Net-zero rules must look beyond 2030, BPF urges government

The British Property Federation has called on the UK government to set out guidance for carbon emissions regulations beyond 2030 to give investors clarity and support them on the road to meeting the UK’s net-zero targets.

The comments came in response to the government’s publication of its Industrial Decarbonisation Strategy and two consultations on energy efficiency within commercial property.

The first consultation was on the extension of Minimum Energy Efficiency Standards (MEES), setting out a target EPC B rating for all commercial properties by 2030. The second was on the introduction of performance-based energy ratings in large commercial and industrial buildings.

Though welcoming these proposals as a “vital step forward” in the industry moving toward net-zero, the BPF said commercial property investors need the government to provide more clarity on net-zero regulations.

The trajectory for regulations beyond 2030 is still relatively unknown, but property owners will be making investment decisions today for existing buildings and developments that will long outlive 2030.

In order to facilitate new investment into UK towns and cities and to support investors working toward net-zero goals, the government needs to provide a roadmap for regulations that look beyond the coming decade, the BPF said.

What does the energy ratings consultation propose?

The government has proposed a policy framework for assessing energy use within buildings. The first step will require commercial and industrial buildings larger than 1,000 sq m in England and Wales to publish annual performance-based ratings.

For years, EPC ratings have been the main guide for assessing energy performance and carbon emissions in buildings, which, as the consultation argued, does not necessarily reflect the reality of a building’s energy consumption.

Despite contributing to a 14% fall in carbon emissions in buildings between 2008 and 2018, EPCs do not measure metered energy consumption, which means a high EPC does not guarantee that a building emits less carbon.

Under newly proposed rules, owners and single tenants will have to disclose a performance rating – based on energy use and emissions from the building compared to other similar buildings – publicly online.

Initially, the rules will apply only to the office sector, about 10,000 buildings in England and Wales are larger than 1,000 sq m.

Overall, the government expects these rules to have a “transformative effect”, reducing bills by £1bn in 2030 while offering valuable information to businesses, investors, insurers and others.

Alex Green, assistant director, development & sustainability, at the BPF said: “It is important that the government applies this new rating system to other commercial building uses, including retail, in the near future, but with consideration of the unique challenges presented by other building types.

“The commercial property industry is committed to driving positive change for our environment, and accurate measurement of energy use will be key to success.”

Nils Rage, sustainable design and innovation manager at Landsec, said: “As an industry we need to take ownership of our carbon emissions and not simply push them down the supply chain or rely on off-sets as a path to net zero.

“We welcome the recognition in this announcement of the need to move to a measure that is based on the actual performance of buildings. This is a significant step forward and would move the industry away from a purely compliance-based approach, encouraging much greater ownership of the problem across our industry. We look forward to engaging with it.”

EPCs to continue playing a central role in net-zero regulations

Following its first MEES consultation in October 2019, the government confirmed that non-domestic buildings will be required to be EPC B by 2030 “where it is cost effective to do so” in the Energy White Paper. The MEES consultation launched last week reviews responses from the industry, which raised concerns about “significant implementation issues”, despite largely supporting the rules.

As part of the consultation, the government has proposed a new framework for the EPC B trajectory, which includes plans to:

• Phase in the requirement with an interim milestone of EPC C in 2027
• Introduce a compliance window approach designed to simplify compliance and enforcement – landlords will need to present a valid EPC by April 2025 and they will have until April 2027 to demonstrate the building is an EPC C or that they have registered a valid exemption; the process will repeat with a target of EPC B between April 2028 and April 2030
• Move away from enforcement at the point of let, introducing a temporary six-month exemption to address the challenges of compliance for shell and core premises

Green said: “The government’s commitment to a new stretching Minimum Energy Efficiency Standards up to 2030 will act as an important signal to industry, but this is still too short-term in its approach for commercial property investors whose investment decisions today are based on forecasts that span the next several decades to come.

“Property owners will want to know that their investments and energy saving works are future-proofed for longer than the next nine years.”

The struggle to decarbonise homes by 2050

The built environment’s impact on the environment is well known: accounting for about 40% of the UK’s carbon emissions, property has a significant role to play if the country is to meet its legal commitment to reach net-zero emissions by 2050.

While the consultations launched last week refer to commercial property, they coincided with the Environmental Audit Committee’s report on energy efficiency of existing homes.

According to the report, about 19m of the 29m homes across the UK fall below an EPC C rating and need to be retrofitted at an average cost of £18,000 per home (excluding the addition of a heat pump). That suggests more than £340bn will need to be invested just to bring the worst performing homes up to a decent energy efficiency standard – far higher than the government’s estimate of between £35bn and £65bn.

Among its recommendations, the report called for feasibility reviews, the introduction of home upgrade grants and investment into relevant training.

Julie Hirigoyen, chief executive of the UK Green Building Council, said: “To achieve net zero by 2050 we will need to improve almost all of the UK’s 29 million homes, which means retrofitting on average at least 1.8 homes per minute. This is an enormous challenge, but also a tremendous opportunity.

“To have any hope of success, Government needs to act on the Committee’s recommendations, grasping the nettle to deliver a comprehensive, properly funded, long-term home energy retrofit programme – including the £9.2bn package of energy efficiency measures promised in the Conservative manifesto.”