With the passing of each day in the run up to 23 June 2016, we are exposed to more arguments for and against the UK’s exit from the EU. So it would seem remiss not to take this opportunity to flesh out an angle that is less likely to make the headlines: what will Brexit mean for UK environmental real estate policy?
Campaigners on either side of the debate have published a wealth of information highlighting both the pros and cons of leaving the EU – mostly concerning the longer-term impact on trade agreements, investment and labour force movements. However, little is being added to the debate on any issues concerning the environment, even though around 80-90% of UK environmental regulations over the past four decades have arisen directly from EU law. So what happens if Britain decides to leave the EU? Will all, some or none of our environmental policy sit in the firing line?
There is little information at present on what life outside the EU would look like, so the best we can do is to appreciate the extent of the policies that could be affected.
Environmental policies
With this in mind, the first step is to disentangle the complex web of regulations to understand those derived at national, EU and international levels. Given that many environmental issues, including water and air pollution, and climate change do not respect national boundaries, it is no surprise that there have been so many environmental policies established by the EU. This legislation supports global goals such as those in the 1997 Kyoto Protocol and the COP21 agreement made last December, which commits the EU to reduce greenhouse gas emissions by 40% by 2030. Among the EU environmental policies made in recent years, the ones particularly relevant for the real estate sector are the Energy Performance of Buildings Directive (“EPBD”), the Energy Efficiency Directive (“EED”) and the Renewable Energy Directive (“RED”).
λ EPBD: The transposition of the EPBD into UK law in 2007 introduced the requirement to procure an energy performance certificate (“EPC”) when selling or letting buildings, alongside the need for air-conditioning inspections and the target for zero-carbon homes (the latter of which has since been scrapped by the government).
The EPBD also ultimately led to the Energy Efficiency Regulations 2015 requiring a minimum EPC rating of E from 2018. So, what has the EPBD achieved? While many people criticise EPCs – inconsistencies in quality, lack of enforcement and usefulness of the recommendations report – the fact that EPCs are now compulsory has resulted in greater transparency about the efficiency of the UK building stock. In addition, the minimum EPC standards will drive energy improvements in buildings in the medium term. Both of these will help achieve our stretching carbon reduction targets.
λ EED: This aims to meet the EU’s energy saving target of 20% by 2020. This directive resulted in the UK implementing the Energy Savings Opportunity Scheme Regulations 2014 (“ESOS”). This legislation requires large organisations to carry out energy audits every four years and has affected around 10,000 organisations. Despite some critics arguing that the UK created a much more complex and gold-plated approach compared with other European countries, ESOS could be one of the most effective “sticks” we have to improve the operational efficiency of the UK’s existing building stock, with the potential to save businesses more than £31bn between now and 2030 (evidence submitted by the Chartered Institution of Building Services Engineers, November 2015).
λ RED: Brexit could mean mixed messages for the renewables sector. RED established a legally binding target of 20% renewable power by 2020. To achieve this, the European Investment Bank has invested £5.6bn into renewables since 2007, with the UK receiving 24% of this investment and non-EU countries only receiving 12%. Investors into the UK’s renewables market have not indicated that they would withdraw, should the vote to leave be successful, and the government would be keen to increase the proportion of renewables in the electricity mix to reduce exposure to fuel price hikes and safeguard security of supply. On the other hand, given the recent rollbacks on renewables policies by the government (which reduced solar subsidies by 65% and scrapped support for onshore wind), it is hard to believe that the UK would drive investment in renewables without the accountability that being part of the EU brings.
A threat to energy security?
There is concern from some factions that the UK’s exit from the EU could threaten Britain’s energy security. A recent report written for the National Grid by Vivid Economics warned that our exit could cost Britain £500m a year if it also resulted in our exit from the “internal energy market”, which would remove access to low-priced gas, energy storage and secure supplies. Coupled with this is the potential for the cost of infrastructure projects to rise owing to market uncertainty created by Brexit. As with all areas of policy, much of this is subject to the negotiations that would take place in the two years after a “leave” vote, when negotiators would look to establish unilateral agreements aimed at mitigating these risks.
If we do vote to leave the EU, it is unlikely that representatives at the negotiating table are going to abandon more than four decades of environmental legacy created jointly by the UK and the EU. Most experts, even the strong “leave” campaigners, such as MP John Redwood, seem to agree that the government would seek to ensure continuity with existing regulations where possible. Whatever the result on 23 June, we will still need to be held accountable on those global environmental issues that cross our national boundaries.
Emma Hoskyn is a director at JLL Upstream Sustainability Services, UK
