Property has been a key target in the UK government's plans for reduction of greenhouse gas emissions. This is no surprise given that buildings account for nearly 50% of the country's emissions as a whole. Over the last decade we have seen a raft of legislation and regulations aimed at the construction and design of new buildings, and restrictions on the refurbishment of existing building stock. The UK government has introduced Energy Performance Regulations for the property industry and most recently following from the Climate Change Act 2008, the government has introduced an emissions trading scheme under the Carbon Reduction Commitment Energy Efficiency Scheme Order 2010. Change is taking place and the property industry is playing its role to reverse the trend of increasing carbon emissions. However, on a related matter, the progress to date across European countries for the reduction of energy consumption is not on track to meet the European Union's overall target to reduce energy consumption by 20% by 2020, the projections estimating that only half that target will be reached.
Energy Efficiency Plan 2011
The European Council has requested "determined action to tap the considerable potential for higher energy savings of buildings, transport and products and processes" (European Council Conclusions 4/2/2011 Nr: EUCO 2/11). As a result, the European Commission published a new Energy Efficiency Plan in March 2011 (EU Plan). The EU Plan indicates that improvements in energy efficiency can provide the most effective method of protecting Europe's energy supply for the future as well as aiding its attempt to create a more carbon neutral Europe.
The Member States have already set out their targets and are implementing their strategies for reducing energy consumption. These will require to be reviewed and, if necessary, revised to ensure the progress takes each country more in line with the rate of improvement that is necessary to meet the EU target. The suggestion is that if a European Commission review of Member States' progress (scheduled for 2013) does not reveal a significant increase in efficiency, the European Commission may set binding targets for the Member States to ensure the 20% reduction in energy consumption is achieved.
Although the implementation of this plan focuses on a range of sectors including transport and industry, the main area of focus (and the area in which the greatest potential for savings lies) is the energy consumption within buildings.
The European Scrutiny Committee in the House of Commons has considered the EU Plan. In its report, it states that the Minister of State for the Department of Energy & Climate Change confirmed that the UK government is also of the opinion that more effort is needed to ensure the EU targets are met by 2020. The Committee supports the proposals, which refer to current strategies by the Member States, but the Committee also expresses gratitude for the current position that action will be taken at EU level where necessary but that national programmes are still encouraged for policy making. Currently, the UK has a number of initiatives under way which endeavour to achieve the necessary targets but it may be that there is scope within those to adopt some of the recommendations of the EU Plan to enhance the likelihood of success.
The Green Deal
One of the main focuses of the EU Plan for property is the renovation of buildings. The UK is already acting on this subject in terms of the Energy Bill 2010-11 and the government's proposals in terms of the "Green Deal" published last year. Recognising that the UK has some of the oldest building stock in Europe, renovation is a necessary step. The EU Plan provides an example from Odysee indicators, www.buildup.eu, which reveals that almost two thirds of energy consumption is for space heating. The Commission is of the view that techniques to reduce existing buildings' consumption are available in the market place, but they need Member States to provide greater incentives for private individuals to improve efficiency.
The Green Deal sets out to encourage private firms to offer energy efficiency improvements to homes and businesses with the costs being met by consumers via payments with their energy bills rather than with any initial costs for works carried out. The cost will be set out on utility bills alongside any savings made as a consequence of energy efficiency. The Green Deal relies heavily on accredited suppliers and advisers being involved to ensure consumer protection on the sale and installation of products, but setting up such a system will be neither quick nor simple. Also, there will be a real need to persuade the public to "buy in" to the schemes to be proposed, particularly given the early indications that the potential saving to the consumer is dramatically outweighed by the costs of installing new systems alongside steadily increasing fuel costs. It is a "Golden Rule" of the Green Deal that the charges should not be greater than anticipated savings over the lifetime of the energy efficiency improvements, but there is no guarantee.
The intention is for the property rental sector to be involved as well as owner/occupiers. In terms of the Energy Bill 2010-11 there is provision to review all rented properties by 2014 and it may be that, as a consequence, a minimum rating is imposed in order to certify that a property is rentable. In addition, the recommendation is that Member States do more to encourage cooperation between those with competing interests in properties, for example landlords and tenants. To date, the legislation has not addressed this, which has caused difficulties in dealing with carbon reduction but perhaps a way forward for energy consumption will lead to a compromise on that too.
It is envisaged by the EU Plan that the renovation of public sector buildings will be used as the "good example" for the private sector. The EU Plan estimates that the amount of refurbishment would require to double across the EU to assist with targets. The minimum figure of 3% per year is suggested and the level of renovation regarded as acceptable is such a level as would bring the property up to the level of the top 10% of energy efficient properties in the country. The public buildings should be the flagship properties of a country so far as their rate of energy efficiency is concerned, whether owned or rented accommodation.
The procurement process will also be involved in the overall strategy. So far as the purchase of works and services are concerned greater regard must be had to energy efficiency. Setting an example in this way is part of the process of remodelling the way suppliers operate and measuring the benefits by way of anticipated reduced energy consumption at the time of supply is a necessary step in the reshaping of the thinking of everyone involved in the process.
It is unclear whether the measures contained within the Green Deal are sufficient to close the gap or whether there will be sufficient take up by individuals and businesses to make the initiative succeed.
The Green Deal proposals do not address the public sector specifically, however the UK will be required to adhere to any binding measures imposed by the European Union within this area in the future, and so adjustments may be made to the overall plans to prioritise the renovation of public buildings.
The property market in the UK is changing and the demand for energy efficient buildings and, in turn, those buildings with low energy consumption is likely to increase. There are mixed views as to the costs associated with less energy efficient buildings versus the investment costs of renovation to improve energy efficiency. The main incentive to take action to improve energy efficiency will be market forces in the event of a value difference if buildings are compared according to energy efficiency. However, as the legislation looks to become more forceful in order to meet the targets, we are likely to see an increase in activity to create a portfolio of properties which meet the energy efficiency standards, in any case.