Balance sheet

Ten years on from the first UN Earth Summit in Rio, climate change has grown in importance in the collective consciousness. Regardless of whether you believe recent flooding in central Europe and France was directly related to climate change, the international scientific community is in no doubt about the overall trend. The Intergovernmental Panel on Climate Change (IPCC) brings together the world's leading climatologists and related scientists.

Their latest report, from early 2001, highlights that the atmospheric concentration of the best known greenhouse gas (ghg), carbon dioxide (CO₂), has increased by more than 30% since industrialisation began around 1750. The present CO₂ concentration is now probably higher than it has been for the past 20 million years, and the current rate of increase is unprecedented during at least the past 20 000 years. It also shows that about three-quarters of anthropogenic emissions of CO₂ during the last 20 years was due to fossil fuel burning, and the rest mainly due to land-use change, especially deforestation. The 1990s was probably the warmest decade and 1998 the warmest year since instrumental records began in 1861, while the 20th century also had the largest increase in temperature of any century of the last 1000 years. The report also points out that snow cover and ice extent have been reduced, glaciers have retreated and precipitation has increased.

The UK's own Royal Commission on Environmental Pollution, reporting in 2000, observed that the unfettered consumption of fossil fuels would lead to dangerous and destructive climate change, and proposed a massive reduction of 60% from current UK annual CO_{2 emissions by 2050 and perhaps of 80% by 2100.}

The starkness of these few statistics explains the frustration of many non-governmental organisations, and EU negotiators, at the failure of the World Summit on Sustainable Development in Johannesburg to embrace quantified targets for increasing renewable energy use following opposition from oil producing nations led by the US.

More positively, and perhaps more surprisingly, during the Johannesburg summit Russia and Canada announced their intent to ratify the Kyoto protocol, causing the protocol to become binding for signatories. Suddenly Kyoto is real, and signatory nations must meet their ghg emissions reduction targets by the compliance period 2008-12.

So ghg emissions from energy use continue to rise in importance in government thinking. And not just in government. Recognising the evolution of stronger national and international regulation penalising ghg emissions, companies and institutional investors have woken up to the potentially huge regulatory and financial liabilities attaching to companies that fail to manage their emissions.

Earlier this year, a group of institutional investors holding assets of almost five trillion dollars approached the 500 largest quoted companies in the world asking for information on their greenhouse gas emissions. Carbon dioxide has entered the boardroom and will be shown on the balance sheet.

Where does this leave the built environment? The building stock is the single largest source of ghg emissions. Across Europe, the residential and tertiary sector (principally buildings) accounts for more than 40% of final energy consumption, and rising. In the UK energy consumption in the built environment causes 46% of total carbon emissions of which commercial buildings account for 16%.

The impact of climate change on the built environment is going to be felt in two respects. Firstly building designs may need to change to reflect the greater likelihood of extreme weather events affecting for example wind speed and rainfall, and new temperatures, over the design life of the building. Secondly, driven by an evolving legislative and regulatory framework, buildings (and their occupants) are going to have to play their part in reducing emissions.

The dominant legislative framework governing energy and emissions in the built environment through the Kyoto commitment period and beyond is the forthcoming EU Directive on the Energy Performance of Buildings (EPD).

The 1990s was probably the warmest decade and 1998 the warmest year since instrumental records began in 1861

The directive has its origins in Europe's Kyoto commitments. It aims to exploit some of the enormous energy and emissions saving opportunities in the built environment by creating a methodology to calculate energy performance, by imposing minimum energy performance requirements on new and renovated buildings, by certificating buildings' energy performance, and by requiring the regular inspection of energy systems.

However while the EPD is imminent, its effects are not. The directive's second reading in the European Parliament is due in October, following minor amendments made over the last few months. Once the directive enters into force it must be transposed into law in the European Member States by 2005. Public buildings must have certificates in place by 2009, and commercial buildings from that date onwards, but then only at the time of sale.

In the UK the commercial building stock turns over slowly – new construction accounts for about 1% of total building stock annually and major refurbishment 2·5%, so many buildings will not be affected for decades.

The new directive has a slow fuse then, but what of the opportunities for energy saving that it tries to stimulate? Energy consumption in commercial buildings is rising. The number of buildings is increasing, and these are more intensively used, with longer operating hours, more electrical equipment and more air conditioning. There are some downward trends in energy use, such as more efficient plant and equipment, better controls and low-energy lighting, but these do not outweigh the basic upward trend. Energy surveys of UK commercial buildings consistently demonstrate potential annual energy savings of 10-20% or more, through investment that could pay back in six months or less. Nevertheless, these opportunities are frequently not exploited.

So the huge potential for improvement in the built environment appears counterbalanced by barriers to change. At root is the problem that the market does not sufficiently reward energy efficiency. The true external costs of energy are still borne at the societal level, foiling the 'polluter pays' principle, and energy remains a relatively low priority in building design and operation.

Why is this? Even though energy is often only 1% of operational costs for the occupier of a typical commercial building, it's certainly not just about the low price of energy. Even if the Climate Change Levy (CCL) had a greater absolute impact on energy cost in commercial buildings it would not reduce energy use. After all, petrol price rises over many years haven't reduced road traffic.

Energy consumption is affected by how buildings are designed, procured, valued, traded, fitted out, managed and the equipment used in them. But the real issues underlying these are utility, risk and awareness. In offices, high specification means high valuation in a market where air conditioning has become a must have for tenants, whose willingness to pay unnecessarily high energy costs and cause high emissions reflects their need for flexibility, comfort and convenience, and who do not necessarily understand or value environmental features. The landlord-tenant barrier is crucial also. The actions and contractual responsibilities of each party in the relationship can militate against energy saving, and even incentivise greater energy use.

So the opportunities for reducing energy use and ghg emissions in the built environment, and especially in commercial and public buildings, is enormous. While current market forces tend to counteract a proactive approach to energy efficiency improvement, the imminent EU Directive on Energy Performance of Buildings promises a robust legislative framework, albeit over a long timescale, within which a number of routes to improved performance may be followed.