The effect of Carbon Reduction Commitment on construction

With the government's Carbon Reduction Commitment due to come into force in a year's time, Beachcroft partner Ben Thornycroft asks whether the legislation will force further changes in construction.

The government's lauded Carbon Reduction Commitment (CRC), which is a central part of the UK's strategy for controlling carbon dioxide (CO₂) emissions, is now little under a year away from coming into force.

The new mandatory emissions trading scheme, which aims to improve the energy efficiency of buildings, will tackle emissions not already covered by Climate Change Agreements and the EU Emissions Trading System. The government hopes it will reduce the country's carbon footprint and help meet the ambitious emissions reduction targets set by the Climate Change Act.

CRC, scheduled to come into effect in April 2010, will affect large organisations in both the public and private sector, which collectively currently account for a third of the UK's CO₂ emissions. Participant organisations will have to monitor their energy use and report on their equivalent CO₂ emissions and purchase allowances, sold by the government at the start of each year, for each tonne of CO₂ they emit.

Following the initial sale, should CRC participants wish to buy further allowances, they can do so by trading with other participants. The more CO₂ an organisation emits, the more allowances it has to purchase. So there is a direct incentive for these organisations to reduce their emissions. The better an organisation performs in terms of reducing its emissions, the higher it will appear in the annual performance league table.

Qualification for the scheme is based solely on having a total half-hourly electricity consumption of at least 6,000 megawatt-hours (MWh). Organisations that have at least one half-hour electricity meter settled on the half-hourly market, but whose annual energy consumption is less than 6,000 MWh, do not have to participate fully.

The government estimates indicate that around 20,000 public and private sector organisations - including retailers, leisure outlets and health trusts - will be required to participate in some way. The majority of these will simply be required to make an information disclosure once every few years that tells the administrator about their electricity usage. Unfortunately, only around 5,000 organisations will be required to participate fully so, more significant is the fact the majority of organisations won't be covered by the scheme.

Energy savings

While on an individual basis those not obliged to participate have relatively low carbon emissions, collectively they constitute a significant contributor. Currently, with the exception of the direct cost of energy savings, there is little incentive for smaller organisations to improve the efficiency of their buildings, or move to a new more energy efficient building.

Energy Performance Certificates, while rating a building's efficiency, don't actually require any improvements or reductions in CO2 emissions to be made. In fact, unlike domestic homes, there is currently no target for zero-carbon new non-domestic buildings. Similarly, as new buildings make up a relatively small proportion of all buildings, the bigger issue remains dealing with existing carbon-inefficient buildings.

One option would be to introduce legislation and incentives for the retrofitting of existing buildings with energy-efficient measures. Given the cost involved and the current economic climate, it is likely to be difficult to persuade people to voluntarily spend money on business premises, particularly while they are falling in value and the likely pay-back is unknown, so some form of legally binding pressure is necessary. The cost of introducing such measures may be political and economic, but not when weighed against the environmental cost of not taking bold steps.

Further to this, addressing the issue of what to do with the current building stock is as much about looking at how buildings are used, for example turning down thermostats and reducing water usage etc, as it is fitting them with carbon efficient technology.

There's no doubt about it, the CRC is a positive step in the right direction. It is indicative of a changing tide of opinion and a sign of growing sentiment on the part of the government to do something about climate change. The CRC will put pressure on developers to build more carbon efficient buildings as tenants seek to avoid the cost of high energy bills or the cost of buying allowances through the CRC scheme.

What remains clear is that there is more to be done to widen the net to encompass those that remain untouched by the CRC when it is introduced. In legal terms, there currently isn't enough in place to ensure a low-carbon approach to building development and refurbishment is adopted.

Aside from the Climate Change Levy and the CRC, all other momentum is currently voluntary or being led by the market and the carbon reduction agenda. Hopefully, old and existing buildings will be caught by legislation in the future. However, rolling schemes out may be a problem - there simply isn't time to take a gradual approach. The CRC should be viewed as one tool and not the answer to all our problems. Rather aptly, it is only the tip of what is undoubtedly a melting iceberg.