This article, written by JLL’s UK Sustainability Director Alex Edds, was originally published in Building, a leading publication within the UK’s construction industry. To access the original Building article, please click here.
Has the government lost its way on the path to a low carbon economy?
Back in 2010 David Cameron pledged to run the “greenest government ever” yet climate change barely featured in the Conservative’s recent election campaign. What’s more, since being re-elected Cameron has put in motion a series of short-sighted and regressive measures which will seriously jeopardise investment in the green economy and undermine the substantial progress that’s already been made.
As a case in point, last week the government announced that it will not be introducing zero carbon homes in 2016 and zero carbon commercial buildings in 2019. This comes after years of signalling and encouraging the housing industry to invest heavily in delivering energy efficient homes. What is more frustrating is that it comes at a time when George Osborne launched his vision to get Britain’s housing industry building again by overhauling the planning system.
I think we can all agree that Britain desperately needs more housing but there is no justification for building inefficient homes and offices with a permanent legacy of high energy bills, when we have the opportunity to lead the world in sustainable construction. Furthermore, this stop-start policy making approach gives investors little confidence in the government’s vision for a low carbon economy.
The decision by the chancellor to remove the tax exemption for renewable energy companies is bizarre and undermines the long term investment rationale for investing in the “green economy”. As Alasdair Cameron of Friends of the Earth says “it is like charging an alcohol tax on apple juice”. The effect has been a drop in share prices of renewable energy firms by as much as 25%.
Neil Woodford, one of the most respected fund managers in the UK, has hit out at this sudden and unexpected change in policy and its “profound consequences” for future investment behaviour. In his blog, he said that “if government cannot be trusted to fulfil its long term commitments, then it will have to accept that it cannot rely on the support of institutional investors. That would not be a good outcome for the UK economy”.
All of this comes at a particularly crucial time when leadership on climate change is paramount. In December, Paris will host COP21 where 192 country leaders will meet to discuss, and hopefully agree, on long term global targets to curb greenhouse gas emissions. The meetings are informed by the assessment reports of the Intergovernmental Panel on Climate Change (IPCC), which released its Fifth Assessment Report at the end of 2014. The report highlighted that climate change is not only continuing to rapidly accelerate but that we are still not doing enough to curb it.
The UK’s own Climate Change Committee produced its half year progress report last month which unsurprisingly found that the UK is lagging in its efforts. The report analyses each sector of the economy and provides clear policy recommendations to support the decarbonisation of our economy.
The key message for the property sector is that it is not fulfilling its potential. It calls on the government to “simplify and rationalise existing policies for energy efficiency improvement, with a view to strengthening incentives by the end of 2016, and publish proposals for minimum energy performance standards for the private-rented sector”.
So it would seem that the government has interpreted the recommendation to “simplify and rationalise” as an excuse to remove and abolish, and as a consequence further confuse the industry. This comes at a time when a major new study from the Grantham Institute argues that economics is no longer a barrier to tackling climate change. It claims almost all measures to arrest global temperature rise to less than two degrees will bring new economic benefits to individual countries.
With this backdrop it is frustrating that our government, and in particular those that control the purse strings, still don’t seem to “get it”. As each Budget comes and goes, we miss the opportunity to build a clear vision, and set the pathway for low carbon investment – and to build an enviable green economy. Our industry continually calls for consistency and clarity on long-term policy decisions, which sadly never seem to materialise. These recent examples of back-pedaling suggest that the government believes that policy can simply be amended to suit changing political priorities without due consideration for the economy, businesses, investors, and the environment.
What we need is a clear roadmap to give investors, and in the industry, confidence that investing in a low carbon future is the only pathway. As it is, the industry is unsure what U-turn the government will make next.
Alex Edds is responsible for overseeing JLL’s comprehensive UK sustainability strategy. The Building for Tomorrow Sustainability Agenda is delivered across four workstreams, including Leadership; Clients; Workplace; and Communities.