THE CLIMATE CHANGE ACT
Long before climate change affects the United Kingdom we will have an energy crisis. In response to this in 2008 Parliament passed the Climate Change Act. This is groundbreaking legislation affecting businesses both large and small. The Act is designed to create a framework to reduce the greenhouse gas emissions of the United Kingdom in excess of the European Union agreed target of 20% by 2020. The ambition of Government is to reduce the United Kingdom’s emissions by 34% by 2020 and by 80% by 2050. The first stage in this process is the introduction of the Carbon Reduction Commitment (CRC) which is effective from 1st April 2010. It is entirely directed at buildings and this has significant ramifications for landlords, tenants and the investment market.
Registration for the scheme begins on 1st April and businesses large and small have until 30th September to complete the registration process. It is an onerous obligation which has penalties both criminal and civil for non compliance. It is not just about manufacturing or a steel works! If landlords or their managing agents pay electricity bills on single or multiple buildings within the same corporate group of £500,000 or more which amounts to 6,000MW/h on a half hourly metered basis they will have to enter the carbon trading scheme. Therefore if a property owner supplies electricity or gas to tenants and recharges through the service charge they may have to enter the scheme. Managing agents may also find themselves having to register if they and not the landlord have to pay. Once registered those participants will find themselves on a league table and have to enter a carbon trading auction. There is a transition period until 2013 thereafter expect the auction to be expensive. For the first year this is based on the 2008 electricity consumption.
In future years the league table position will determine the cost of carbon as so buying a property that damages this could produce huge costs in terms of carbon for the investor. A far higher test of carbon benchmarking is needed and the RICS have just launched a sustainability survey report and this is available from Wilbourn Associates and although not cheap, it is far less than a full BREEAM report.
For existing owners of property, the cost of recovering CRC costs may not be possible through the current lease structures and this could cause conflict. Future leases should be drafted along the lines of a Green Lease.
So what should you be doing now?
Check whether you have to participate
Map your liabilities-these could be huge
Build capacity in the right team
Assess your operational readiness to provide evidence packs
Are there emission reductions that can be taken across the portfolio
Address landlord and tenant issues-can you share or recover the costs
Create an auction strategy.
There is too much political capital not only in the UK but from overseas for you to assume it doesn’t matter. It does.
Philip E. Wilbourn BSc. C.Env. FRICS
Wilbourn Associates Chartered Environmental Surveyors
Tel: 0114 243 5500 Fax: 0114 251 8479
Web-links:
Green Issues:
http://www.news.greenasap.co.uk"www.news.greenasap.co.uk
Asbestos:
http://environmental-surveyors.com/asbestos.htm
Brownfield sites:
http://environmentalsurveyors.com/brownfield_tax_consultancy.htm
Environmental:
http://environmental-surveyors.com/managing-the-public-interface-of-contaminated-land.htm
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