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The path to sustainable growth in the built environment
Last week, I hosted an event with Caroline Flint, shadow energy and climate change secretary of state, who told an audience of business leaders that it was "sad to see Michael Gove threatening to undermine the green building standard for schools".
It is rare for the opposition's energy spokesperson to criticise the education minister, but this demonstrates the huge importance of high quality buildings across all sectors in the transition to a low carbon economy.
Residential buildings represent around 28% of UK greenhouse gas emissions and the commercial and public sectors add a further 14%. They also leave an unwelcome legacy, locking future generations into resource use way beyond that of other sectors of the economy, due to both the longevity of the stock and the cost of replacement.
As a result, buildings embody one of the most cost-effective and significant opportunities for the UK to achieve its carbon reduction imperatives, improve business competitiveness and deliver new jobs and growth.
A new report from the Aldersgate Group, Building Britain: The path to sustainable growth for the built environment, highlights the opportunities and challenges in this sector. It outlines a suite of recommendations for how greater progress can be made, informed by consultation with our members from business, politics and society.
One of the defining messages is that a sustainable built environment is good for business and good for competitiveness.
Although the transition towards a low carbon economy and built environment is genuinely challenging, rising energy prices are having a greater proportionate impact on the bottom line of business. In certain cases, the projected impact on some non-energy intensive businesses of price increases over the next ten years stands to run to the hundreds of millions of pounds.
That is why a good number of property investors are taking greater account of energy and environmental performance in their acquisitive due diligence and in their asset management strategies. Similarly, some occupiers – especially those with significant operational portfolios – are beginning to model and respond to the financial and business continuity risks of future energy price increases, climate change impacts (on heating and cooling loads, for example), carbon taxation and security of supply concerns.
Encouragingly, some owners and occupiers are beginning to break new ground by collaborating on environmental performance and management through or alongside their lease agreements. Perhaps more significantly, many in the construction industry are now focusing on the commercial opportunities which the shift towards a low carbon economy presents by developing new business models, innovating with construction materials and techniques, deploying advanced building energy technologies and transforming the way in which property services are delivered to both residential and commercial customers.
While an encouraging sign of progress, these approaches remain the exception rather than the rule. That is why far greater regulatory and fiscal emphasis needs to be placed on improving the performance of our existing building stock and stimulating innovation in the delivery for new buildings.
There has been progress in the development of some policies over the last few years. We have seen, for example, primary legislation passed which paves the way for minimum energy performance standards for existing buildings and the government has met its target to reduce carbon emissions by 10% across its central estate within a year of taking office.
However, this is often being overshadowed by abrupt regulatory changes (such as the cuts to Feed in Tariffs and the removal of financial incentives from the CRC Energy Efficiency Scheme) and a distinct shift in government rhetoric on the costs rather than the opportunities for addressing climate change and environmental stewardship.
This is leading to significant uncertainty in the market and eroding investor confidence. As such, the coalition government must up its game in bringing forward effective regulation and fiscal instruments to incentivise resource efficiency and to deter carbon intensive construction, occupation and management.
Four standout recommendations from the report include:
1. Tackle existing buildings
Accelerating the retrofit of the UK's homes and businesses will create local job opportunities and stimulate the economic recovery. This must include policies to incentivise consumers to take up the Green Deal, clarity around regulations for minimum energy performance standards, the roll out of Display Energy Certificates in the private sector and sorting out the CRC Energy Efficiency Scheme.
2. Enforce the standards
Environmental regulation depends on consistent policy and effective enforcement, ensuring competitive advantage to the proactive actors in the industry. In particular, a widening performance gap means that energy use and carbon emissions can be up to three times higher than projected in the design stage.
3. Get the definitions right
Clarity about what definitions mean in practice is vital for progress and short-term investment, particularly around zero carbon homes and buildings. Having said that, the industry has generally reacted positively to the recent consultation on building standards.
4. Assume a leadership position for the public sector
The government comfortably beat its 10% challenge for energy use reduction on its estate, rapidly adopting a 25% target for 2015 and trumpeting the financial and carbon savings made. Yet only 3,000 buildings are involved compared to the 48,000 previously included in sustainability targets.
This last point on government leadership is critical at a time when private sector demand is weak. That is why building standards for schools, raised by Caroline Flint, is such a vital issue.
As a recent letter by the Aldersgate Group and UK-GBC to Michael Gove demonstrates, the cost of a school achieving high performance standards would be far outweighed by the resulting savings on energy bills.
Not only would removing these requirements send a damaging message to the property sector, it is also a direct challenge to the broader case that high building standards can stimulate innovation and growth.
Energy efficient schools have an important role to play in the wider economic programme to deliver spectacularly efficient new buildings and a world beating retrofit programme that would make every inhabitant, whether business or consumer, more profitable and richer.
Andrew Raingold is executive director of the Aldersgate Group. The Aldersgate Group is an alliance of leaders from business, politics and society that drives action for a sustainable economy.
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