Carbon Penalties and Incentives Report

Commercial building energy efficiency policies have potential to be more effective, says jointly commissioned Government and property industry study

Government policy designed to reduce carbon emissions from commercial buildings need to be better understood, more efficiently monitored and easier to enforce, reveals a new report launched today by the Green Construction Board and the Property Industry Alliance, representing the £647bn commercial property industry, and the Government.

The ‘Carbon Penalties and Incentives Report’, produced by Deloitte, identifies that the inefficient distribution of policies, their perceived complexity and poor enforcement are the main barriers to achieving green growth and reducing emissions in the commercial property industry.

The report makes a number of recommendations for improving the policy framework:

  • Real estate professionals need to develop a better understanding of environmental matters, and their implications, to integrate them alongside standard legal and valuation concerns. Providers of real estate education need to integrate this into their programmes. The report indicates that there are economic opportunities that may arise from catalysing a green construction and retrofit industry. The study found emerging evidence of benefits for owners and occupiers of green buildings such as lower operating costs, lower risk exposure and increased marketability.
  • Better environmental performance data is needed to inform owners and occupiers in their choice of business premises. This is currently not routinely collected and buildings are not routinely labelled. Better data could also help to inform better policy making in the future, and build understanding of the effect of existing policies.
  • Policies which require defined actions are preferable to policies which require industry to set in place processes or gather information without any compulsion to act on the findings. The Report says that policies which focus on setting standards are cost-effective for Government to implement and relatively easily understood by the industry.
  • The current policy framework is perceived by industry to be complex and more functional linkages between policies could be achieved by ‘bundling’ them together in mutually reinforcing packages of standards, penalties or incentives and labelling. This would have the effect of reducing complexity and the time commitment attached to compliance.
  • There is a need for a more systematic and collaborative approach to appraising the effectiveness and impact of green policies and regulations. Experts from both industry and Government should monitor these on an ongoing basis.
Download the report

Liz Peace, Chief Executive of the BPF, said: ‘The energy performance legacy of the existing commercial stock is a challenge too large for the industry or Government to face alone and we need to be well equipped with the knowledge of what works and what does not, if we are to tackle this head on. This research allows us to consider fully the effectiveness of current policy instruments and provides a platform for the future course of Government and industry initiatives.’

Bill Hughes, Managing Director of Legal & General Property and Chairman of the Steering Group overseeing the Project, said: ‘The conclusions have been striking, since they show a clear preference for regulation of markets and policies which articulate clear trajectories toward 2050 emissions targets. It is essential that industry works together with Government to ensure that policy that is implemented doesn’t lend itself to unintended consequences in behaviour and instead is carefully aligned to driving real and achievable results throughout the sector.’

Miles Keeping, Partner at Deloitte Real Estate, said: ‘This research has clearly shown that there is an increasing expectation within the market that a commercial property’s investment-worth will be affected by how well it is protected from environmental risk. Furthermore, it also recognises the opinion of the market that if this important component of the UK economy is to prosper it needs effective policies to reduce energy consumption and regulate carbon emissions.’

Michael Green, Chief Executive of the British Council of Shopping Centres said: ‘BCSC has long argued that the incremental layering of climate change policy has caused confusion and uncertainty in the commercial property industry. This important research shows the need for long term signals to allow the sector and its investors to plan against environmental risk.’

Paul McNamara for the IPF said: ‘Effective Government policies should work with rather than against the ‘grain’ of the market. This study should help Government to better understand how to do this with respect to green policies for the commercial property market’.

Alexandra Notay, ULI UK Policy Director said: ‘ULI has led a number of programmes since 2008 focused on providing impartial information and reducing the confusion that surrounds the issue of energy efficiency and commercial property. We are particularly keen to support the recommendations in this report that might enable existing policies to be “bundled” together to give the real estate industry greater clarity in how they can achieve reductions in carbon emissions.’

Richard Kauntze chief Executive, British Council for Offices (BCO), said: “The BCO welcomes the recommendations within this research. We are increasingly seeing demand in the market place for more sustainable and high-performance buildings, with occupiers and investors paying close attention to these issues. Better environmental performance data in the marketplace will help occupiers to make more informed choices regarding their business premises.” 

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