U.S. Federal level
In December 2011, the U.S. government announced $2 billion in energy retrofit subsidies along with pledges by private-sector firms to engage in energy efficiency capital projects totaling an additional $2 billion over the next eight years. In January 2012 the U.S. federal government announced an additional $5 billion in clean-energy manufacturing tax credits as part of a broader manufacturing tax break plan.
The U.S. Congress passed a Department of Defense (DoD) Reauthorization bill banning the use of funds to pursue Gold or Platinum LEED certification in DoD buildings in the fiscal year 2012, except in cases where the DoD seeks a waiver from Congress.
State of California
In January 2012, California instituted a Mandatory Commercial Recycling program to reduce greenhouse gas emissions by diverting commercial solid waste from landfills, a program considered necessary because commercial enterprises generate nearly three-quarters of all solid waste in landfills, much of it easily recyclable. Under the law, that goes into effect on 1 July 2012, public and private-sector entities that generate more than 4 cubic yards of solid waste per week must engage in recycling, either by separating waste at the source or by retaining services to collect, haul and process mixed waste. Apartment buildings with five or more units are also subject to the law, and owners of leased property can require tenants to separate waste. The law also requires local governments to develop compliant programs.
The California Air Resources Board has approved an Advanced Clean Car program requiring 15 percent of new cars sold each year - an estimated 1.4 million vehicles - to run on batteries, hydrogen fuel cells or plug-in hybrid technology by 2025, with 70,000 zero-emission vehicles targeted by 2018. The measure is expected to halve current greenhouse gas emissions by 2025. Although the program has no stated requirements for commercial real estate, implementation will create demand for a large number of vehicle-charging stations at buildings over the next several years.
State of Maine
Maine, a U.S. state with a population of 1.3 million and about 3,000 building permits in 2010, has become the first U.S. state to ban the application of LEED in developing and renovating state government buildings, overturning a nine-year-old requirement of LEED compliance. The change came by Executive Order of the Governor of Maine at the request of state timber interests, who are concerned that Maine's extensive timber supply is not Forest Stewardship Council certified and would not therefore be favored in state construction projects.
A requirement passed in 2006, that all new commercial buildings of 50,000 sq ft or more must conform to LEED certification guidelines, took effect in January 2012.
USA / Canada
The U.S. and Canadian governments have signed a five-year agreement to set a common system for benchmarking energy performance in institutional and commercial buildings, based on the U.S. Environmental Protection Agency's ENERGY STAR system. Running from 1 October 2011 to 30 March 2016, the agreement enhances ENERGY STAR Portfolio Manager software to include Canadian reference data such as weather, energy and emissions factors, and metric units. The tool will be available in English and French Canadian.
Canada remains a laggard in terms of environmental legislation and its full support of the oil industry's exploitation of the oil sands, known to be the second largest pool of carbon on the planet, continues to cause controversy.
So far the only federal environmental initiative is the implementation of the Federal Sustainable Development Strategy 2010-2013 which, as of 1 April 2012, requires that new construction and build-to-lease projects and major renovation schemes will have to achieve an industry-recognized level of high environmental performance. Such recognition will require a level of 'Silver 'for LEED New Construction certifications or '3 Globes' if the Green Globes Design rating system is used.
As of 1 April 2012, existing Crown buildings over 1,000 sq m will also need to be assessed for environmental performance using an industry-recognized assessment tool such as BOMA BESt (Green Globes Existing Buildings).
Provincial green building policies, such as those of Manitoba and New Brunswick, also call for LEED (Silver) or Green Globes Design (3 Globes) certification for new buildings.
In November, the Localism Bill received Royal Assent to become the Localism Act 2011 bringing changes to planning regulations. Its aim is to draw power away from central government to local communities, and to give local authorities new freedoms and flexibility. Some parts of the Act are for immediate implementation, but the majority of measures will come into effect in April 2012, including the National Planning Policy Framework (NPPF). From a sustainability perspective, the key development to watch out for will be the NPPF which includes a presumption in favor of sustainable development. The consultation on the proposed NPPF is now closed and the government's response is awaited.
Further details are available here.
In Scotland, the government has just closed a consultation on measures to improve the energy performance of existing non-domestic buildings which, if brought into force through section 63 of the Scottish Climate Change Act 2009 (as currently suggested in October 2012), could have significant implications for Scottish real estate. The measures proposed include:
- Any building over 1,000 sq m would need to (a) provide for the assessment of their energy performance and greenhouse gas emissions (via an EPC rating process), (b) take steps to improve the energy performance and carbon emissions according to a specific improvement plan, to be implemented in a period limited to 3.5 years. It is proposed that this floor area threshold would then be reduced to 500 sq m and then 250 sq m over time – although a timescale is not specified.
- The measures outlined above would be required at the point of sale, grant of lease or lease renewal.
- Buildings participating in the 'Green Deal' (a finance method of energy efficiency improvements of commercbial real estate by third party organizations to recuperate investments from occupiers through service charge contracts) from Autumn 2012, as part of the UK Energy Act 2011, would be exempt from the above requirements.
Full consultation documents are available here. http://www.scotland.gov.uk/Topics/Built-Environment/Building/Building-standards/publications/pubconsult
The Renewable Heat Incentive opened to applications on 28 November 2011 and will provide applicants with quarterly payments for heat generated over 20 years. The first phase targets the non-domestic sector, in particular industrial, business and public sector users, which together are responsible for 38% of the UK's carbon emissions. Phase 2 (timetable currently unknown) will include scope for more technologies and support for households.
Further information and tariffs are available here.
Following speculation in the previous edition of the Global Sustainability Perspective about whether the UK government would put into practice its Carbon Plan, this was formally launched during December and included an updated timeline of actions and milestones for the next five years. While the government has not committed to extending Display Energy Certificates (DECs) to commercial buildings by October 2012, it does set out a number of goals which include:
- To encourage voluntary uptake of DECs by the commercial sector by March 2013
- Develop policies to enable application of the 'Green Deal' to the commercial sector
- Consult on planned revisions to Part L 2013 Building Regulations and improve the content
- Support the 'Green Deal' through format and quality of Energy Performance Certificates (EPCs)
- Begin roll-out of smart meters across the UK
The full plan is available here. http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/carbon-plan/3750-carbon-plan-annex-c-dec-2011.pdf
The French 'Grenelle' package of environmental laws, voted in 2009 and 2010, continues to generate decrees that define, in more detail, a series of requirements impacting the real estate industry. Two of the more noteworthy decrees deal with energy performance in buildings for new constructions and introduce the obligation to add an environmental annex to commercial lease agreements.
The decree on energy efficiency ('Réglementation Thermique 2012') came into force on 28 October 2011 and covers office and retail buildings. It introduces an average energy consumption level that should not exceed 50kWh/sqm/year. This performance requirement will be adjusted for buildings in specific geographical areas with different heating and cooling requirements, and could therefore oscillate between 50 – 80 kWh/sqm/year. Compared to the previous regulation (in force since 2006), this new level corresponds to an extremely ambitious reduction of 50% of building energy consumption.
The Environmental Annex obligation concerns newly leased office or retail premises over 2,000 sq m and came into force on 1 January 2012. It requires contracting parties for new leases to add an annex containing a mutual agreement to exchange environmental performance data about the building, with a focus on energy consumption. The intention is to formalise communications between landlords and tenants so that environmental performance can be established for the whole building. It also allows for the mutual definition of performance improvement agreements over the lease term.
On 1 July 2012 the federal government will introduce into Australia a price on carbon. The starting price will be A$23 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 on 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 the 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.