Budget 2009: Sustainable solutions or a green smokescreen?

In April, Chancellor Alistair Darling made history by delivering the world's first 'green' Budget. Sarah Speight asks: were his measures as sustainable as they were cracked up to be?

At a time when saving the planet is an increasingly political issue, Mr Darling could hardly avoid addressing the green agenda in this year’s Budget. And he has indeed delivered the most ambitious climate change legislation in the world. But, say the critics, he didn’t do enough: the words “missed opportunity” abound in the property arena. So what exactly are these new ‘green’ measures, how will they be implemented, and – crucially – how will they affect commercial property?

Carbon budgets
Budget 2009 sets the world’s first carbon budgets: in other words, a legally binding target to reduce 34 percent of emissions by 2020, with £1.4bn to help achieve this. The target is in fact a requirement of the Climate Change Act, introduced last year with the aim to reduce overall emissions by 80 percent by 2050 (based on 1990s levels).

However, industry waits with baited breath for the Energy and Climate Change Strategy that the government will produce this summer, setting out policies that will deliver this and subsequent carbon budgets.

The question being asked is, inevitably, how will the new carbon budgets be delivered? Consultation responses on heat and energy saving, and zero-carbon homes, will be reflected in the policy framework the strategy sets out. But, as the British Property Federation (BPF) points out, the government will consult on zero-carbon, new non-domestic buildings in the autumn, as well as the Carbon Reduction Commitment (CRC), currently under consultation.

Patrick Brown, senior policy adviser at the BPF, said that the federation welcomes the introduction of carbon budgets. However, he added: “Though we appreciate that policies need to be kept under review, the government will need to steer a very careful path between adjusting policies in light of new evidence and maintaining a framework which the industry can embrace and respond to.”

Also, Lord Turner, chairman of the Climate Change Committee – which recommended the 34 percent target – commented post-Budget: “If the targets are to be met, we need to start reducing our emissions now and we need tough policies and strong leadership from the government.” Ahem.

Energy saving
Since saving energy is the easiest way to cut carbon emissions, the Chancellor has allocated £375m to support energy and resource efficiency in businesses, public buildings and households over the next two years, plus £70m for decentralised, small-scale and community low-carbon energy. It is hoped that these two cash injections will support employment, and save 380,000 tonnes of carbon dioxide, as well as around £60m in energy bills each year.
According to the BPF, though, this funding pot equates to ‘not much’ for property owners and investors. Most significant for commercial property is £165m in interest-free loans for businesses and the public sector, paid over the next two years via the Carbon Trust to help improve energy efficiency.

The Trust welcomes the new funding, of course. Tom Delay, Carbon Trust CEO, says that it represents a four-fold increase in the Trust’s current loans programme for the public and private sectors. He added: “Overall, it will cut £40m from the UK’s annual energy bill and deliver a quarter of a million tonnes of additional carbon dioxide savings a year.”

The remaining cash will be shared out thus: £100m for local authorities to deliver housing to ‘higher energy efficiency standards’; £100m for improving insulation in social housing; and £10m for waste infrastructure.

Home-grown energy
To help reduce carbon emissions further, the Chancellor has earmarked £405m to support the development of a ‘world-leading’, home-grown, low-carbon energy and green manufacturing sector in the UK (such as wind and marine energy). Also, UK renewable and energy projects could benefit from an additional £4bn, delivered via direct lending from the European Investment Bank. However, the BPF says that this capital is more likely to address funding shortfalls in existing projects.

The current UK target to generate 15 percent of energy from renewable sources by 2020 will need more production by small-scale renewable energy technologies and community heating schemes. Therefore, £45m will be thrown at small-scale renewable energy projects, primarily delivered via the Low-Carbon Buildings programme – but this is apparently only open to householders, community groups, public and non-profit-sector applicants. A further £25m will be given to low-carbon community heating schemes, allowing at least ten communities to benefit from locally produced energy.

The government intends to foster the development of combined heat and power (CHP) by extending the climate change levy exemption for indirect sales of CHP electricity to 2023, subject to state aid approval. This, it says, will help to bring forward £2.5bn of investment and 3GW of capacity by 2015.

Mr Darling also promised an ‘uplift in support’ for offshore wind investments, by increasing the Renewables Obligation banding for offshore wind projects. This is expected to support £9bn of investment and power up to 2.8 million homes.

A missed opportunity?
Given that buildings account for just under half of all carbon emissions, the green measures in the Budget are considered inefficient. John Alker, head of advocacy at the UK Green Building Council (UKGBC), said: “Has anything changed for the commercial sector? I think the answer’s no. The pot that the Carbon Trust has is slightly larger, but there is no wholesale attempt to get to grips with the energy efficiency of either our existing commercial building stock or indeed incentivise new buildings to be greener. In many ways, that’s a missed opportunity.”

The UKGBC is promoting a Code for Sustainable Non-Domestic Buildings, and Alker points out that the government has promised a consultation on the 2019 zero-carbon target for commercial buildings, due later this year. He adds: “Although the government is talking about new buildings, we also think that the code should apply to existing buildings, so that at certain points in a building’s life cycle, [the owner] should be incentivised to refurbish the building, and obligated to do so if they don’t.”

In fact, a survey conducted by law firm Taylor Wessing showed that the development industry is not averse to incentivising energy efficiency, particularly with regards to existing building stock. Some 57 percent of respondents indicated that incentives such as tax relief, grants or aids will be more effective than regulation.

Andrew Simms, policy director of nef (the new economic foundation), and head of nef’s Climate Change Programme, hit the nail on the head. He acutely observes the Chancellor’s contradictory pledge to kick-start the car and oil industries in this so-called ‘green’ budget: “Anything positive done to promote a low-carbon economy was cancelled out by other measures that will lock in fossil fuel-intensive infrastructure. Setting an emissions reduction target in these circumstances is like setting someone a deadline to give up smoking, and then pushing them into a smoke-filled bar where all the walls are lined with cigarette machines.”

The Chancellor’s green promises, then, could be described as a smokescreen for revenue-generating temptations – and willpower alone will not help industry to sustain a cut in carbon emissions.

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Sarah Speight is a freelance property journalist. She can be contacted at sarah.speight@googlemail.com