We all know that there is no single ‘magic policy bullet’ that will support the growth of a self-sustaining market for energy efficiency investments, and that a jigsaw of policy pieces is needed to build the necessary framework.
This is the first in a series of blogs looking at ACE’s new policy tracker, and it considers commercial buildings. It asks, are all the jigsaw pieces in place? What more can we do easily? And what is going to be a little more difficult?
Where we are now
The Committee on Climate Change identified a least-cost pathway to meeting the 5th carbon budget. Our analysis of the gap between this and the Government’s projection of emissions given the current policy landscape, shows that – by 2030 – commercial buildings will be emitting 42% more carbon than the ideal, and public sector buildings 34% more. And the excess energy use involved is costing businesses a lot of money: in London alone, businesses spend over £4 billion per year on gas and electricity; if they could reduce their energy use by a third, that would mean over £1.3 billion every year for these businesses to use on something more productive.
In policy terms, a quick look at the policy tracker clearly shows that we’re really not doing very well. We don’t appear to have a vision for our commercial buildings, nor do we have an overall target for their energy efficiency. And we’re not very good at celebrating the achievements of those companies that are working hard to improve their energy productivity.
We have no comprehensive and engaging tax incentives to encourage energy efficiency investments, and there is little action by government to encourage the development of attractive finance offerings.
On a more positive note, the minimum efficiency standards for offices in the Private Rented Sector will result in improvements to our worst commercial buildings, making them better workplaces and hence supporting happier and more productive workers. We do have energy performance certificates to give organisations information about the premises they are buying or renting, although the requirement for these could be better enforced. And, in the past, central and local government has taken the lead, through energy demand reduction targets and National Indicators on carbon emissions.
And finally the good(ish) news: products policy has driven up the minimum efficiency standards of widely used appliances, and ESOS has ensured that larger business at least have the tools to understand their energy use and the potential for improvement. Both these success stories are potentially at risk during Brexit, but we can act to avoid this.
The quick wins
There are some politically and practically easy steps that government and business can and should take right now. The Clean Growth Plan needs to set a high level of ambition for our offices, offering a vision of healthy, comfortable workplaces that support increased productivity; setting a target for commercial buildings energy efficiency and a trajectory towards achieving that target.
The public sector needs to once again set an example: we need targets for energy efficiency in the sector, and public reporting on progress towards these. Implementing this will help Government achieve the efficiency improvements that it is looking for from the sector without taking money away from public services.
We need a clear message from Government that existing minimum efficiency standards for products, and requirements for energy auditing, will be retained as we exit the EU; and indeed that these policies, which have reduced business energy bills, will be enhanced in the future.
And we as businesses should collaborate on schemes that recognise those companies that are taking a lead in managing their energy use and celebrate their success.
Beyond these easy wins, there are other things that won’t be quite as straightforward, but which really do need to happen.
Our existing minimum energy performance requirements for new buildings should be strengthened – by reinstating the trajectory to zero carbon – and our requirements to report on the energy performance of all buildings better enforced.
The review of business energy efficiency taxation has simplified the system but we are still not at the point where all fuels for all users are taxed equitably according to their impact on the climate; and we need to complement the tax with a requirement for public reporting on energy performance for larger companies.
And Government needs to work with the finance sector to ensure that all businesses wishing to invest in energy efficiency (including SMEs) can access attractive finance offerings to support these investments.
If we get these things right, and if we work with the construction trades, we could begin to tap into the already significant market for building refurbishment to ensure that energy performance improvement is a core part of any refurbishment project.
Difficult to do, but we must work out how
Expanding the use of minimum energy performance standards in existing buildings seems to be very difficult politically, and yet business is quite able to deal with regulation in all sorts of areas, provided that it is given sufficient warning and helped to understand how best to respond. So we should be looking at how we can widen these standards out from the Private Rented Sector and how we can strengthen them.
And we need to bring energy efficiency investments to the top of the pile for business decision-makers: tax incentives for businesses to invest in energy efficiency again seem to be something that Government is reluctant to think about and yet, without them, energy audit recommendations risk being nice projects that get left on the shelf when something more interesting comes along.
We’re really not doing that well at the moment, but surely it is time now for Government to act on some of the easy wins whilst working with us on plans for the next steps. And we should not shy away from the more difficult steps – the prize: more competitive businesses, a happier and healthier workforce, and greater energy resilience, is too important!
Do have a look at the details in our snapshop policy tracker and let us know what your view is. And if you are interested in finding out more about why we think some policy changes are easier than others, have a look at Chapter 6 in our 2016 report on Buildings and the 5th Carbon Budget.
We look forward to policies developing over the coming months and we will be updating the tracker in response to these changes.