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Legislation Update

United Kingdom - Mandatory Carbon Reporting for all quoted companies from 2013

In July, the UK government took a bold step to increase transparency and accountability for business greenhouse gas (GHG) emissions. DEFRA, the UK government's Environment Department, released draft regulations for consultation. It will require all quoted companies to disclose Scope 1 and Scope 2 emissions (roughly corresponding to owned vehicle fleets' and on-site energy consumption and energy supplied from utilities) in their Directors' reports. The obligations will start for years ending after 6 April 2013.

The universe of businesses required to report on emissions has been expanded from 'London Stock Exchange listed' to 'all quoted companies'. Consultation is ongoing and further revisions to the guidance are expected. Assets throughout Europe will be affected, as listed companies incorporated in the UK will be required to report on global emissions.

The enlarged scope of organisations includes all companies that are UK incorporated and whose equity share capital is officially listed in an European Economic Area (EEA) state or is admitted to dealing on either the New York Stock Exchange or NASDAQ.

The government will consider expanding the regulations to cover all 'large' private companies in 2015.

European Union - Energy Efficiency Directive

A new EU Directive on Energy Efficiency was agreed on 15 June 2012 and accepted by the Council on 4 October 2012. It aims to improve energy efficiency in its member states, an integral objective of which is to lead a transformation in the energy performance of existing buildings, in the same way as the Energy Performance of Buildings Directive (EPBD) of 2002 and its recast of 2010 is leading the transformation for new buildings.

The key element of the directive, Article 4, creates the potential to significantly scale up the market for energy saving building renovations for the long term. The provision stipulates that by 30 April 2014, member countries must establish a long-term strategy (i.e. beyond 2020 and leading up to 2050) for mobilising investment in building renovations to improve energy performance of the existing building stock to:

  • Provide an overview of the stock based on statistical sampling;
  • Identify cost-effective approaches based on type and climate;
  • Introduce policies and measures to stimulate cost-effective deep renovations (energy consumption reduction by a significant percentage to reach 'very high' energy performance);
  • Define a forward-looking perspective to guide investment and industry; and
  • Produce an evidence-based estimate of expected savings and wider benefits.

The first version of the strategy must be updated every three years and submitted as part of National Energy Efficiency Action Plans.

Singapore - Green Mark Certifications Targets and Subsidies for Retrofits

The Singapore government has increased its subsidies for the retrofitting of buildings that will be 'Green Mark' compliant. Starting on 26 July 2012, the government increased the subsidy from 35% to 50% of total capex cost for building retrofits, depending on the level of certification achieved. The government will also co-fund those projects, including consulting costs and hard construction costs.

With this new subsidy program, as well as further new regulations - such as requirements for buildings to have three annual audits and for utility companies to submit data on building energy consumption - Singapore is quickly positioning itself as a global trailblazer in green building policies.

Singapore's long-term target is for 80% of its total building stock to be Green Mark certified by 2030 – one of the most ambitious green building targets in the world. The target is being facilitated by a history and variety of government regulations, incentives and initiatives, which have helped to establish Singapore as a leader in green building thought-leadership.

Germany – Sharply Lower Solar PV Feed-in Tariffs

In Germany, as in many other countries, the Feed-in tariff scheme for solar energy generation and its subsidies has been lowered again. The most recent regulation concerning Photovoltaic electricity generation ('EEG 2012 PV-Novelle', applicable retroactively to 1 April 2012) saw a decrease of some 25% for Feed-in tariffs for roof installations between January and April of this year. Another 5-10% of subsidy reduction is planned by the end of the year.

In addition, subsidies will no longer be available for installations above 10MW and, for solar panels above 40KW, the feed-in tariff only applies to 90% of electricity generation.

Operational energy performance of buildings and what is needed in UK government policy

Today, Energy Performance Certificates (EPCs) are a mandatory requirement for the sale and letting of commercial buildings in the UK. The UK government is in the process of considering further legislation aimed at reducing CO2 emissions from the commercial property sector. EPCs have played an important role generating awareness about energy consumption in buildings and are a compliance issue. They can undoubtedly help to set goals for improved design and refurbishments of buildings.

However, EPCs are based on theoretical not actual energy performance and it is only through reductions in actual energy use that we will be able to meet energy and carbon reduction targets. Therefore, in the absence of a measure of actual energy consumption - for example, through Display Energy Certificates (DECs) - how can the commercial property sector fully understand the environmental impact of its buildings, and communicate actual energy performance to the marketplace?

This is the issue being tackled in the forthcoming research by Jones Lang LaSalle and the Better Buildings Partnership, a coalition of London's leading commercial property owners supported by the Mayor of London and the Greater London Authority. We analysed the actual energy use of over 200 office buildings in London and compared performance with their EPC ratings. Our findings demonstrate the issue of correlation between EPC ratings bands and actual performance. The report is due to be launched in mid-November.

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