The directive will be good news for contractors because substandard buildings will have to be brought up to spec. But it could be bad news for developers, as buildings that don't make the grade may have to be demolished.
The directive is called the Energy Performance of Buildings and the idea is to make a building's energy consumption much more obvious to its users. At present, landlords have no incentive to improve the energy efficiency of the buildings they lease out, because they don't pay the bills. And tenants have no reason to spend money improving property that doesn't belong to them.
The directive could be the first stage towards compulsory minimum standards for the energy consumption of all buildings, something the government is discussing. This is what happened to domestic appliances; in 1995, an EU directive required washing and cooling appliances to be labelled for their energy consumption. In 1999, a minimum standard was introduced, and it is becoming more rigorous each year. Terry Wyatt, partner in M&E consultant Hoare Lea, says: "Bringing buildings up to a minimum standard is inevitable. This is going to be made more significant if we are to meet our carbon targets." He welcomes the directive as the first step. "It should affect value," he explains. "We need to link energy performance to value."
David Vincent, of government-funded body the Carbon Trust, thinks carbon trading will be used to allow owners of inefficient buildings to continue to operate them once a minimum standard is introduced. "There has to be a way of helping those people whose buildings don't come up to standard," he says. "Carbon permits are one way round this." Owners of energy-inefficient buildings would buy carbon permits – effectively, the right to pollute by being allowed to emit more carbon dioxide than the minimum standard allows. The permits would be bought from owners of efficient buildings that pollute less. This is potentially expensive, as the more carbon a building emits, the more the owner would have to pay. This cost should act as an incentive for the refurbishment of energy-inefficient buildings.
The details of the energy performance standard and the auditing process have yet to be finalised, but sustainable energy consultant ESD is working on a possible scheme for offices. Called Europrosper, the scheme is funded by the EU and the UK government through the Carbon Trust. Buildings would be rated on a scale A to F for their total energy consumption. A second, more meaningful scale would benchmark the property with a best-practice energy-efficient building of the same size and type of use. This would enable potential occupiers to compare the energy-efficiency of buildings they may be thinking of renting or buying.
Robert Cohen, the scheme's project manager, believes the auditing process needs to be simple enough to be done by the building's occupiers. "We are looking at a self-certification scheme," he says. This could be done over the internet; the occupier would submit information, including fuel bills, the building's size and its use. The software would work out the rating and an approved assessor would check the details and issue the certificate.
Suggested energy-efficiency improvements will also form part of the certification process. Again, Cohen thinks this could be done over the internet: "We could get some useful information from the building owner by asking some simple questions such as, 'Do you have any lighting controls?'" Alternatively, occupiers can choose to have of a full-energy audit carried out by a qualified assessor. Cohen says the certification process won't be expensive, but "it will reveal some very inefficient buildings. Some owners will feel it blights their property. But, of course, that's the point of the process. Ultimately, the climate change agenda is to improve performance."
Realistically, the directive is likely to be in force by the end of the year. It is expected to be ratified at the next meeting of the council of ministers on 6 June and is likely to be approved as Spain holds the presidency and is keen to see it go through. The move enjoys support throughout the EU and has already been subject to a consultation process. After ratification, it will be formally approved by the European parliament and will then into immediate effect when it is published in the EU's Official Journal.
Each member state is given up to three years to implement the directive, although a state can request an extra four years to implement it, if it can prove it does not have enough people to carry out the audits. The desire of environment minister Michael Meacher to introduce the directive as soon as possible to help the UK meet its commitments to reduce carbon emissions, means it is likely to be in effect here long before the maximum period expires. Getting building occupiers to carry out the audits reduces the number of assessors needed, thus removing an excuse to delay implementation. The legislation to implement the directive is already in place in the form of the Building Regulations and the European Communities Act, so construction may see a revision of Part L soon.
Some developers recognise the potential savings energy auditing could make for their business. Kier Property has recently finished the concept design for an office development in Reading. A cost-benefit exercise was carried out to see whether it was worth making the building compliant with the new Part L of the Building Regulations. "It was a complete no-brainer," says Colin Bane, the senior project manager. "Making it Part L-compliant cost an extra £50k, but we calculated it would knock 0.25% off the yield [rental value] if it wasn't built to current standards. That's £0.5m a year."
But concern for future energy performance can lead to some strange choices. Kier intends to use standard double-glazing with a wider cavity for its Reading scheme, rather than the more energy-efficient argon-filled cavity, in case the argon leaks, reducing the building's future energy rating.
It can only be a matter of time before buildings come with little fridge magnets promoting their green credentials.