tax abatement model is not a viable incentive option at this time. If it were the follow the structure of the precedent from Cincinnati, Ohio, the city of Cambridge would offer a tax abatement to net zero buildings. The abatement would be limited to a certain amount and would expire after a determined number of years. While it respects existing requirements, does not punish buildings that meet current standards, and may encourage innovation, it is not revenue neutral and does not have the political support to continue. The temporary or partial elimination of property taxes paid would reduce operating income for the City and place limitations on City services. Although the City would not be paying the developers directly through a cash incentive, the tax abatement functions as a direct transfer of funds because the property will be exempt from paying a portion of their property taxes for a period of time. These characteristics stymie political support and eliminate it as a potential incentive at this moment. Evaluation of Potential Incentive Programs Table 7 combines Tables 2 6 to illustrate how the incentives compare to one another, showcasing each s respective strengths and weaknesses. The simple colors of green, yellow, orange, and red indicate the relative positive (green) or negative (red) performance of the incentive within that particular category. This table is meant to complement the more detailed descriptions offered in the above section and serve as a starting point for comparison and discussion. TABLE 7: EVALUATION MATRIX OF POTENTIAL INCENTIVE STRUCTURES Incentive Encourages Innovation Respects Requirements Revenue Neutrality Political Support Summary Score Density Bonus Cap & Trade * Feebate Revolving Loan Tax Abatement * assuming new and existing buildings are included in program Future Research and Next Steps This research process has identified two possible incentives that merit future research: density bonuses and a cap-and-trade program. Both of these incentives ranked at the top of the five possible incentives that were researched and evaluated within the Cambridge context. Next steps associated with each option are detailed below. Collaboration with Envision Cambridge to Explore Density Bonus Incentive To inspire leadership and encourage investment in innovation, it is recommended that the City of Cambridge develop compelling incentives to drive achievement of net zero emissions buildings in advance of the net zero new construction requirements being phased in by sector between 2022 and The City will explore the potential impact of offering density bonuses to projects that achieve net zero emissions (Net Zero Action Plan Action 2.2.2).

15 15 The Envision Cambridge working group assessment process has identified density bonuses for net zero buildings as one of multiple potential community priorities. In order to move forward with concrete recommendations for potential net zero density bonuses, it is necessary to further quantify the nature and magnitude of these bonuses. A preliminary investigation of precedents of other jurisdictions that have offered density bonuses to achieve green buildings beyond the minimum standards has been completed, and a team has begun additional research on the level of incentive needed to achieve net zero emissions buildings. This future research will recommend specific levels of the density bonus by building type and geographic location, evaluate how the bonus will interact with density bonuses used to meet other community priorities, such as affordable housing, and specify an administration and enforcement structure. Preliminary Research on Carbon Cap-and-Trade Precedents Carbon cap-and-trade approaches represent another path for valuable future research. Research questions will address precedents at municipal, state, regional, and national levels, explore how cap-and-trade could be implemented in the Cambridge context, program design and administration, and the potential impact it could have on Cambridge s greenhouse gas emissions and pathway to becoming a net zero energy community. This research will also need to explore possible conflicts with the Regional Greenhouse Gas Initiative and if or how it could be incorporated into a local carbon offset fund. Preliminary research will provide the foundation for a more in-depth study by a dedicated team of consultants. Conclusion The Cambridge Net Zero Action Plan recommended that the City pursue market based incentives to encourage new buildings to innovate and achieve greater levels of energy performance than required in advance of the Net Zero standards for new buildings. This study reviewed potential market based incentive approaches based on literature review and precedents in other communities and considered how they could align with the City s parameters for market based incentives along with the incentive needs of Cambridge building developers. It can be concluded that traditional market incentive approaches such as the feebate structure contemplated by the Net Zero Task Force may not effectively drive higher building energy performance without violating the City s principles of revenue neutrality and avoiding penalizing buildings that meet current performance standards. However, alternative incentive structures such as density bonuses and cap-and-trade do have the potential to lead to higher performing buildings in Cambridge and should be studied further.