The rules of the game are changing — fast. Building codes are getting stricter, carbon targets are becoming law, and there’s more money than ever on the table to help projects comply. For those of us in the plumbing and mechanical trades, that means system design is no longer just about meeting specifications; it’s about meeting emissions goals, taking advantage of incentives and navigating a patchwork of evolving regulations.

Whether you're working on a high-rise in New York, a school in the Midwest or a hospital in California, chances are you're already seeing the shift. Let’s break down how new codes are driving design decisions, where incentives can tip the scales and why carbon is becoming the new metric for success. If you’re looking to stay ahead of the curve and help your clients do the same, now’s the time to pay attention.

When codes drive design

Not long ago, designing a building system was a relatively straightforward equation: meet the code, hit the budget and deliver comfort and efficiency. But, today, that equation has changed.

Walk into a design meeting in New York or Los Angeles, and chances are the conversation won’t start with equipment specs or duct layouts; instead, it’ll likely start with carbon caps, electrification timelines and whether the proposed systems will be compliant not just now, but ten years from now.

Building performance laws are moving fast, and the pressure to decarbonize is turning what used to be routine design decisions into complex risk calculations. Engineers, contractors, and project managers must now factor in long-term emissions performance alongside efficiency, cost and comfort.

All across the country, codes are now active drivers of system design with direct consequences for what engineers can design and what contractors can install. Let’s take a closer look at two of the most influential code frameworks changing the game, New York City’s Local Law 97 and California’s Title 24.

New York City’s Local Law 97

Since its passage in March 2019 as part of the Climate Mobilization Act, Local Law 97 (LL97) has risen from policy ambition to a regulatory powerhouse reshaping how systems are designed and buildings operate. The law’s bold targets (40% emissions reduction by 2030, net zero by 2050) now stand as the defining constraints on large building retrofits and new systems. LL97 applies to existing buildings over 25,000 square feet, making it one of the most ambitious climate laws targeting existing structures anywhere.

The law officially took effect on January 1, 2024. Buildings were required to submit their first emissions report by May 1, 2025, with owners who exceed emissions caps looking to face penalties of $268 per ton of CO₂e over the limit. Without action, the percentage of noncompliant buildings is projected to jump from ~11% in 2024 to ~63% by 2030.

What’s the point of this law? Well, buildings account for a staggering 70% of New York City’s greenhouse gas emissions. Local Law 97 aims to cut emissions from large buildings, which produce 30% of building-based emissions despite constituting just 2% of the city’s building stock.

According to Ryan Colker, executive director of energy, resilience & innovation at International Code Council, “Jurisdictions are navigating a complex legal landscape, and in many cases, the path forward is unclear. Depending on location, they may face court rulings or legal requirements that could potentially limit their ability to harmonize electrification codes.” As one of the stricter laws on curbing emissions, reaching these goals is no easy task.

So, who’s on track? As of early 2024, 89% of covered buildings are meeting the 2024 limits — an encouraging sign. But, for the 2030 window, projections indicate 63% of buildings will fall short unless significant changes are made.

While there are assistance programs for building owners trying to reach these goals, like:

• The NYC Retrofit Accelerator, which provides advisory services and connects owners to vetted contractors at no cost
• Urban Green Council and other non-profits, which offer carbon calculators and best practice guides
• The NYC Housing Preservation Department assists with energy improvements through grant programs for affordable housing
• The city announced a “good faith effort” to give building owners an extra two years to comply with plans.

What resources do tradesworkers have? Thankfully, quite a few! Colker continued, “The Code Council has a variety of resources to help engineers. Our Digital Codes Premium (DCP) platform provides online access to the latest codes, calculator tools and an AI Navigator.” These tools are typically easy to use, and are designed to help professionals find code provisions quickly. “DCP also includes responses to the frequently asked code interpretation requests we’ve received.

“Outside of the codes themselves, the Code Council also offers an extensive training program that includes courses on the latest code editions to help users better interpret and apply the codes in the field.”

With compliance creeping closer and penalties stacking up, the message is clear: designing today means designing with carbon caps and retrofit roadmaps in mind.

California’s Title 24

Now, picture a project kickoff in California. Instead of asking where the gas line goes, architects and engineers are asking, "How ready is the panel for an all-electric future?" California’s building energy code, Title 24, has leapt from behind-the-scenes regulation to a defining design driver for every new construction project.

California’s Title 24 building energy code has undergone significant updates in recent years, and even more transformative changes are already on the way. The 2022 code cycle, which was adopted by the California Energy Commission on August 11, 2021, officially went into effect on January 1, 2023.

These standards marked a turning point by requiring electric-ready infrastructure for all new residential and multifamily buildings that still include gas or propane appliances. Builders must now install dedicated 240V electrical circuits, provide labeled panel space and ensure that buildings are prepped for future electrification of heating, water heating, cooking and clothes drying.

Looking ahead, California is preparing for the next wave of updates. The 2025 Title 24 code cycle, which includes updates to CALGreen (Part 11 of Title 24), is set to take effect on January 1, 2026. This update is expected to push further into electrification by potentially phasing out “electric-ready” provisions and replacing them with mandatory all-electric requirements for space and water heating in many building types.

Additional CALGreen proposals include new requirements for construction waste diversion, stormwater management and even bird-safe glazing; all signaling California’s broadening vision of sustainable building design.

These changes — past, present and pending — reflect a state-wide policy commitment to deep decarbonization, electrification and climate resilience. For engineers and contractors, staying current with Title 24 isn’t just about passing inspections; it’s about designing systems that are code-compliant on day one and future-proof for decades to come.

Turning incentives into opportunities

Laws aren’t the only things pushing for electrification. Tax credits, rebates and utility programs all offer financial incentives that can often reduce upfront costs for electrification and energy-efficient upgrades.

The Inflation Reduction Act (IRA) and Department of Energy (DOE) funding are key to this opportunity, offering layered savings that can transform project feasibility. The key is stacking incentives wisely by combining federal tax credits with DOE rebates, state- and utility-level programs.

Now, the big question: how are the Inflation Reduction Act and DOE funding offsetting upfront costs? For IRA tax credits, there are two major players: the Residential Clean Energy Credit (Section 25D) and the Energy Efficient Home Improvement Credit (Section 25C).

The former covers 30% of the cost of clean energy systems such as solar panels, geothermal heat pumps or battery storage from 2022 through 2032, and usage tapers to 26% in 2033 and 22% in 2034. The latter also offers a 30% deduction for upgrades like heat pumps, insulation, windows and electrical panels: available from 2023 to 2032, and capped at $1,200/year for renovations and up to $2,000 for appliances like heat pumps.

The IRA also directs significant funding to the DOE for immediate rebates:

• High-Efficiency Electric Home Rebate Program (HEEHRP): Allocates $4.5 billion over 10 years to help low- and moderate-income households pivot toward electrified systems. Rebates reach up to $14,000 per home (e.g., $8,000 for heat pumps, $1,750 for heat pump water heaters, $4,000 for panel upgrades, $2,500 for wiring, $1,600 for insulation, and others)
• DOE HOMES & HEAR Rebate Programs: These can be combined with 25C tax credits on overlapping retrofit work.

For instance, a case study from the Department of Treasury reported that one homeowner, Anthony Evans, received a $2,000 HOMES rebate on a mix of heat pump and insulation work, and then claimed $900 in tax credits, bringing a $5,000 project down to just $2,100 net.

The real advantage lies not just in any single program, but in stacking them: applying DOE rebates against equipment cost, then using tax credits on the remaining portion and topping it off with utility-level incentives. Many project decisions that previously seemed cost-prohibitive now become feasible, and even economically compelling!

The middle ground: hybrid systems

As electrification accelerates, hybrid systems — especially in HVAC and water heating — are carving out a practical middle ground. Combining electric and fossil-fuel technologies, these systems offer resilience, grid flexibility, and code compliance without requiring a full departure from legacy infrastructure. In many climates and applications, hybrid designs aren’t just a compromise, they’re a strategic choice.

One area where hybrid solutions are gaining traction is water heating. Heat pump water heaters (HPWHs) are increasingly used in combination with electric resistance or gas backup elements to deliver both efficiency and reliability. These systems not only reduce emissions but also offer opportunities for grid-responsive operation.

"Driven by regulations, demand response for HPWH has become more common in specific jurisdictions,” notes Julian Ferrante, product manager of residential electric and heat pump at Bradford White. “With permission of the consumer, utility companies can message the water heater to use more or less electricity during different times of the day. If the utility company has time-of-day pricing, this helps optimize the consumer’s electric bill while also allowing the utility company to manage load on the electrical grid."

This kind of demand flexibility is becoming essential as utilities respond to peak demand pressures and electrification policies converge. Hybrid HPWH systems, especially those with grid-integrated controls, allow utilities to "pre-heat" water during off-peak hours.

Meanwhile, upcoming federal efficiency mandates are accelerating the shift toward heat pump technology in both residential and commercial sectors. The DOE has announced new standards for water heaters that will take effect in October 2026 for commercial units, and May 2029 for residential models.

“For residential water heaters, HPWH today meets these anticipated requirements for electric water heaters,” notes Ferrante. This positions hybrid systems as a code-compliant and future-ready option—offering a bridge to full electrification while allowing building owners and operators time to adapt.

In many cases, incentives and compliance pressures are tipping the scales. When paired with demand response programs and smart controls, hybrid systems can qualify for both IRA-backed rebates and utility incentives, offsetting first costs while setting the stage for long-term decarbonization.

The road ahead

The trades are standing at a pivotal crossroads. Across the country, building codes are tightening, carbon caps are gaining teeth, and performance metrics are expanding from energy use to full lifecycle emissions. Incentives are helping bridge the gap — for now — but many of the most generous tax credits and rebate programs have expiration dates or diminishing returns.

For engineers and contractors, the challenge is no longer just staying code-compliant; it’s staying carbon-smart. Those who understand how to navigate evolving regulations and leverage incentives strategically will be best positioned to lead their clients through the transition.

Whether it’s choosing heat pumps, designing compliant systems or preparing for the next round of DOE standards, the future of the trades will belong to those who design not just for performance, but for permanence.