The Climate Change Bill, which lays down binding targets on emissions, is now law and directly affects the property industry. By Charlotte Eddington
The Climate Change Bill received royal assent on 1 December, at which point it became law. It reflects binding targets agreed by EU leaders in March 2007 for emissions reduction and represents the world’s first legally binding framework to tackle climate change.
The key provisions of the bill include:
? reducing carbon emissions by at least 26% by 2020 and emissions of all greenhouses gases by at least 80% by 2050
? five-year carbon caps (carbon budgets), placing an upper limit on emissions during that period
? an independent, expert committee on climate change to advise the government on how to achieve its targets. The committee is chaired by Lord Adair Turner. Lord Turner was appointed as chairman of the Financial Services Authority in October but is expected to continue his committee role until 2009
? a government duty to assess the risks of climate change to the
? encouraging additional emissions trading, waste-reduction and renewable energy transport schemes.
The government aims to achieve its 80% target through energy efficiency, the increased use of renewable energy and a reduction in total energy consumption through carbon pricing.
Proposed measures
A number of measures are to be used, which include:
? a carbon-reduction commitment (CRC) to target electricity-consuming industries that are not covered by the EU emissions trading scheme
? a renewable transport fuels obligation aimed at reducing road-transport emissions by increasing the use of biofuel
? greater powers for local authorities to develop incentive schemes for reducing household waste and improving recycling
? mechanisms such as green taxes, subsidies and incentives.
The carbon footprint of all businesses and products will be increasingly scrutinised. Large businesses that have not previously been covered by mandatory emissions reporting requirements are likely to have to report publicly on their CO2 emissions under initiatives such as the CRC.
Businesses will be expected to invest in energy-efficient initiatives. This will make economic sense as energy prices rise, and payback periods should become shorter such investment will also provide business opportunities. Business costs will rise as carbon is factored into the purchase, usage and disposal charges of materials, products and processes, so working with supply chains in order to reduce carbon and the associated costs will be crucial.
Effects upon the property industry
The legislation will directly affect the property industry as it faces increasing regulation and scrutiny from the government, other business sectors and the public in the drive to meet the reductions.
The most relevant proposals are the establishment of trading schemes and the creation of waste-reduction pilot schemes.
Reporting is key to this, and various projects have been and are being undertaken around the world regarding the reporting of the effects attributed to property. For example, the Global Reporting Initiative, together with property experts from around the world, is considering how property companies should be reporting their sustainability “impacts”. A property supplement covering this issue is to be published it will be a welcome addition to the existing catalogue of guidance.
The first mandatory cap-and trade scheme – the CRC – will drive energy use accountability. It will involve a large number of participants, namely companies and subsidiaries that use more than 6,000 MWh pa. This equates to a spend of around £500,000 pa on electricity. If the scheme is implemented as intended, those actually using the energy in tenanted buildings will be significantly affected.
The scheme is likely to be the first time that many companies have had to consider the implications of carbon pricing and its effect upon profits. The concept has raised interesting discussions concerning the cost of carbon and issues such as energy-efficiency improvements, landlord and tenant interaction and recharging. As carbon prices increase and the government puts in place the mechanisms and changes, companies will be forced to engage.
The micro level also faces many hurdles. Additional work is required on linking more closely the value of the asset with the operation of the building and investment in efficiency improvements that provide the best returns on cost and carbon reduction. Existing buildings, of course, represent the biggest challenge. Improvements at all stages of the property life cycle are important.
Some work has already been done with regard to the energy efficiency of existing buildings.
For example, the All Party Urban Development Group sought input from key industry representatives. In addition, a number of property companies are leading the way in making fundamental changes to their asset-management programme in order to meet the new emissions targets.
Leaders – and slackers – in the field
Large unit developers such as Gazeley, Goodman and Segro are all developing carbon-neutral schemes. Gazeley’s 31-acre business and logistics park in
Canary Wharf Group’s developments must all meet a BREEAM “excellent” rating, but the KPMG building goes one step further – a target of a 50% reduction in carbon dioxide emissions. This target was worked out over six months with a number of bodies, including the BRE and the Carbon Trust, to establish an achievable target.
Stanhope has set a target of a 20% improvement against Part L (covering conservation of fuel and power) regulations for its new commercial office buildings. BT aims to reduce its
Marks & Spencer, through its plan A strategy, seeks to:
? make carbon-neutral all
? reduce the amount of energy used in stores by 25% psf of floorspace and
? achieve 20% improvement in energy use in warehouses and offices.
John Lewis is hoping to reduce carbon dioxide emissions per £m sales by 10% by 2010 against its 2001-02 baseline, 20% by 2020 and 60% by 2050.
An obvious omission is the public sector. Both national and local legislation would be adopted more readily if the public sector were visibly seen to be embracing its own standards. Although some public bodies have set themselves targets, government reporting shows that only 9% of public buildings meet their minimum standards.
Charlotte Eddington is group head of energy and sustainability at CB Richard Ellis
