Reducing carbon emissions from the UK's nondomestic buildings by xfo14057

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									Reducing carbon emissions from the UK’s non-
domestic buildings




December 2009
We will soon be launching a new report on non-
domestic buildings


     “What would a carbon reduction target of at least
     80% mean for non-domestic buildings in the UK?”,
     both in terms of government policies needed to
     deliver it, and subsequent action from industry.


    Report due to be fully launched December 09 - primarily policy focused

    Our perspectives are based on:
    – In-depth interviews with ~70 players from across the entire value chain
    – ‘Success scenario’ analysis conducted in conjunction with Arup based on
      a detailed model which predicts the carbon emissions, from non-
      domestic buildings under a range of different scenarios,




                                                                             2
This sector matters…
  18% of the UK’s carbon emissions are from non-domestic buildings –
  they need to be an important part of the move towards a low carbon
  economy

  Many of the measures for carbon reduction in our buildings exist today,
  and so could be implemented quickly


… and has the potential to deliver carbon savings
 economically
  35% carbon reductions by 2020 (vs. 2005) could deliver a net benefit
  to the UK of £4-5bn – our ‘Success Scenario’

  Reducing more carbon, sooner, will lead to a reduction in the
  cumulative cost of achieving an 80% reduction by 2050

  In fact, reductions of 70-75% could be possible at no net cost to the
  UK

                                                                            3
     Historical carbon emissions have been flat – this
     will not get us close to 80%



       M tons CO2                                   CO2 Emissions   Floor space
                                                     Change rate    Change rate
        100

         90

         80                                           -0.5% p.a.    +3.7% p.a.
         70

         60

         50

         40

         30

         20

         10

          0
           90

           91

           92

           93

           94

           95

           96

           97

           98

           99

           00

           01

           02

           03

           04

           05

           06
         19

         19

         19

         19

         19

         19

         19

         19

         19

         19

         20

         20

         20

         20

         20

         20

         20                                                              4

Source: CCC
    There were at least 24 barriers mentioned by
    interviewees
    Key:     X   = # of mentions

        Lack of demand – both                                   Awareness &                  Design/build team
                                                                                                                            Operations
        end user and within VC                                   information                     alignment
   37       Lack of financial case                       13       Lack of post-         21      Lack of skills &       13   Operating problems
   23       Regulatory & planning                                 occupancy                     knowledge to deliver        delay payback
            disincentives2                                        evaluation &                  low carbon             3    Increase in
   17       Lack of end–user demand &                             feedback              12      Design-out of low           unregulated load
            investor push                                12       Information                   carbon measures
   15       Split financial incentive                             unavailable           4       Poor commissioning
   10       Lack of capital, e.g. spending                7       Lack of awareness             & handover
            freeze                                                                      3       Liability issues
    9       Lack of motivation                                                          2       Perverse incentives
    5       Financial disconnect                                                                of fee structures
    5       High transaction cost                                                       1       Lack of compliance
    5       Lack of CSR incentive
    5       Misinformed on cost-benefit
    1       Lack of client mgt skill to
            procure/operate low C building
            (Lack of skills & knowledge to
            deliver)


                                                                            Structural inputs

                                           5       Slow refurb cycle
                                           5       Market structure – complex, fragmented, siloed, conservative
                                           1       Demolition rate


                                                                                                                                           5
1 Disaffection with planning is 14, of which dislike of Merton rule is 10
Source: Interviews
The industry is complex


                                                                                      Commissioning &                                           Change of
Financing / specification              Design                        Build                                           Operate
                                                                                       Hand over                                               use/refurbish


                               Developers

     Investors                                                                 Investor owners (landlords)

                                                                                     Owner occupiers

           Planning authorities                                              Inspectors                Tenants
                                                                                                       • Public sector
                                    Design team                                                        • Large
                                                                                                       • SMEs

                             Contractors2               Contractors                                          FM and energy mgrs


     Agents1                                                                                          Agents

                                          Building equipment and
                                             material suppliers




                Leads to the building EPC                                           Leads to the building DEC

                     Different barriers to delivery of low carbon buildings exist at every stage of the building journey

      Key:        = High level decision-making        = Execution of brief/contract and associated decision-making       = Supply of products / transaction
      services                                                                                                                                                6
      1 Provide market intelligence   2 Design and build
      Source: Interviews; CT analysis
 The barriers combine with the complex industry
 to create a Circle of Inertia

                        Where is the business case?
 1 FUNDER                                             2 OWNER/DEVELOPER
 “I would provide                                     “I would specify but the
 finance but there is                                 funder won’t provide
 no occupier demand”                                  finance and tenants are
                                                      not asking for them.”




3 TENANT                                              4 CONTRACTOR
“I might choose an energy                             “I could build but the
efficient building but there                          developers won’t specify”
aren’t any and energy is not a
material cost of occupancy.”

                                                                           7
Starting by focusing on 2050




                               8
     The scale of change required is huge with the
     average building in 2050 needing to be 4 DEC
     ratings better than today




                                                     9

Source: DCLG, Carbon Trust analysis
 Doing nothing is not an option



        MtCO2
             80

                      Emissions from new
             60
                      buildings if built to 2006
New                   building regulations
             40
buildings
             20

                                                                                             80% decrease in
                                                                                             30% increase in
              0                                                                              carbon emissions
              2005     2010      2015     2020      2025      2030      2035   2040   2045

             20


Existing     40
buildings
             60


             80


            100
                                                     Emissions from existing
                                                     buildings after demolition




                                                                                                                10
      Source: BRE and Arup (data); CCC, Arup, Carbon Trust (analysis)
 Our Success Scenario achieves 80% carbon
 reductions by 2050 at the lowest cumulative cost
 to the UK

        MtCO2
             80


             60                                                                                            1

New
buildings    40                                                                                            2       Carbon reduction measures
                                                                                                                         Demand reduction
             20
                                                                                                                   1
                                                                                                           3             measures

                                                                                                                   2     Low carbon buildings-
              0                                                                                                          linked energy supply
              2005      2010      2015       2020      2025      2030       2035      2040   2045   2050
                                                                                                                   3     Wider grid decarbonisation1
             20             Emissions remaining after
                            carbon reduction measures                                                      3
Existing     40
                                                                                                           2
buildings                                                                                                              Emissions remaining after
                                                                                                                       carbon reduction measures
             60                                                                                            1

             80


            100                                                                                                Demolition




      1 Excludes offsite low carbon buildings energy supply that is connected to the grid

      Note: Carbon dioxide emissions savings are normalised across all interventions                                                                   11
      Source: BRE and Arup (data); CCC, Arup, Carbon Trust (analysis)
For emissions to travel along a trajectory that
means an 80% reduction by 2050 is realistic:

  Up to 2020                Beyond 2020




                                                  12
SO THE CHALLENGE IS HUGE, AND REAL URGENCY IS NEEDED IF
THE COST OF CHANGE IS TO BE MINIMISED

A TRANSFORMATION IS REQUIRED, BOTH IN OUR BUILDINGS,
AND IN THE INDUSTRY WHICH DELIVERS THEM

OUR CONCLUSION IS THAT GOVERNMENT CAN TAKE A LEADERSHIP
ROLE IN DELIVERING THIS TRANSFORMATION
– INDEED, THERE IS CLEAR DEMAND FROM WITHIN THE INDUSTRY
  FOR GOVERNMENT TO CLEARLY SET THE LONG TERM DIRECTION
  FOR THE INDUSTRY
– AND GIVEN THE LARGE NUMBERS OF BARRIERS THAT EXIST,
  THERE A CLEAR CASE FOR GOVERNMENT INTERVENTION

WE HAVE SUGGESTED A STRATEGY FOR GOVERNMENT TO
CONSIDER, INCLUDING A DETIALED RANGE OF POLICY OPTIONS

                                                           13
Government should consider developing policies
that target ‘Better buildings, used better’

 We have developed a set of policy options for government to consider

 They are placed within a framework which aims for ‘better buildings, used properly’ by:


        Targeting buildings      1. Policy package for major
                                 interventions (new build,
                                 major refurbishment)



                                 2. Policy package to drive
                                 improvements for buildings
                                 whilst ‘in-use’

        Targeting Organisations 3. CRC policy package
        who own/use the
        buildings
                                4. Non-CRC policy package


                                                                                      14
Specific policy options

 CARBON REDUCTION TO 2020
   Existing policies, set to the correct level e.g.:
   – CRC
   – Building Regulations

   Some new policies, e.g.:
   – Roll out Display Energy Certificates and Energy Performance Certificates to all non-
      domestic buildings
   – Public sector leadership: public sector to implement cost-effective options from DEC advisory
      reports within the 7 year lifetime of the report.
   – Minimum building standards: all buildings to achieve at least an F rated EPC by 2020 (where
      cost-effective).
   – 'CERT' for SMEs: Develop a national program led by the energy suppliers to install the simple,
      low cost energy efficiency measures in existing buildings, paid for by a marginal increase in SME
      energy bills.
   – Building focused advice: a pro-active advice and support program targeting cost-effective
      improvements in the poorest buildings - those with F and G rated DEC/EPC certificates. This will
      act as a supporting policy to the above driver policies.


ENSURING SUCCESS AFTER 2020
  Alongside the policies, a focus will also be needed to deliver
  – Innovation – more, lower cost options for carbon reduction
  – A supply chain capable of delivering genuinely low carbon buildings

                                                                                                    15
To summarise:



        This sector matters

        Big opportunity, big challenge – transformation needed

        Government to implement a coherent strategy for non-
        domestic buildings, aimed at delivering ‘Better
        buildings, used properly’




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