Carbon Emissions Bill: is a rethink required?

Carbon Emissions Bill
Does the Carbon Emissions (Buildings) Bill make sense right now?
Regulations taking action on embodied carbon are on their way. John Wallace explores whether the proposals in their current form make sense given the pressures the industry is under.

It never rains but it pours. Running parallel to the tightening of the Minimum Energy Efficiency Standards (MEES), the Carbon Emissions (Buildings) Bill is due for a second reading in the Commons on 24 February 2023.

This will set limits and the recording of data on the ‘embodied carbon emissions’ (aka ‘greenhouse gas emissions’) that arise out of the construction, maintenance and demolition of buildings. 

The Bill was inspired by the Part Z proposals put forward by a group of construction sector consultants in April 2022. This was a proof of concept demonstrating a way in which embodied carbon regulation could be introduced in UK law. 

Its aim was to ensure that embodied carbon be assessed on all projects, as part of a comprehensive whole-life carbon assessment, and that embodied carbon emissions be capped on all major construction projects.

This movement towards the regulation of embodied carbon had support from significant construction sector players, including Lendlease, Morgan Sindall and Laing O’Rourke.

The Bill amends the Building Regulations 2010 by:
  • Empowering the secretary of state to approve a methodology of calculation of whole-life carbon emissions of construction work separated into operation and embodied carbon. This includes ways in which the whole-life carbon emissions of building work shall be expressed, the creation of a reporting platform and tools that may be used to carry out assessments.
  • The whole-life carbon emissions of the construction must be calculated and reported where: a new building or multi-building development is erected or; construction work is undertaken to an existing building with a useful floor area of more than 1,000 sq m or; more than 10 new dwellings are created.
  • No later than the day before the works commence the “person carrying out the work” must give the local authority a notice specifying the calculated CO2e whole-life carbon emissions rate for the works, a specification for the calculation of the emissions, and a reference to the location on the reporting platform where the emissions have been reported.
  • Approve “upfront carbon emissions requirements” for construction works (in the form of target CO2e upfront embodied carbon emissions rates). Where an existing or new building or multi-building requires reporting, the works shall not exceed the target CO2e upfront embodied carbon emission rate for the works that have been so approved.
  • The creation of a “whole-life carbon assessor” accreditation scheme.

The Bill anticipates that emissions calculations and reporting will begin on 1 January 2025 and the imposition of upfront emissions requirements for construction works will start from 1 January 2027.

The knock-on effect of the new regulations will be seen in lawyers feverishly drafting amendments to standard form appointments and building contracts so as to ensure that architects, designers and contractors build out in compliance with the “upfront carbon emissions requirements”. 

Cost of compliance

Developers may find themselves obliged to engage specialist CO2e whole-life carbon emissions consultants to advise on the cost of compliance prior to the acquisition or development of buildings. 

Any such appointments will need to ensure that suitable warranties and PI insurance are in place so that developers can be compensated if those they engage fail to comply with the regulations. 

Lenders will, no doubt, seek warranties from developers that any developments will comply with the new regulations and they will almost certainly consider the increase cost of compliance of these regulations and the MEES when considering lending criteria.

Given that the new regulations apply to construction works on existing buildings (subject to the criteria above) and compliance is anticipated by 2027, developers need to be thinking now about not only intended acquisitions, but existing buildings in their portfolios.

Developers will need to ensure they comply with these new obligations when completing planned developments.

Net zero by 2050

The UK Green Building Council reports that the construction sector is responsible for 25% of the total UK greenhouse gas emissions. If surface transport (i.e. vehicle emissions) are included within the scope of the built environment, the total share of UK emissions increases to 42%. 

The government has set itself the ambitious target of achieving net zero by 2050.  Something has to be done, but is this the right time?

Developers are already counting the cost of an inflationary materials and labour market, a receding economy and high interest rates. Clearly, the bill needs rethinking and perhaps re-timing, to ensure that its well-intentioned ideals are pragmatic.

John Wallace is founder and managing director of Ridgemont, a specialist construction and real estate boutique law firm.

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