Carbon: a New Economic Commodity

Adrian Malone
2010 is a major year for the low carbon economy. With many countries introducing carbon tax or cap and trade schemes, carbon is effectively becoming an economic commodity. So how does this affect the built environment, and what role does it play in decision making?

2010 is a major year for the low carbon economy.

  • In the US, work is underway to pass the America Clean Energy and Security Act through Senate.
  • France is currently revising its variable carbon tax policy for major polluters.
  • Ahead of many other nations, the UK will introduce in April its own domestic carbon cap and trade scheme.

Although passed in the House of Representatives in June 2009, the American Bill is under threat. The failure in December 2009 to agree binding country emissions caps at Copenhagen resulted in uncertainty about carbon prices which has shaken both American political and business leaders, and also those of other nations. Australia delayed its vote on carbon emissions cap and trade until May 2010 as a result of the recession. Although this has been bad news for the Obama-Biden Administration's commitment to introduce an economy-wide carbon cap and trade scheme, individual States may lead the way where the Federal Government will not.

Energy Performance of Building Directive

The UK's domestic cap and trade scheme, the CRC (Carbon Reduction Commitment) Energy Efficiency Scheme and feed-in tariffs aim to drive investment in energy efficiency improvements and low carbon technologies. In October England and Wales will feel the tightening of energy performance standards for buildings, a trend which all European Union members may be required to follow if the recast of the EU Energy Performance of Building Directive is accepted later this year.

Carbon's impact on the built environment

So how does a carbon tax or cap and trade scheme affect the built environment, and what role does it play in decision making? Whilst building codes and environmental assessments such as BREEAM, LEED and Passivhaus are starting to permeate the marketplace, many buildings are still built, operated and refurbished with little consideration of their carbon emissions impact. Carbon hasn't been part of the decision-making process because for non energy-intensive organisations such as banks, healthcare operators and professional services, energy costs are a small part of their operating overheads.

The low carbon economy

Carbon taxation - a value placed on every tonne of carbon emitted - changes this by forcing organisations to measure, calculate and pay tax on the carbon emissions they release, thereby creating an incentive to build to low carbon standards and operate more efficiently. It also places the onus firmly on the organisation to measure, monitor and make available carbon emissions data.

Because it is levied on the organisation and not individual buildings, carbon taxation requires building owners and operators to take an estate-wide approach to understanding and reducing carbon emissions. For new build, the incentive lies in developing a building with market advantage and one which can promise long-term low carbon operations.

Energy efficient approaches

The role of Whole Life Costing is an important tool in understanding how best to invest to maximise carbon reduction. The models take into consideration the capital, operational, maintenance and end of life costs associated with a particular design approach or piece of equipment and provide a means of comparing current building standards and equipment with more energy efficient approaches. Such models are being widely used in public sector organisations where value for money is paramount. Adding carbon costs into the equation and fiscal benefits from feed-in tariffs will produce new preferred options.

But it's not just legislation that's driving organisational change - reputation and accountability have started to play an important role. Clients are requiring businesses to demonstrate their sustainability credentials, demanding BREEAM Excellent / Outstanding or LEED Platinum ratings.  The UK carbon trading scheme, CRC, will also publish a league table to ‘name and shame' the poorest performers and use positions to hand out financial bonuses and penalties.

Carbon is becoming more integrated into everything we do. Organisations need to be prepared to comply and take advantage of the opportunities presented by the new economic commodity - carbon.