Boston Mayor Michelle Wu speaks to state lawmakers at a Revenue Committee hearing on Wednesday, Oct. 11, 2023. Photo by Chris Lisinski | State House News Service

Boston won’t pursue a ban on fossil fuel-burning building systems in new developments, a key element of Mayor Michelle Wu’s environmental sustainability platform.

Wu had sought for Boston to join a group of nine communities in the first round, citing the building sector’s contribution to climate change. More than two-thirds of Boston’s greenhouse gas emissions are generated by buildings, according to city climate studies.

Real estate groups have warned that the new regulation could make more projects unprofitable, restricting development including housing production.

“We are pleased that the mayor recognizes the challenges associated with a fossil fuel ban at this time and we look forward to working with the Administration to ensure housing and economic development projects can proceed,” commercial developers’ group NAIOP Massachusetts CEO Tamara Small said in a statement.

Non-fossil fuel systems typically come with higher upfront costs for developers, but promise lower long-term projected operating costs.

“If Boston were chosen for the program, it would have sent a strong message. As disappointing as this news is, as advocates, we still have to acknowledge the smaller wins,” Elischa Fludd, executive director of the Massachusetts Climate Action Network, said in a statement. “Many Massachusetts towns were chosen for the program, which puts pressure on the larger cities to follow suit. We hope this decision empowers bolder action and greater cooperation for this type of program to become effective across the state.”

Wu abandoned Boston’s efforts to join the pilot after being notified that it was unlikely to be approved by state regulators, The Boston Globe reported.

The Department of Energy Resources was not immediately available for comment, but a spokesman told the Globe that Boston is “electrically similar” to other communities already approved for the pilot, posing a challenge for the selection process which is designed to draw data from a wide range of municipalities.

Under Massachusetts’ 2022 climate bill, DOER was given authority to approve fossil fuel building system bans for new construction in 10 communities. DOER has approved the pilot in nine communities: Acton, Aquinnah, Arlington, Brookline, Cambridge, Concord, Lexington, Lincoln and Newton.

Northampton, Salem and Somerville also have submitted applications for the 10th and final slot, which opened up after West Tisbury withdrew from the program.

Despite this defeat, Boston developers still face increasingly strict emissions rules.

In July, Wu signed an executive order banning fossil fuel systems in new municipal buildings and major renovation projects.

The Wu administration also has sought to encourage decarbonization of existing building stock while acknowledging the financial burdens on landlords and homeowners. A $10 million grant program is being offered to affordable housing landlords for energy retrofits such as replacement of gas-burning stoves and heating systems.

Development of decarbonized heating and cooling systems in Greater Boston has been primarily limited to multifamily developments using Passive House techniques that include tightly insulated building envelopes.

Millennium Partners this year completed the world’s largest Passive House-certified office building at its Winthrop Center skyscraper in the Financial District. The project is projected to use 150 percent less fossil fuels than a traditional office tower, and developers credit the building’s sustainable design for attracting environmentally-conscious tenants.

Developers of some major commercial projects in Boston are voluntarily designing them with utility systems that run on electricity in all but the most extreme weather conditions. They include Samuels & Assoc.’s 401 Park Drive lab building in the Fenway and the 176 Lincoln St. mixed-use project in Allston by Berkeley Investments and Harvard University. Such projects use built-in heat recovery units combined with electric heat pumps.

Real estate industry groups have warned that new decarbonization regulations, including the natural gas ban pilot and the state’s new opt-in stretch code that took effect July 1, will add another financial hurdle making projects infeasible and drive up the costs of residential construction.