Beyond Bali

After all the sound and fury, what did the Bali roadmap portend for the property sector, asks Richard Burge

It is now some five months since the decision-makers at Bali returned to grapple, or not, with the challenge of squaring the conference outcomes with their own domestic policy imperatives. Five months may mean nothing in the glacial pace of international climate politics, but in the world of international business it is a long time.

So what, if anything, did the tumult of the climate change conference presage for the commercial property and construction industries and what has been happening in the UK since?

Looking back from this distance, it now seems hardly possible to credit the political shenanigans at Bali. The conference scenes were extraordinary: open hostility between diplomats trying to carve out a treaty that would cover the globe; the chairman breaking down in tears of exhaustion and despair; and the EU threatening publicly to boycott (and thereby completely scupper) the US-led talks on climate change among the rich nations in 2008. But what did this vast meeting of more than 11,000 people and 187 nations on a beautiful Indonesian island actually achieve? Not a lot, on the face of it. There was plenty of talk about sharing technology, protecting forests and the like. But at the final hurdle, politicians failed to agree on the size or the sharing of the burden of reducing the emission of greenhouse gases which every year takes us closer to the precipice. The pleas of the leadership of the private sector for clear and obligatory targets for global emission reductions fell on deaf ears. Instead, there was an agreement to keep talking, to come up with binding commitments by the end of 2009 so that the Kyoto Treaty can be replaced on 1 January 2013, and that those commitments should be based on science (this latter entailing a significant change in the USA's negotiating stance).

In other ways, the problem of US (or rather the current White House) intransigence was simply overlooked in the hope that a more enlightened tenant would be in place by the time the USA has to fish or cut bait.

There was much happening on the margins of Bali, however, that did give an indication of what might be on the negotiating table as we head towards a successor to Kyoto. Many of these prospective developments could have a potentially major impact on property development. Buildings consume some 40% of the world's current energy burden, so construction and building management are bound to be the focus of significant scrutiny by policymakers over the next few months, particularly in the bargaining between the industrialised nations and the emerging economies of India and China.

During discussions on how to reduce the climate impacts of the aluminium, steel and cement industries, the idea emerged of setting global industry sector deals. This approach could help resolve the conundrum of agreeing overall national targets and help businesses within sectors operate on a level competitive playing field. Elsewhere, the World Business Council on Sustainable Development called for national emission management schemes to be linked together so that a global carbon value and price would emerge. And in the debates on land use and payments for reforestation as carbon banks, it became clear that the sheer scale of need would create a huge demand for voluntary carbon investment - the one preferred across the world by the private sector because it responds to market demands.

Bali also crystallised the significance of some other developments over the previous few months: firstly, the launch of a new international standard (ISO 21930) for sustainable building that makes the first attempt to take into account the entire lifecycle effects of climate on a building, while the private sector has launched the Voluntary Carbon Standard, the first business-like and market-focused standard for carbon credits.

Secondly, the western group of USA states (whose most recent member is Vermont) have announced that they are likely to auction emission allowances. Although there was some concern that too many credits would be placed on the market and so depress the price, it was a clear indicator that we may be moving towards a position where all carbon emissions will have to be paid for.

Perhaps most important in the short run, Bali also focused attention on the potential of the USA's Leadership in Energy and Environmental Design (LEED) environmental impact assessment system. Certified hotel projects under the US Green Building Council's LEED system have produced a 30-45% reduction in energy use, a 35% fall in carbon emissions, a 40% drop in water use, and a 70% decline in solid refuse.

Among environmental activists, these are rapidly becoming the baseline targets for the entire property sector and already some forward-looking UK companies are taking up the system alongside the UK's current

Building Research Establishment Environmental Assessment Method (BREEAM) certification system. Recently, giving the keynote address at a seminar in London on sustainability regulation in the UK property industry, James Bowdidge, the Chief Executive of London property development company The Property Merchant Group (PMG) said the company was planning to undertake voluntary LEED assessments for its future London office developments, in addition to BREEAM evaluations.

Bowdidge stressed the company's commitment to BREEAM, but explained his rationale that by also making use of LEED, UK businesses could help to foster an internationally recognised language and standard for environmental impact assessment for building and construction.

Since Bali the pace of development on environmental issues has certainly quickened for the British property and construction industries. New regulation has been introduced in the last few weeks alone - the Environmental Performance Certificate for commercial buildings, to go alongside the new Display Energy Certificate for public-sector buildings. In addition, a new voluntary code for the property industry, the IPD Environment Code (for Measuring the Environmental Performance of Buildings; see page 46 for more details), has been developed and launched by leading property consultancy IPD, supported and sponsored by a raft of UK banks and property companies. And most recently we have seen the introduction by major property owners and institutions, such as Hermes, of the country's first green leases.

These impose serious environmental sustainability obligations both on landlord and tenant.

All these have been greeted by stakeholders, understandably perhaps, with a mixture of caution, scepticism, commendation and criticism. But, as with BREEAM, it's early days for these new regulation systems and self-regulatory codes. There are bound to be teething troubles and glitches, but it is vitally important that the UK property industry should be seen to engage fully with all such initiatives. Using the industry's combined knowledge and ingenuity constructively will help ensure any environmental regulation provides a more meaningful and efficiently administered yardstick of buildings' true environmental impact while being less onerous and expensive for businesses themselves.

Moreover, by engaging more fully with regulatory and self-regulatory initiatives, the property industry internationally could also help head off the clear risk of governments and the voluntary sector being tempted to grandstand and to impose regulation and standards which are driven by politics rather than economics. After all, in the international context, there are still some industry Luddites - indeed at Bali the phenomenon of so-called greenwashing - drew the attention of many industrial sector representatives who recognised that they needed to clean up their act - or be cleaned up, via coercive regulatory intervention.

It is clear that the UK property industry, at any rate, is beginning to make serious, responsible efforts to reduce its carbon footprint. But these efforts must be more concerted and brought more effectively to the attention of politicians and their environmental influencers. All too often the commercial property industry is still invisible at major environmental gatherings, in news and debate on environment, energy and climate issues. Its concerns are being dealt with through the proxy of other industries such as mining and minerals, oil, and commodities.

Bluntly, if the commercial property sector wants to avoid having misguided and impractical regulatory environmental targets and standards imposed on its activities it needs to be more visible, more positive, and clearly seen to be setting and implementing its own, well thought-through and constructive climate change agenda for its own industry.

Richard Burge is a board director of The Property Merchant Group
www.pmguk.com

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