08-24-2025, 09:44 PM
Overview
Greenhouse gas (GHG) regulations are increasingly affecting contractors within the construction industry. These laws aim to reduce carbon emissions, promote clean technology, and encourage sustainable practices. While initially centered on large-scale projects and companies, 2025 regulations have started affecting smaller contractors by introducing stricter reporting and compliance requirements.
Key Regulatory Trends
Greenhouse gas laws shape the construction industry by introducing higher standards for energy efficiency, sustainable materials, and carbon accounting. Although some federal mandates faced pushback and withdrawals, the momentum at state and local levels continues. Contractors adapting to these regulations through technology adoption, workforce training, and material selection will position themselves as industry leaders and future-ready businesses while contributing meaningfully to climate goals.
Greenhouse gas (GHG) regulations are increasingly affecting contractors within the construction industry. These laws aim to reduce carbon emissions, promote clean technology, and encourage sustainable practices. While initially centered on large-scale projects and companies, 2025 regulations have started affecting smaller contractors by introducing stricter reporting and compliance requirements.
Key Regulatory Trends
- Many states, including California, have implemented progressive building and energy codes such as the 2025 Building Energy Efficiency Standards and CALGreen Code, which require better insulation, solar-ready designs, and the use of efficient electric heat pumps.
- These standards target reduction of emissions and energy consumption in construction, with an estimated $4.8 billion in energy cost savings and 4 million metric tons of GHG reduction statewide.
- Regulations increasingly emphasize embodied carbon reduction by mandating use of sustainable materials like recycled concrete and bio-based products.
- Contractors are expected to align with lifecycle carbon assessments and adopt technologies like Energy Star appliances and solar panels to meet efficiency requirements.
- A recent federal proposal requiring large contractors to disclose and reduce GHG emissions was withdrawn in 2025 after industry feedback highlighted practical difficulties in accurately measuring emissions related to workforce, materials supply chains, and indirect sources.
- Although the federal GHG disclosure rule was withdrawn, the trend underscores an industry expectation for transparency and environmental responsibility.
- Large contractors (with contracts over $50 million) faced demands to report Scope 1 (direct), Scope 2 (indirect energy), and Scope 3 (value chain) emissions.
- Significant contractors (over $7.5 million) were to report Scope 1 and 2 emissions.
- Such disclosures would have included climate-related financial risks and science-based emission reduction targets.
- Contractors must educate themselves and their teams on evolving regulations and sustainable construction practices.
- Adoption of new technologies like heat pumps requires retraining and updated skillsets.
- Procurement strategies may need adjustment to prioritize low carbon materials and local sourcing.
- Early adopters of green building practices can build competitive advantages by marketing environmentally friendly services.
- Scope 1 Emissions: Direct emissions from owned or controlled sources.
- Scope 2 Emissions: Indirect emissions from purchased electricity, heat, or steam.
- Scope 3 Emissions: All other indirect emissions in a company’s value chain.
- Embodied Carbon: Total GHG emissions associated with material extraction, manufacturing, and transport.
- Heat Pumps: Energy-efficient devices used for heating and cooling as alternatives to fossil fuel systems.
Greenhouse gas laws shape the construction industry by introducing higher standards for energy efficiency, sustainable materials, and carbon accounting. Although some federal mandates faced pushback and withdrawals, the momentum at state and local levels continues. Contractors adapting to these regulations through technology adoption, workforce training, and material selection will position themselves as industry leaders and future-ready businesses while contributing meaningfully to climate goals.
