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Greens introduce world-leading energy efficient building scheme.



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Christine Milne

Greens introduce world-leading energy efficient building scheme

Media Release | Spokesperson Christine Milne

Thursday 17th September 2009, 9:42am

in

• Emissions Trading

• Energy Efficiency

The Australian Greens will today introduce into the Senate a Bill for a world-leading scheme to upgrade

Australia's commercial buildings such as offices, schools, hotels and shopping centres for energy

efficiency.

The Energy Efficient Non-Residential Buildings Scheme, developed from an idea from Lend Lease,

Lincolne Scott and Advanced Environmental, would establish a cap and trade scheme for building energy

efficiency, ensuring that all of Australia's commercial buildings are upgraded as swiftly and fairly as

possible.

"We have a huge opportunity to reduce our impact on the climate and save money at the same time by

embracing energy efficiency, an opportunity we have barely begun to tap here in Australia," Australian

Greens Deputy Leader, Senator Christine Milne, said.

"This scheme, developed here in Australia, is the world's first proposal that would tap the full potential of

energy efficiency in commercial buildings.

"By capping energy use from the commercial building sector, bringing that cap down over time, and

allowing building managers to trade permits, we would trigger a tremendous investment in energy efficiency

upgrades and see greenhouse emissions and energy bills come down fast.

"We know that price is only one small barrier amongst many to energy efficiency measures being taken up,

so an emissions trading scheme can never be as effective as a scheme which requires building managers

to make it a priority."

The scheme would work by

• setting a declining energy intensity cap for each building type for each climate zone, (based on data

collected over two years);

• allocating permits within that cap for each building based on its size; and

• allowing trading of permits between building owners - those whose buildings are relatively efficient can

sell extra permits, while those less efficient will have to buy more to match their energy use.

The scheme has the great advantage of rewarding early movers while still ensuring that the whole sector

improves its performance.

The commercial building sector is currently responsible for 17.7% of Australia's energy-related greenhouse

emissions, but emissions from the sector could be halved by 2030 through energy efficiency measures,

according to the Australian Sustainable Built Environment Council.

"The Rudd Government clearly does not yet appreciate the huge emissions reductions that energy

efficiency can deliver, having consistently underestimated the potential in its official statements to the UN.

"The Government has a great opportunity to demonstrate that it is serious about the climate crisis by

supporting this Bill and getting our offices, schools and shopping centres working towards energy

efficiency."

Attachment Date Size

Efficient Building Scheme Second Reading Speech FINAL.pdf 17/09/09 9:42 am 49.54 KB

Safe Climate - Efficient Building Scheme EM.pdf 17/09/09 9:42 am 29.24 KB

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Safe Climate (Energy Efficient Non-Residential Buildings Scheme) Bill 2009

That the Bill be read a second time.

While the Rudd Government and the Opposition are still enamoured of the idea that Australia has to balance acting on the climate crisis with the economic cost of such action, around the world forward-thinking businesses and governments are recognising that it is not either or, but both. There are tremendous economic opportunities in reducing our greenhouse pollution.

Energy efficiency is not only the fastest way to reduce our emissions but, when thoughtfully implemented, it also saves us more money than we spend to achieve those savings. With the implementation of sensible energy efficiency policies, Australia can achieve far greater emissions reductions than the Government has proposed in the Carbon Pollution Reduction Scheme and at far lower cost. Indeed, the Government's failure to understand the huge economic benefits of embracing energy efficiency is central to the failure of ambition in the CPRS.

This Bill is designed to seize the huge environmental, social and economic benefits of upgrading Australia's non residential buildings to be energy efficient - saving money for businesses and making a big dent in energy sector greenhouse pollution.

In order to play our fair part in avoiding catastrophic climate change, Australia needs to commit to at least 40% emissions cuts below 1990 levels by 2020, on our way to building a zero emissions economy. Whilst the Greens see an environmentally effective and economically efficient emissions trading scheme as key to that transformation, it is widely acknowledged that there is a range of non-price barriers to action in various sectors of the economy. If deep cuts are to be achieved an emissions trading scheme must be complemented by polices to urgently drive a huge expansion in renewable energy generation and the systematic exploitation of energy efficiency. Indeed it is likely that these complementary measures, particularly those which drive improvements in energy efficiency, will be more effective in reducing greenhouse gas emissions for the next several years.

Energy efficiency policies and measures are needed to overcome the non-price barriers and drive change in industrial facilities, non-residential buildings and homes. The Greens have legislative proposals to give effect to these measures at all three levels. This Bill proposes a new scheme to drive energy efficiency upgrades in existing non-residential buildings, including offices, hotels, shopping centres, hospitals and schools.

The main barriers to taking up energy-efficient measures include: • energy costs are typically a small proportion of total expenditure for most people. The potential savings are perceived as small compared to the time and effort needed to research and implement energy efficiency improvements; • frequently, the person who pays the energy bill is not the person responsible for

the selection and purchase of energy-using equipment;

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• the benefits, or payback of these investments, are gradual, accruing over the medium to long term, as savings on energy bills; • information is not always available at the right time to consumers, tradespeople, managers and policy makers to enable informed energy efficiency choices to be

made; and, • many consumers lack capital to buy new energy-efficient equipment or make the required changes to their homes or businesses. Energy efficiency has to compete with other priorities for capital investment.

Because many of these barriers remain unaddressed, there is tremendous untapped potential in Australia for energy efficiency. The very high greenhouse intensity of our economy means that every gain in efficiency gives us a larger cut in emissions than almost any other OECD country. According to the Climate Institute Australia has the third highest energy intensity of OECD countries, with only Canada and US worse performers. During the period 1990-2004 Australia’s energy efficiency improved at a rate three times slower than the OECD average.

Energy use in Australia's non-residential buildings alone was responsible for 17.7% of our total energy related emissions in 2005, according to energy policy and planning consultant George Wilkenfeld. Yet this energy demand, principally for heating or cooling, lighting, and equipment, can be substantially and cost-effectively reduced.

In June this year US President Obama talked about “technologies that are available right now or will soon be available”, which can “make our buildings up to 80 percent more energy efficient”.

According to conservative research published by the Australian Sustainable Built Environment Council (ABSEC):

• Electricity demand in residential and commercial buildings can be halved by 2030, and reduced by more than 70 per cent by 2050 through energy efficiency; • Energy efficiency alone could deliver savings of 30-35 per cent across the whole building sector, including the growth in the overall number of buildings, out to

2050;

• Energy savings across the entire the building sector could reduce the costs of greenhouse gas abatement across the whole economy by $30 per tonne, or 14 per cent, by 2050;

• By 2050, GDP could be improved by around $38 billion per year if building sector energy efficiency is adopted, compared to previous economy-wide estimates of the 60 % deep cuts scenario.

Failure to respond to the tremendous potential presented by energy efficiency is a major weakness of the Government's approach to climate change.

Information provided to a Senate inquiry by Szencorp highlighted that Government statements to the UNFCCC indicate it believes that improving energy efficiency across

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all sectors could result in savings of just 3Mt per annum by 2020. Contrast this to estimates from McKinsey & Co - about 50 Mt and ASBEC - 39-45Mt, both by 2020. Considering that the savings identified by just 165 companies in the first round of the Energy Efficiency Opportunities report amount to 4.7Mt, it is clear that the Government just doesn't understand or has chosen not to calculate the real potential of energy efficiency for greenhouse gas reduction.

Options for creating an incentive to improve commercial building energy efficiency A number of policy options to improve non-residential building energy efficiency - primarily related to disclosure of energy performance, green tax incentives or some form of 'white certificate trading' - have been promoted in the past with limited success locally and internationally - including the UK and European Union.

Mandatory disclosure of building energy performance and greenhouse gas emissions, a policy that the Greens took to the last election, requires all commercial office buildings to assess and disclose their energy intensity prior to sale or lease, and for large commercial office buildings to disclose their energy performance on an ongoing basis. The Greens note that COAG has recently agreed to introduce energy performance disclosure prior to sale or lease. Disappointingly, however, no time frame has been agreed for all other building types and no information has been provided to confirm the requirement will be the important disclosure of energy intensity and greenhouse gas emissions. In addition to the mandatory disclosure of a building’s energy performance the Greens believe the Government must create a stronger incentive for building owners to invest in energy efficiency retrofits.

One increasingly popular way to create such an incentive is with a 'white certificates' trading scheme. A white certificate represents avoided energy consumption and so can be created by voluntary improvements energy efficiency. A market for the certificates is created by requiring electricity retailers to buy a certain number of certificates each year. These schemes, in various forms, are common including in Victoria, South Australia and New South Wales. The New South Wales Scheme is the longest running and it has had a less than 1% uptake by the non-residential building sector, creating doubt about its potential to unlock the environmental and economic opportunity.

How the Energy Efficient Non-Residential Buildings Scheme would work There is, however, an alternative energy efficiency trading approach which can build upon these ideas. This approach has been developed and promoted by Lend Lease Corporation, Lincolne Scott and Advanced Environmental and we believe this idea, which prompted the development of this Bill, has a number of advantages over a white certificates trading scheme.

The scheme would have four main steps:

1. Consistent with the Greens existing policy on mandatory disclosure of energy and carbon intensity, the scheme will start with building owners reporting the energy and carbon intensity of their base building, measured as greenhouse gas emissions

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per square metre. We envisage that the scheme would start with large office buildings (say those with a net lettable area greater than 5,000m2), with smaller office buildings and other building types (such as hotels, hospitals, retail centres schools, etc) being phased in over a few years.

2. Once two years of data on the building energy and carbon intensity is received, the Minister would then set an intensity cap for each building type, each year for 10 years, probably starting with the average intensity for a city or region. This would vary by city or region due to local climatic conditions impacting the average. As with the proposed Carbon Pollution Reduction Scheme, the cap would decline predictably over time, with cap 'gateways' to balance investor certainty with the need for regulatory flexibility.

3. The scheme administrator (the same as would be used for the Carbon Pollution Reduction Scheme) will then allocate tradable certificates, each worth one tonne of greenhouse gas (known as CO2equivalents), to each participating building owner, up to the cap. In other words the amount of certificates each building owner would receive would be determined by the emission intensity cap for their building type, and the size of their building.

4. A trading mechanism would then allow building owners to buy and sell the tradable certificates. Owners of buildings which are more efficient than the cap will be allocated more certificates than they actually need, so these can then be either banked or sold to owners of relatively inefficient buildings. In this way the owners of all building types will have a long-term and predictable financial incentive to improve energy efficiency. Non-compliant building owners will face a shortfall penalty which in effect will act as a safety valve on the cost of the efficiency certificates.

The primary advantages of the scheme are that:

i. It is mandatory rather than voluntary for the building owner, thus leading to the systemic upgrade of all of Australia's non-residential buildings. The scheme requires that many thousands of participants seriously apply themselves to the question of improving efficiency.

ii. It creates both incentives for action and penalties for inaction, in other words it can be characterised as a carrot and stick approach. By contrast a white certificate scheme (from the point of view of the building owner) is just a carrot approach.

iii. In addition to creating an incentive to upgrade a building itself, including heating and cooling solutions for example, the scheme also creates an incentive to reduce energy consumption by changing behaviour.

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iv. The price signal created by the scheme is long term and predictable, increasing investment confidence.

v. It rewards early movers, advantaging those who have already undertaken improvements in energy efficiency.

vi. It requires the disclosure of energy and carbon performance information which in itself will improve the awareness of many building owners and tenants and motivate improvements especially when coupled with minimum standards for Government tenancy.

vii. It will stimulate the upgrade of inefficient buildings which will mean clean energy jobs

viii. It will also stimulate investment in innovative solutions - clean energy products and materials.

ix. And it will serve as a much needed building performance measure for building occupants

The Bill requires the Minister to prescribe a number of methodologies, including to measure energy and carbon performance; to manage situations where a building lacks sub-metering; and if necessary to provide for certificate banking and or a means to vary annual caps to account for annual climate variability.

On the question of measuring energy and carbon performance, there are main two schools of thought as to how to achieve this.

The original designers of the scheme have proposed a simple measurement and reporting process which would require building owners to determine the energy intensity for their building(s) based on electricity and gas bills, and official greenhouse gas coefficients, taking into account the buildings size and climatic location. An advantage of this would be the negligible cost of reporting.

Alternatively, others have submitted that one of the existing environmental reporting tools with a requirement for independent verification could be modified and improved to enable them to measure and report energy and carbon performance. This would add to the cost of reporting. On the question of sub-metering, it's important to understand that the scheme applies to the base building only. In other words only energy which is the responsibility of the landlord is relevant, not energy used by tenants.

Even in buildings with tenants, the majority of the energy used is the landlord's responsibility. Typically this is energy used in heating and cooling, installed lighting etc. Tenant energy consumption is still important, however, and in the longer term phasing in

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mandatory reporting of energy performance and participation in the scheme for large tenants could be considered.

The Bill requires the Minister to develop a methodology to deal with typically older or regional buildings which lack sub-metering, thereby exposing the building owner to the entirety of the tenant's energy consumption. It would be expected that the data collected over the transitional reporting period would inform the development of a rule to estimate the proportion of the total building's energy consumption which is the building owner's responsibility. This rule could expire in time to create an incentive to install sub-metering.

We believe some degree of certificate banking is appropriate, as is common in trading schemes generally, to provide participants some flexibility and to help smooth year on year market volatility. In this case, where demand for certificates will in part be determined by climate conditions, the extent of banking should be determined after the transitional reporting period. If it were assessed that the effect of annual climate variability on the operation of the scheme was significant, it would also be feasible for the Minister to develop a methodology to apply a climate correction factor each year.

The Minister's deliberations about the best and most cost-effective measurement and reporting tool, and other scheme design features would be assisted consultation with business and community in a Senate inquiry into this Bill.

Embracing energy efficiency across Australia As I indicated at the beginning of this speech energy efficiency measures must be developed to apply to industrial facilities and all homes as well as the non residential sector.

The Greens remain committed to the substantial upgrade of the energy efficiency of all homes. The Greens' Energy Efficiency Access and Savings Initiative, or EASI scheme, would: • organise a free energy audit by an accredited auditor;

• advise householders of all efficiency opportunities with a payback period of ten years or less; • organise and pay the upfront costs of implementing cost-effective opportunities; • collect repayments as a proportion of savings on the home's energy bills over a

ten year period. Repayments will be less than the savings on energy bills so that no householders will ever be "out of pocket".

Typical home energy efficiency refurbishments would include items such as ceiling, wall and floor insulation, solar hot water systems, efficient lights and shading of windows. This scheme needs to be complemented by new ambitious minimum standards for all new buildings and renovations as well as appliance standards.

The Greens are currently finalising plans for a new legislative scheme that would similarly drive systemic energy efficiency upgrades in the industrial sector.

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Unlocking the obvious greenhouse abatement opportunities from our non-residential buildings provides a significant immediate solution to reducing Australia's greenhouse gas emissions and creating new skills and employment opportunities.

This opportunity must be pursued as a matter of urgency.

I commend this Bill to the Senate.

2009

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

SENATE

Safe Climate (Energy Efficient Non-Residential Buildings Scheme) Bill 2009

EXPLANATORY MEMORANDUM

(Circulated by authority of Senator Milne)

Safe Climate (Energy Efficient Non-Residential Buildings Scheme) Bill 2009 - Explanatory Memorandum

The purpose of the Safe Climate—Energy Efficient Non-Residential Buildings Scheme Bill 2009 is to introduce a scheme to improve building energy efficiency.   The scheme established by the Bill is intended to work as follows:

1. At the start of the scheme the Minister must determine through regulations which types (or sizes) of buildings the Act will apply to. Additional building types can be added in later years. The Minister must also determine the method which building owners must use to measure the emission intensity of buildings. This method may be varied according to different circumstances, such as building type, lease arrangement etc. Emission intensity is measured in greenhouse gas emissions per square metre.

2. A two year transitional reporting period starts on the next 1 July after the commencement of this Act. In this period the owners of a non-residential building types participating in the scheme from the outset must report their buildings emission intensity annually to the Greenhouse and Energy Data Officer. Building types brought into the scheme at a later date will similarly have a two year transitional reporting period.

3. Based on emission intensity data collected during the transitional reporting period the Minister would then set an intensity cap for the relevant building types each year for 10 years. The intensity cap would be guided by the average intensity for each city or region would decline predictably over time. Cap 'gateways' setting an upper and lower bound into the future may be used to balance investor certainty with the need for regulatory flexibility.

4. The Act also establishes a Building Efficiency Certificate Scheme which will be administered by the Greenhouse and Energy Data Officer. The Administrator will allocate tradable certificates, each worth one tonne of greenhouse gas, to each participating building owner. The amount of certificates each building owner will receive will be determined by the emission intensity cap for their building type, and the size of their building.

5. The Minister must establish, within 12 months of the start of the scheme, a trading mechanism to allow building owners to buy, sell or stockpile the tradable certificates. Participating building owners must continue to report their building's energy intensity and surrender to the Greenhouse and Energy Data Officer certificates to the value of the emissions intensity of their building.

6. If the owner of a non-residential building fails to surrender sufficient certificates, the owner has a building efficiency certificate shortfall and is liable to pay a building efficiency certificate shortfall penalty. The amount of the building efficiency certificate shortfall penalty is calculated by multiplying the amount of the building efficiency certificate shortfall by the scheme penalty rate for a year prescribed by the regulations.

7. The Greenhouse and Energy Data Officer must keep a register to be known as the Register of the Emissions Intensity of Non-Residential Buildings. The register may be kept completely or partly in electronic form and freely available for public inspection.