In the discussion of ways to drive energy efficient buildings and thereby cut greenhouse gas emissions in the building sector, some people in the property industry have been critical of anything that would provide a penalty as a complement to incentives, arguing that penalties – any penalties – are unfair.

But why should the property industry not be held accountable for its carbon footprint? And perhaps more pertinently, why won’t the Federal Government eventually hold the property industry accountable?

Given this is surely inevitable, perhaps the critics should stop and think of some of the options open to the Government.

In Europe where there is the EU Emissions Trading Scheme, various countries – including Italy, France, and the UK, – have “white certificate” or ”energy efficiency tradable certificate” schemes in place. Under these schemes, qualifying projects are awarded certificates verifying a certain reduction in energy consumption will be attained. True, they don’t impose penalties, only incentives.

But the upside comes with a big price-tag – in the order of up $50,000 to prove a project and demonstrate that the project would not be financially viable without the value of carbon credits being realised and that the savings are truly additional to business as usual.

And with a commercial building participation rate of just 0.25 per cent of demand abate credits generated it’s pretty clear what non-residential building owners think of it

Similarly, Kyoto mechanisms have failed our sector. Of a total 2700 Clean Development Mechanism projects, just 14 were building projects. Enough said.

But perhaps the most worrying option is the UK’s Carbon Reduction Commitment (CRC), which is due to start in 2010.

The CRC will be based on annual energy bills, and its aim is to reduce carbon dioxide emissions.

The CRC will only cover large businesses and organisations – effectively creating a two-tiered property industry.

There’ll be a three year fixed price window, after which permits will be allocated via an auction process.

But here’s the clincher: it’s all penalty and no incentive, and the penalties are applied from the bottom up, rather than only applying to emissions over and above a benchmark.

So if a building has a carbon footprint of 100 kg of CO2 a square metre, under the CRC the building owner would pay 100 x [carbon price] a sq m annually.

This is clearly a bad outcome with no tools to work with to pursue the best answer.

For much of the past year,Global Head of Sustainability for Lend Lease, Maria Atkinson,  and I have been working on a scheme that could cheaply, fairly and efficiently incentivise energy efficiency improvements in non-residential buildings equivalent to a 50 per cent cut in carbon emissions in our cities before 2020 and stimulate 46,000 new high-skilled permanent jobs for Australians.

It would also deliver a raft of other social and economic benefits, including better health and productivity.

Building owners who improve the energy efficiency of their assets would be rewarded, and the transaction cost to participate in the scheme is estimated to be around $500 per building. From the government’s perspective it’s also cheap, with potential to be cost-neutral to administer.

Called the Efficient Building Scheme, it’s a complementary sector specific trading scheme for non-residential buildings, which would work by providing an incentive to maximise energy efficiency improvements in buildings as soon as they come up for re-lease or earlier, balanced by penalties for inaction.

A building owner would simply calculate the total annual greenhouse gas emissions for a building using fuel bills, total emissions would then be divided by the net lettable area so that large inefficient buildings aren’t inadvertently rewarded, these figures would be compared to a predetermined cap and the building’s avoided or excess emissions would be calculated.

By comparison to the UK CRC, if the benchmark under the EBS were set at 80 kg of CO2 a sq m annually the building owner would pay (100-80) x [carbon price], which is only 20 per cent of the UK CRC.

The Rudd Government appears to have looked towards the EU Emissions Trading Scheme in the development of its Carbon Pollution Reduction Scheme (CPRS). It’s a fair bet they’ll be watching the introduction of the CRC.

Why wouldn’t the Australian property industry put its support behind a cheap, fair, efficient scheme which offers incentives and penalties and therefore avoid the threat of government looking towards the CRC for inspiration?

Ché Wall is the Managing Director of Lincolne Scott, an internationally recognised green building expert and a committed advocate of emissions trading. He was a co-founder of the Green Building Council of Australia and the founding Chairman of the World Green Building Council. In 2004 the Banksia Environmental Foundation named him the Prime Minister’s Environmentalist of the Year.
Go to https://www.lendlease.com/sustainability/index.html#/direction-detail-continued for video clips of Ché Wall and Maria Atkinson explaining the Efficient Building Scheme. To access more detailed information on the scheme click on the ‘Efficient Building Scheme’ in the Contents list on the linked page.