Legislative Update
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United Kingdom
Energy Act 2011 - The Green Deal
The Energy Act 2011, which gained Royal Assent on the 18th of October 2011 provides initiatives which aim to improve and promote the energy efficiency of non-domestic buildings in the UK.
The Green Deal is one key provision, which incentivises investment into energy efficiency improvements of existing buildings through providing finance to undertake improvement works, but with no upfront costs to owners or occupiers taking advantage of the scheme.
However, no commencement date has officially been set for non-domestic properties and is expected to be delayed until at least the first quarter of 2013
The Green Deal will be available for non-domestic properties which is intended to improve the energy efficiency of buildings owned or occupied by SMEs (small and medium enterprises). It is thought that the non-domestic scheme will launch sometime after the domestic programme, which is likely to be at the earliest in the summer of 2013.
Further details are available here:
http://www.decc.gov.uk/en/content/cms/tackling/green_deal/green_deal.aspx
Energy Act 2011 – EPC Marketing Changes
As of April 2012, the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 have been amended and will now require an Energy Performance Certificate (EPC) to be included in the marketing materials of a property being put up for rental or sale within 7 days.
Additionally, air conditioning reports must be entered onto the EPC register. Failure to comply with the amended regulations can result in a fine of up to £5,000.
This reflects the growing focus on EPCs through the Energy Act 2011 which stipulates that from 2018, it will be unlawful to let both residential and commercial premises that do not meet minimum energy efficiency standards (likely to be an EPC rating of “E” or above). This measure will ensure that properties would have to meet a minimum standard to qualify for the rental market and therefore will be likely to help lower aggregate emissions from the built environment.
For more information on the Energy Act 2011, see:
http://www.decc.gov.uk/en/content/cms/legislation/energy_act2011/energy_act2011.aspx
Localism Act 2011
Following the assent of the Localism Act 2011, on the 27th March, the much awaited National Planning Policy Framework was published, replacing 44 Planning Policy documents. Following consultation the new policy includes a somewhat strengthened presumption in favour which now reflects the five principles of sustainable development from the 2005 Sustainable Development Strategy. This should allow the policy to take a more holistic approach to sustainability when considering planning applications, rather than an ‘economic growth rules’ approach as previously proposed. In order to give local authorities time to transition to the new approach, a 12 month transition period will now be entered. Understanding local authorities’ perception of sustainability issues will be key to the successful implementation of the policy. Demonstration of consideration of sustainable development as defined by the local authorities within planning applications will be increasingly important in the future.
The National Planning Policy Framework is available to view here:
http://www.communities.gov.uk/documents/planningandbuilding/pdf/2116950.pdf
Further Changes to the CRC Energy Efficiency Scheme
The Budget, announced on the 21st March, included the launch of a consultation to determine whether the CRC Energy Efficiency Scheme can be significantly simplified to help ease the administrative burden and associated costs of compliance on participants.
The government has directed, if satisfactory simplification of the Scheme cannot be achieved it is expected that the Scheme could be scrapped by the end of the first phase. Jones Lang LaSalle believe that it will be a real challenge for the CRC to be simplified enough to lead to the significant savings in administration costs that the Government is seeking. If it is to be scrapped, it is likely to be replaced with a significant increase in the Climate Change Levy and mandatory carbon emissions reporting.
The full Budget report is available here.
http://cdn.hm-treasury.gov.uk/budget2012_complete.pdf
Further Revision of Feed-in-Tariffs
From the 1st April 2012, new decreased tariff rates have been announced for solar PV installations due to falling cost of solar PV technology since the scheme was introduced. The new tariff rates for Solar PV installations will apply to those registered on the Scheme from the 3rd of March 2012 after the government’s originally planned commencement date of 12th December 2011 was ruled unlawful by UK courts.
Rules have also been introduced for multiple solar PV installations under the feed-in-tariff scheme. The new ‘multi-installation’ tariff rate is set at 80% of the standard tariff where a single individual or organisation is already receiving FITs for 25 or more other solar PV installations.
It has also been confirmed that all properties installing solar panels on or after the 1st April 2012 will require an EPC certificate demonstrating a rating of D or above to qualify for the full feed-in-tariff.
For further details click here:
http://www.decc.gov.uk/en/content/cms/news/pn12_010/pn12_010.aspx
France
Over the past years, the French “Grenelle” package of environmental laws has produced a series of decrees that defined in more detail environmental obligations for real estate. With the change of Government after the Presidential elections in May and the parliamentary elections scheduled for June, there are not many new regulations expected.
One of the few decrees passed since the last Global Sustainability Perspective concerned the mandatory labelling of building and construction materials such as flooring, wall coverings and paints. Its goal is to protect or improve the indoor air quality of buildings by reducing the amounts of VOCs/volatile organic compounds in the air: (« Arrêté du 19 avril 2011 relatif à l'étiquetage des produits de construction ou de revêtement de mur ou de sol et des peintures et vernis sur leurs émissions de polluants volatils »)
Another new regulatory item pushes for the development of electric vehicles in France. The French Government introduced a new obligation for property owners in terms of the construction of the infrastructure for electric and hybrid vehicle charging stations. This obligation covers enclosed and covered parking areas in office buildings which need to allow at least 10% of their parking space to be EV-friendly. In practice, it means that cable ducts and cable trays must be provided from the central electric panel to the parking spaces, and that electricity supply must take into account those future electric vehicle charging demands .The obligation is already in force for all new office buildings with a planning permit received after 1 July 2012. The obligation will be extended to existing buildings from 1 January 2015. (“Arrêté du 20 février 2012” referring to the “Décret n° 2011-873 du 25 juillet 2011”)
The recast of the European directive on the energy performance of buildings (EPBD) of 2010 produced a recent regulation that introduced the first Energy Performance Certificate for shopping centers in France, if sold or leased (Arrêté du 18 avril 2012). It comes into force on 1 July 2012. It only applies to energy consumption related to common and retail areas that are supplied by central HVAC systems.
USA
One of the trends in the United States is for local municipalities to introduce local regulations for making buildings greener. This has been done already in cities like New York and San Francisco.
For example, Jones Lang LaSalle is joining forces with BOMA (Building Owners and Managers Association) to help introduce a “Green Building Ordinance” for commercial buildings in Chicago.
A draft of the ordinance seeks to define regulations about Energy Benchmarking and Disclosure for publicly owned, privately owned residential and commercial buildings over 50,000 sqft (4600 sqm).
The goal of Energy Efficiency Performance Standards is to use Energy Star scores and performance to develop, drive and prioritize energy efficiency action plans. It aims also at establishing the National Average Energy Star Score as the minimum performance goal for Chicago buildings.
Following a vote in its Senate on 19 April, Mexico is poised to enshrine long-term climate targets into national legislation. The margin of the vote was huge indicating that all political parties have found common ground on this issue. Now all that's needed is the signature of President Felipe Calderon, which is expected to soon.
The bill includes a number of measures:
- 30% reduction in greenhouse gas emission growth measured against a "business as usual" pathway by 2020, and 50% by 2050
- 35% of energy to come from renewable sources by 2024
- obligation for government agencies to use renewables
- establishment of a national mechanism for reporting on emissions in various sectors.
The targets look pretty demanding at first sight - especially for a country where the population is growing and the economy expanding, and where oil makes a significant contribution to the national coffers.
Australia
Local Government Amendment (Environmental Upgrade Agreements) Act 2010
The New South Wales government has introduced Environmental Upgrade Agreements to NSW. The agreements, which are the first state-wide agreements of their kind in Australia, create a tripartite arrangement between building owners, local councils and lenders whereby building owners take a loan to finance environmental upgrades. These can include increasing efficiency of energy or water consumption, monitoring of environmental quality, and facilitating alternative methods of transportation to the use of a private motor vehicle. The loan is repaid via a charge on the council rates.
The agreements provide building owners with improved lending conditions and flexible loan options while the involvement of the council as the financial intermediary provides lenders with loan security. Under the agreements, building owners may be able to pass on the costs of the upgrades to the tenants as a statutory outgoing however the differential can be no more than the cost savings the upgrade provides to the tenants. Environmental Upgrade Agreements were first introduced in Australia by the Melbourne City Council in 2010 however it is limited to commercial buildings within the boundaries the Melbourne LGA
Carbon Price
Since our last update on the introduction of a carbon price into the Australian economy, the Property Council of Australia has released a study identifying that the cost to operate a commercial building is expected to increase by around 1.8% on average as a result of the carbon price. Jones Lang LaSalle clients are encouraged to consider the following when preparing 2012/2013 budgets and management programs:
- Passing costs on: Not all leases will allow costs to be automatically passed on from landlords to tenants and should be reviewed on a case by case basis. Can lease provisions be revised to allow pass through of carbon costs?
- Energy efficiency is key: energy efficient buildings will be less impacted by the carbon price than energy intensive buildings. What initiatives require capital expenditure to improve energy efficiency?
- Manage your supply chain: The carbon price will affect the cost of building materials and other goods and services. Which of your suppliers are passing through additional costs associated with the carbon price? What contracts need to be reviewed to determine who is responsible for paying the additional costs?
- Communicate initiatives: Tenants will be more focussed on energy efficiency as costs increase. Are there any initiatives to address energy efficiency at your building and how is this communicated between landlord and tenants?
- Reporting: What additional reporting and record keeping obligations are required as a result of the carbon price.
The PCA has also produced a Carbon Price Impact Calculator to estimate likely increases to operating a building and impacts on construction costs. Click here to access the calculator and the PCA report.
Victorian Energy Efficiency Target (VEET) Act
In April 2012, the Victorian Government announced updates to the suite of tools available to assess projects under the Victorian Energy Efficiency Target (VEET) scheme. The VEET scheme commenced in 2007 and will operate in three-year phases until 2030.
The purpose of the VEET scheme is to reduce greenhouse gas emissions, encourage the efficient use of electricity and gas, and to encourage investment, employment and technology development in industries that supply goods and services which reduce the use of electricity and gas by energy consumers.
Under this scheme, Accredited Persons are able to create Victorian Energy Efficiency Certificates (VEECs) when they assist energy consumers to improve their energy efficiency. These certificates are able to then be sold to a Relevant Entity who surrenders the VEECs each year to meet their obligations under this Act.
NSW has a similar scheme called the Energy Savings Scheme. On 1 July 2012 the Federal Government will introduce into Australia a price on carbon. The starting price will be AUD23 per tonne of CO2-e emitted and will directly affect around 500 of Australia’s highest polluters. The direct impacts on the Property industry will be minimal as construction material costs will be heavily compensated and the relative proportion of building outgoings attributable to energy consumption is low. However as the price on carbon filters through the supply chain there will be subtle impacts to operations and construction. This provides an opportunity to review the return on investment of energy efficiency improvement programs and any additional cost burden may shorten payback periods of some projects. Parties should also be reviewing lease structures as gross leases will result in landlords bearing any flow through costs of the carbon price whereas in a net lease arrangement those costs are more likely to be picked up by the tenant.
Japan
A couple of laws have been approved at the session of the Japanese Parliament, the National Diet of Japan, both of which will likely be established by this summer.
The Act on Low Carbon City Development
With the establishment of this legislation, tax privileges will be provided for residential properties recognised as “low emission residence”.
The Act on Purchase of Renewable Energy Sourced Electricity by Electric Utilities (Feed-in Tariff Scheme for Renewable Energy)
This Act obliges electric utilities to purchase electricity generated from renewable energy sources (solar PV, wind power etc.) based on fixed-period contract with fixed price. Please note this information has been carried over from your last survey. Additional information can be found here: http://www.meti.go.jp/english/policy/energy_environment/renewable/pdf/summary201109.pdf
Singapore
According to the Singapore Green Building Council, the Building and Construction Authority (BCA) has been tasked to bring forth a number of initiatives and incentive schemes to reshape the construction industry and enhance its overall image.
The National Environment Agency (NEA) also unveiled a slate of new schemes to encourage more building owners to reduce energy usage and carbon emissions. All these are in preparation for the impending Energy Conservation Act, which applies to businesses using more than 15 gigawatt hours of power a year.
China
The Chinese government has established a goal for green buildings to account for 30 percent of new construction projects by 2020, according to an official document released early May. The joint release by the Ministry of Finance and the Ministry of Housing and Urban-Rural Development marks the first time that China sets a goal for the development of green buildings.
The move underlines China's intent to speed up the development of energy-efficient construction by increasing policy incentives and improving industry standards, as well as promoting technological progress and the development of related industries.
The same release also specifies a goal of bringing China's building energy consumption ratios closer to those of developed countries by 2020.
The construction of energy-efficient buildings will be subsidized according to a three-tier grading system specified in the 2006 evaluation standard, the document said. First-tier buildings will make their developers eligible for a subsidy of 80 yuan (USD12) per square meter, while second-tier buildings will qualify for 45 yuan per square meter.