Michael Skelton

1 August 2012 – The impact of the carbon price on the construction industry has been minimal, according to a Davis Langdon report that its authors say will help businesses refute or back claims for price rises.

Commenting on the report, author and Davis Langdon Business Intelligence Global manager Michael Skelton, said he believed the carbon price would create societal change, either through the pricing mechanism or perceptions of risk. And he did not think it would be possible for Opposition Leader Tony Abbott to dismantle the tax in its entirety, if he was elected as prime minister.

The report was prepared to provide an evidence-based view of the impact of carbon pricing on building and infrastructure projects, Mr Skelton said.

This was because although the ACCC had already found the highest impacts would be on construction, waste and refrigeration, which all impacted on the construction industry, some of the greatest components of construction – concrete (cement), fuel, glass and aluminum – were all under a 94.5 per cent shielding.

Mr Skelton said despite the low financial cost he believed carbon pricing would create societal change with the trend of market leaders, who were already being innovative in materials and construction, being followed by small builders and businesses.

“Much of that trend will filter down into the broader market,” he said.

“And I don’t think it’s always a financial impact that causes behavioural change – sometimes perceived risk can change behaviour. (And) anything that keeps the industry moving, on the edge, is good.”

He said carbon pricing, while fixed until 2015, would then move to market forces and “ebb and flow” to become a part of the landscape in the same way as GST.

Mr Skelton said a change of the Federal Government, with opposition leader Tony Abbott still declaring he will drop the tax, would be interesting.

“There are lots of incentives and tax relief in the system which would make it quite challenging and in discussions I have had with colleagues, it’s not thought it would be repealed in its entirety.”

The report also looked into how each aspect of the clean energy legislative package will impact the construction of buildings and infrastructure using Davis Langdon’s purpose-built Embodied Carbon Metric to analyse building materials for their embodied carbon content.

It found the carbon price impact on road and rail projects was notably higher than on the buildings sector. Although the materials associated with infrastructure project were less emissions-intensive they were typically sourced from carbon price liable organisations.

The report found post construction operational factors such as electricity costs would also be affected by the carbon price. According to Federal Treasury forecasts, energy prices will increase by an average of 10 percent in 2012-2013, a rise contributed to in part by the carbon price.

Mr Skelton said the report showed that while construction cost impacts would be relatively minimal at the construction stage, the lifecycle implications were significant and would “require long term thinking to manage risks effectively”.

“The built environment is one of the largest users of energy in Australia, and responsible for up to 23 percent of Australia’s greenhouse gas emissions during operational phase. The report shows that actions taken during construction to reduce energy use will have long term benefits over the life of the asset,” he said.

Mr Skelton said future proofing measures including using materials with lower embodied carbon, passive design improvements, and high efficiency heating and cooling systems had the potential to act as a hedge against future operational cost increases, and higher asset values during the asset’s lifecycle.

“By adopting smart, energy efficient passive design principles and other measures during the construction phase, operational efficiencies can be achieved over the whole lifecycle of the asset that will provide long term benefit and reduce risk,” he said.