Energy efficiency regulations in the United States operate on two tracks: federal standards set the minimum performance of appliances and equipment sold anywhere in the country, and state and local rules govern how buildings are constructed, how large buildings report their energy use, and what efficiency programs utilities must run. Several of these rules shifted at the start of 2026, including new restrictions on air conditioning refrigerants and the expiration of the main residential energy tax credits.
Federal Standards for Appliances and Equipment
The efficiency of manufactured products like air conditioners, water heaters, furnaces, and lighting is regulated by mandatory federal standards. The authority traces back to the Energy Policy and Conservation Act of 1975, which lets the U.S. Department of Energy set minimum energy conservation standards for consumer and commercial equipment. 1Office of the Law Revision Counsel. 42 USC 6295 – Energy Conservation Standards Congress has expanded that authority over the years, and DOE now regulates dozens of product categories. A manufacturer cannot legally sell a covered product in the United States unless it meets the applicable performance floor.
Compliance runs through testing and certification. Manufacturers use DOE-prescribed test procedures to measure energy consumption, then submit certification data electronically through the agency’s compliance system confirming that each basic model meets the standard. 2U.S. Department of Energy. Building Technologies Program DOE reviews those reports, selects products at random for verification testing, and issues civil penalties when products fall short. Non-compliant products can be pulled from the market. This is separate from the voluntary ENERGY STAR program, which identifies products that exceed the federal minimums.
DOE revises standards on a regular cycle. Each update must be both technologically feasible and economically justified, so the agency cannot set a standard so aggressive that it drives products off the market or makes them unaffordable. 3Department of Energy. Regulatory Processes
Why States Rarely Set Their Own Appliance Rules
Federal appliance standards preempt state regulation. Once a federal energy conservation standard takes effect for a covered product, no state can enforce its own efficiency requirement for that product except through a narrow set of exceptions. 4Office of the Law Revision Counsel. 42 USC 6297 – Effect on Other Law A state legislature cannot simply pass a law requiring a stricter efficiency rating for residential water heaters than the federal standard demands.
A state can petition DOE for a waiver. If it shows that its regulation is needed to address an unusual local condition and would not unduly burden interstate commerce, DOE may grant one. Building codes for new construction also get carve-out treatment, so a state or local code can require a higher-efficiency product as part of a broader building code under certain conditions. 4Office of the Law Revision Counsel. 42 USC 6297 – Effect on Other Law Outside those channels, the federal standard is effectively the ceiling. That is why most state-level efficiency policy focuses on buildings and utilities rather than on the appliances themselves.
State and Local Building Energy Codes
How a building is designed and constructed is controlled by the state or municipality where it is built. Building energy codes set requirements for the thermal envelope, covering insulation levels for walls, floors, and attics, along with performance criteria for windows and doors. They also govern the efficiency of installed mechanical systems like furnaces, boilers, and water heating equipment.
The most widely adopted framework is the International Energy Conservation Code, a model code published by the International Code Council. The current edition is the 2021 IECC, and it covers both residential and commercial buildings. 5Department of Energy. Commercial and Residential Building Energy Codes States adopt the IECC as a baseline and frequently amend it to reflect local climate or policy priorities. Not every state adopts the latest edition immediately, so the version in force can vary significantly from one jurisdiction to another.
Local building departments enforce the code through plan reviews and on-site inspections. Passing those inspections is a prerequisite for construction permits and the final certificate of occupancy.
The 2026 Refrigerant Change for New AC Systems
A major shift in HVAC equipment took effect on January 1, 2026. EPA rules under the American Innovation and Manufacturing Act now restrict the installation of new residential and light commercial air conditioning systems that use R-410A, a refrigerant with a high global warming potential. 6Federal Register. Phasedown of Hydrofluorocarbons Restrictions on the Use of HFCs Under the AIM Act in Variable Refrigerant Flow Systems New systems installed after that date must use approved low-GWP alternatives, commonly A2L refrigerants such as R-454B or R-32.
The restriction applies to new equipment, not existing systems. If your current air conditioner runs on R-410A, you can keep using and servicing it. When you replace it, the new unit will use one of the newer refrigerants, and installation practices for A2L systems are different in some respects. Limited transition exceptions exist for equipment manufactured before January 1, 2025, and for certain projects with building permits issued before October 2023, but those windows are closing.
Benchmarking Rules for Large Commercial Buildings
A growing number of state and local governments require owners of large commercial buildings to track and publicly report annual energy consumption, a process called benchmarking. 7Environmental Protection Agency. Building Energy Benchmarking and Transparency: Overview for State and Local Decision Makers These policies typically cover buildings above 50,000 square feet and require annual reporting through the EPA’s ENERGY STAR Portfolio Manager tool. 8Energy Data Management Guide. Commercial Building Benchmarking Policies
Once a building’s performance is measured and disclosed, owners can compare their properties to peers and identify improvements. In several jurisdictions, buildings that consistently report poor performance face additional requirements, such as a mandatory comprehensive energy audit. These operational rules focus on how the building runs day to day, covering lighting, ventilation, and heating, rather than how it was originally built.
Utility Energy Savings Targets
Many states impose energy savings targets directly on utility companies through policies known as Energy Efficiency Resource Standards. An EERS sets a quantitative, long-term target requiring utilities to reduce energy consumption by a specified percentage of their retail sales through customer efficiency programs. These targets can apply to electric utilities, natural gas utilities, or both, and can come from legislation or from a regulatory commission order.
Targets vary widely. Some states require annual incremental savings of roughly 1 to 2 percent of retail electricity sales, while others set cumulative reduction goals over a longer horizon. Utilities meet the targets by funding rebates for efficient appliances, weatherization assistance, and subsidized energy audits for residential and commercial customers. When a utility falls short, the state regulatory commission can impose penalties or require additional investment. This is the machinery behind most of the rebate offers homeowners see on their utility bills.
Federal Tax Credits Ending in 2025 and 2026
The tax incentive landscape changed sharply heading into 2026. Two of the most popular residential credits were effectively terminated at the end of 2025.
The Energy Efficient Home Improvement Credit, which covered up to $3,200 per year for upgrades like insulation, windows, and high-efficiency HVAC equipment, was available for improvements made through December 31, 2025, and does not apply to work done in 2026. 9ENERGY STAR. Federal Tax Credits for Energy Efficiency The Residential Clean Energy Credit, which provided a 30 percent credit for solar panels, battery storage, and geothermal heat pumps, similarly ended for property placed in service after December 31, 2025. 10Internal Revenue Service. Residential Clean Energy Credit
For commercial property, the Section 179D energy efficient commercial buildings deduction remains available but faces its own deadline. The deduction allows a per-square-foot write-off for buildings that achieve at least 25 percent energy savings compared to a reference standard, with amounts that increase for deeper savings and for compliance with prevailing wage and apprenticeship requirements. Section 179D does not apply to property where construction begins after June 30, 2026, so commercial owners weighing efficiency upgrades should note that cutoff. 11Department of Energy. 179D Energy Efficient Commercial Buildings Tax Deduction
The broader clean energy production and investment tax credits for electricity generation were not eliminated by the recent reconciliation legislation, but new restrictions apply. Wind and solar facilities generally must begin construction before July 2026 or start producing electricity before 2028 to qualify, and all recipients face new restrictions related to foreign entity involvement. 12Congress.gov. IRA Tax Credit Repeal in the FY2025 Reconciliation Law Part 1