Low carbon economy: the opportunity for CRE

The drive towards a global low carbon economy has challenged world leaders to consider which legislative instruments and green policies will be most effective in driving down carbon output and supporting energy efficiency. Most developed nations are now considering or trialling cap and trade schemes, which impose financial penalties on organisations which fail to make sufficient energy efficiencies, using the revenue to reward those that do. 

Traditionally considered 'big wins' in carbon reduction initiatives, manufacturing and transport are now making way for buildings as a key weapon in the war against climate change. McKinsey's carbon abatement cost curve demonstrates significant cost-neutral and even financially attractive opportunities to reduce energy consumption in buildings. In the US, where buildings represent more than 40% of total energy used, building owners can reduce their energy bills by more than $3bn annually. Analysts predict a significant impact on corporate real estate as organisations strive to achieve energy efficiencies, using new technologies, energy management services, retrofits on existing buildings and green methods in new buildings.

Energy efficiency delivers cost efficiency
The prize has been sized and for many organisations, energy efficiency delivers great cost efficiency. Compliance with new climate change regulations which directly affect corporate real estate is already mandatory in the UK, is under trial in Japan, and is under consideration in the US and many other countries. 

Peter Ferguson, Johnson Controls' director of environmental sustainability, believes that energy efficiency legislation can offer significant opportunity for organisations to better evaluate and make enduring changes to their carbon output: “Legislative instruments under consideration across the world will demand a thorough understanding of portfolio, energy consumption, and the size of the 'carbon organisation'. There is a compelling business case for greater energy efficiency: capital investment in new systems and technologies can be regained through lowered energy bills, often within guaranteed timescales. 

We are working with some of the world's best known organisations to better understand energy consumption, create new strategies for energy efficiency, and deploy smart technologies to heat, chill and light buildings more effectively. Energy efficiency legislation is already a reality in the UK, and most developed nations have proposals under consideration. Adopting a proactive approach today, rather than simply complying with new legislation as it comes into play, can yield real benefits in environmental, reputational and financial terms.”

UK's CRC Energy Efficiency Scheme
In Europe, which has set out a decade-long pursuit of 20% energy efficiency, the UK is leading the field with its CRC Energy Efficiency Scheme. Similar 'cap and trade' programmes are underway across Asia-Pacific, with Japan in transition stage and New Zealand and Australia considering legislation. In the States too, new legislation to encourage carbon reduction is being debated, although the UK's scheme is broader and seen as more progressive. Analysts agree that 'cap and trade' style schemes are likely to increase in developed nations across the globe, with financial penalties gradually becoming more punitive. 

Global Fast Facts
EU: headline target of 20% energy efficiency by 2020, supported by its Directive on the Energy Efficiency of Buildings.

May2010 crc
The UK is leading with its CRC Energy Efficiency Scheme, requiring all organisations with annual energy bills in excess of circa £500k to report on carbon output by September 2010. In France a series of national laws will promote sustainable development, and will require all real estate adverts to include details of the energy efficiency of buildings, while companies with more than 500 employees will be required to report on carbon. In Germany legislation is likely to be slower to emerge.

Asia-Pacific: Australia's Carbon Pollution Reduction Scheme (CPRS) failed to secure cross-party support and has been delayed until the end of the current commitment period of the Kyoto Protocol. In Japan, a voluntary trading scheme with mandatory disclosure has been developed. In Singapore and Hong Kong similar schemes are under consideration. India has pledged to cut its carbon intensity by 20 – 25% by 2020 compared to 2005 levels, and last year set out plans for a market-mechanism cap and trade scheme similar to that in the UK. 

North America: USA’s Building Star initiative offers financial incentives for owners of commercial buildings to introduce energy efficient measures, including energy management systems, HVAC, lighting, energy audits and tune ups. Agreed by analysts to be less progressive than other schemes around the world, the USA is considering a cap and trade programme which will generate an estimated $79 billion by 2012. Canada has committed to a 17% reduction in carbon emissions by 2020 , in line with the US. However, Canada is likely to hold off a cap and trade scheme until the US passes its own emissions control legislation, not expected this year.
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Related links:
EEI 2010

‘Building star’

Carbon cutting

Fast Facts

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Director Environmental Sustainability

Says Peter, “This is a real opportunity to enjoy the benefits of energy efficiencies and to enhance reputations and corporate balance sheets in parallel.”
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