Sustainability pressures

The final version of the Climate Change Bill is likely to include a requirement to reduce the UK’s CO2 emissions by at least 80 per cent by 2050 as against 1990 levels.  
    
The government has developed two new pieces of legislation with the aim of assisting government to achieve these targets by passing reduction targets to private and public sector businesses – namely the Carbon Reduction Commitment and the Energy Performance of Buildings Regulations.

Carbon Reduction Commitment
A key element of the Climate Change Bill, which will put the government’s aspirations into practice, is the carbon reduction commitment (CRC). This is a mandatory, UK only carbon trading scheme that will start in April 2010 – draft Regulations will be available in February when public consultation will commence. CRC will operate as a cap and trade scheme within which affected organisations must purchase and surrender allowances to cover their CO2 emissions.
    
All those organisations that have electricity consumption through half hourly meters in excess of 6,000 MWH during calendar year 2008 must participate in the scheme. We are expecting in the region of 5,000 organisations to be affected. The Department of Health, as part of central government, will be included within CRC whether or not it meets the criteria. The NHS Purchasing Agency is an Executive Agency of the Department of Health and would therefore be part of the Department of Health for CRC. Other NHS bodies e.g. strategic health authorities, PCTs, NHS acute and mental health foundation and non-foundation Trusts will participate individually if the inclusion threshold is exceeded. We anticipate that most NHS Foundation Trusts and NHS Trusts are likely to qualify. We also anticipate that PCTs will typically not exceed the threshold and will fall outside CRC. It is also inevitable, given the carbon reduction targets, which the UK government has set itself, that over time this threshold will be reduced and more businesses will be drawn into the scheme.  
    
Although the start of the scheme is some time away 2008 is the year that will determine whether an organisation participates in CRC. There are a number of preparatory steps that affected organisations need to be carrying out right now.  

Action points

• Check if your organisation is likely to be affected based on your 2008 electricity usage.
• Consider whether you have the data you need.
• Put together preliminary cost proposals – even if you ultimately get a recycling payment there will be cashflow implications for all businesses.
• Will you seek to develop in-house expertise to trade carbon or will you look to outsource?
• Consider what steps you can take now to maximise your position in the league table.
• Are you the landlord or tenant of any premises? If so, you need to monitor this issue. At present there are ongoing discussions with government as to the best way to treat CRC in the context of landlord and tenant relationships.

Energy performance of buildings
The government has assessed that our buildings are responsible for almost 50 per cent of the UK's energy consumption and carbon emissions. So naturally, buildings were the first target in their overall sustainability drive and attempt to ensure they are able to fulfill their carbon reduction commitments.
    
To tackle emissions from buildings the Energy Performance of Buildings (Certificates and Inspections) (England & Wales) Regulations 2007 were introduced in April 2008 and lay down three requirements:

• energy performance certificates (EPCs) and recommendations for improvement of the energy performance of buildings have to be produced when buildings are constructed, sold or rented out;
• display energy certificates (DECs) are additionally to be displayed in larger buildings occupied by public authorities and by institutions providing public services to, and visited by, a large number of persons, and advisory reports with recommendations for improvement of the energy performance of the building have to be produced; and
• Larger air-conditioning systems have to be inspected at regular intervals not exceeding five years.

In essence, when buildings are sold, let or built, EPCs indicating the ‘asset rating’ of a building expressed by reference to a scale of A to G (A being good and G being poor) together with a recommendations report for improvement of energy performance, must now be produced and provided to the new buyer/tenant/building control free of charge.
    
DECs are separately and additionally required since 1 October 2008. Unlike EPCs the requirement for a DEC is not triggered by a legal transaction or construction of a new building – it is simply required by 1 October 2008. They must be displayed by occupiers of buildings with a total useful floor area that exceeds 1,000 sq m, where the occupier is either a public authority, or is an institution that provides public services to a large number of persons and is frequently visited by those persons e.g. all NHS bodies and private healthcare providers such as BUPA. DECs must be displayed prominently in a place that is clearly visible to members of the public.  
    
The purpose of introducing DECs is to raise public awareness of energy use at these regularly used public buildings and to inform visitors about the energy use of those buildings.

It is expected that the government may use public buildings as an example first in terms of pursuing breaches of the new legislation as it will be easier for them to approach all local authorities and request evidence of DECs as opposed to tracing back through legal transactions that may have given rise to a requirement for an EPC.  
    
Although it may be tempting to view CRC and Energy Performance of Buildings assessments as another example of an additional burden on businesses and potentially one that will distract resources from the key area of providing healthcare it may actually prove to be the incentive that some businesses need to start making real energy savings. Consultants have assessed that the resultant cost savings which can be achieved are likely to outweigh the costs of compliance.