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Property giants urge green overhaul as Government targets fail

Government policies to reduce carbon emissions from offices, shops and factories by 2050 are set to fail, according to the country’s biggest property companies.

In a report to be published this week, the British Property Federation (BPF) will say that energy performance certificates (EPCs) only offer theoretical information on a building’s design – data likely to change drastically once a tenant is inside. EPCs don’t measure actual energy use.

Real estate is responsible for around half of the UK’s carbon emissions.

Property giants including British Land, Hammerson, Hermes, Land Securities, Legal and General. Prupim and SEGRO, who own and manage the country’s biggest shopping centres and offices, believe government policy has ignored the fact that the majority of commercial property is rented out.

This means landlords cannot simply walk into a tenant’s shop, for example, and turn the lights off. Therefore, any incentives and responsibilities for improving energy performance are widely split between the two groups.

The BPF wants to see measurement based on actual energy use made obligatory for the private sector. This could happen by expanding display energy certificates (DECs) - which measure the operational performance of a building – so that they do not just cover public buildings. (See notes).

Property is responsible for a massive 50 per cent of the UK’s carbon emissions, but one of the easiest places to make savings if data is shared and landlords and tenants work together.

Energy use needs to be made transparent if the industry has any hope of meeting green energy targets, believes BPF chief executive Liz Peace. The BPF is pushing for EU law to be changed so that landlords and tenants will be obliged to share energy data. If this happens, then both sides can work together to support real change.

However, Peace admits there is a critical need for firms to change the way they view energy and reduce usage via more effective management before looking at refitting buildings with expensive new gadgets. It is also vital to ensure that any newly installed kit delivers the promised energy and carbon savings, as there is evidence that some developments employ it at planning stage but often don’t use it properly. Essentially, it comes down to effectively measuring what is used.

Experts believe a third of energy use can be cut without any major expenditure, but want research carried out into what financial incentives could spur landlords on to undertake higher cost improvements, looking at where costs and benefits currently do not add up, when all other factors are balanced.

Despite setting up the new Department for Energy and Climate Change there has been no clear policy direction in government with various other departments all covering the same ground. A staggering 70 national and 96 regional bodies currently offer energy efficiency advice. The BPF therefore wants greater clarity on grants and advice that could help green the nation’s buildings. An array of financial benefits already exist (see notes) but few people really know about them.

Liz Peace, chief executive of the BPF, said:

“If a landlord makes an investment in more efficient kit, the tenant can benefit from lower energy bills while the landlord experiences no tangible benefit and faces significant upfront costs. The government should explore how the tax system might be used to actively incentivise improvements by altering the conundrum we have over how the benefits from improvements are shared between landlords and tenants.”

Peter Clarke, executive officer at British Land, said:

“We have found that simple improvements in energy use can be made by sharing data, which often reveals that changes to behaviour can yield big savings on energy and carbon. The key barrier is that, in many cases, landlords and tenants are unaware of where the opportunities lie. The BPF’s www.les-ter.org toolkit, developed with the Carbon Trust, provides a set of tools and a process to enable landlords and tenants to measure, understand and reduce their emissions."

Dave Farebrother, environmental director at Land Securities, said:

"At Land Securities we are finding a high degree of willingness among our clients to engage on matters of energy efficiency, and as existing buildings form the larger part of the ongoing carbon problem the quickest, cheapest and biggest wins for the sector come from changing attitudes and behaviours. DECs, which reflect how buildings actually operate, are much more helpful in this regard than a theoretical EPC."

Bill Hughes, managing director at Legal and General Property, said:

“There is a clear desire at all levels for greener buildings, but this won’t be achieved by focusing exclusively on new build and it won’t be achieved unless the government begins to understand how the market in existing property actually works. Designing new efficient buildings is relatively easy, but without a government-backed initiative to manage down energy use in old stock, targets will remain aspirations.”

Martin Moore, chairman of the BPF’s sustainability committee and chief executive of Prupim, said:

“We need to focus on methods to improve our understanding of what energy we’re actually using. Expanding display energy certificates and providing support to firms to help them measure and reduce energy use is vital. If you cannot measure it, you cannot manage it and if you cannot manage it, you certainly cannot reduce it.”

Claudine Blamey, head of sustainability at SEGRO, said:

“The most significant amount of carbon used during the life of a building is in its use phase. At the moment there are no real drivers for occupiers to reduce their energy. We need incentives to change behaviour if we are going to become a low carbon economy.”

Keith Bugden, director of development at Hermes, said:

“Though the introduction of energy performance certificates has been helpful to some extent, they are not based on actual energy use, much, if not all of which is within the tenants control. Landlords and tenants working together will be key, and how we look at cementing these relationships through the use of smart energy metering, green leases and similar strategies will determine whether we can be successful at meeting increasingly strict targets.”

Jon Lovell, head of sustainability at property consultancy Drivers Jonas, said:

"Despite the commercial benefits of energy efficiency, progress is being impeded by poor energy measurement which is itself a symptom of poorly conceived regulation and fiscal policy. The roll-out of DECs to the private sector would be an excellent first step in highlighting the shared interests of better energy management to landlords and tenants, whilst providing a robust framework through which to introduce better regulation and effective fiscal incentives."

Peter Cosmetatos, BPF director of investment said:

“We want a consultation on how fiscal levers could drive improvements to the fabric of existing buildings. We believe there is a very good case for making better use of the tax system to encourage investment that can improve the energy performance of the existing stock and there is clearly an opportunity to encourage new jobs and new investment through an intelligent and well thought out package of measures.”

Paul Edwards, head of sustainability at Hammerson, said:

"We recognise that the major opportunity for reduction comes with existing buildings, but to move this forward we need a consistent baseline across the industry, DEC's that measure actual performance of buildings would provide this. With this in place, an owner, tenant or investor can make an informed decision, this will foster competition which will drive the industry to be green. Hammerson invested £1.44m in 2008 improving the performance of our existing buildings, resulting in a 15.6% reduction in carbon emissions"

Alex Edds, associate director at Upstream Sustainability Services, Jones Lang LaSalle, said:

“Only by working hand in hand with the property sector, will the government meet its ambitious carbon targets. The intricate nature of our sector creates a mass of complications which can only be resolved by landlord and tenants working closer together. To date much of the legislation has been focused on the landlord and yet it is the occupiers who actually use the energy in buildings. Focusing on operational energy performance is key to realising real change. Through our own Operational Benchmarking Service we have seen little correlation between highly rated EPCs and actual energy use. This demonstrates that EPCs alone are not the answer.”

Notes for editors

General background

The government will fail to achieve an overall reduction in total UK carbon emissions by 80 per cent by 2050 compared to 1990s levels.

The government is due to produce a big policy paper later in the year on how it intends to deliver these savings. This will be based on consultations like this Heat and Energy Saving Strategy report and the advice of a body called the Committee on Climate Change, composed of independent experts and led by Adair Turner (at the moment).

As buildings account for around half of UK and European emissions, the property industry can most likely bank on having to make sizeable emissions reductions. Certainly the prevailing direction of policy would suggest it.

In its report, the Committee on Climate Change advised the Government to pretty much decarbonise the energy supply in this country. There are significant issues with that, not least the ones experienced by developers who are essentially having to build power stations next to developments. Many want to see a proper national energy strategy to manage the transition to such a low carbon energy supply. In any case it will take time - and so energy efficiency is important to manage energy demand and emissions until we make that transition to low carbon energy supplies.

The adoption of DECs in the private sector could:

• expose the benefits of better management and motivate users to make improvements;
• tackle existing as well as new non-domestic buildings;
• at relatively modest cost, offer recommendations for improvement;
• incentivise local generation or onsite renewable energy production;
• offer a comparison with the rating for the building’s EPC would act as a neat barometer of ‘potential’ versus ‘actual’ energy performance, promoting understanding of this issue; and
• assist in the generation of a database of true building energy performance, which would lead to better policy.

Awareness among possible beneficiaries of Government fiscal support is limited. A report by Element Energy detailed that the following percentages were previously aware of the fiscal support mechanisms listed below:

• Landlord’s Energy Savings Allowance (LESA) - 19%
• Enhanced Capital Allowances (ECA) - 22%
• 5% VAT on energy efficient purchases - 57%
• Grant from the Low Carbon Buildings Programme - 49%
• Climate Change Levy Exemption - 46%

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113/ 07968 124545/ ateacher@bpf.org.uk

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