The Paris Agreement and its impact on business and the building sector

In January we reported on the COP21 meeting in Paris and its implications for our sector. On 5th October, the threshold for entry into force of the Paris Agreement was reached as it was ratified by 55 Parties to the Convention, accounting for at least 55% of global greenhouse gas emissions.

On 4th November, the Paris Agreement entered into force, meaning that all countries are required to limit global temperature rise to ‘well below 2°C and to pursue efforts to limit it to 1.5°C’.

This has been labelled by global businesses and political leaders as a ‘truly historic moment’ in the fight against climate change. Here we look at the implications of the Paris Agreement for our sector and progress that has been made since January.

During COP21, all Parties made pledges, known as Nationally Determined Contributions (NDCs), setting out their targeted contribution towards the temperature rise reduction.

Analysis by the Committee on Climate Change of the combined effect of these pledges has shown that whilst they would lower emissions compared to projections based on current policy, they are not enough to limit the global temperature increase to 2°C or below, thus necessitating five-yearly revisions of NDCs.

Action towards the pledges has already been initiated with the organisation CDP observing a 70% rise in the number of cities reporting on their efforts to tackle global warming since COP21, particularly African cities.

They also highlight that companies can move much faster than governments, and the Paris Agreement has given these companies an opportunity to demonstrate their leadership and creativity in reducing their emissions.

In the UK, the Climate Change Act (2008) requires emissions to be reduced by at least 80% by 2050 compared to 1990 levels. These figures are based on reaching the 2°C temperature rise limit but as the Paris Agreement requires ‘well below’ this, the Climate Change Act alone is not enough for the UK to reach its targets.

The government has suggested it will set new targets for after the Climate Change Act ends in 2050 to meet the Paris Agreement, although a recent report by the Committee on Climate Change (CCC) argued against setting these targets and instead concentrating on measures to meet the carbon budgets, which are already very challenging.

They suggest that urgent government action is required to improve energy efficiency, decarbonise electricity and scale up markets for zero emission heating. In the absence of this government action, areas of the building sector are developing initiatives to work towards energy reduction.

Soft Landings is a strategy adopted to ensure a smooth transition from construction to operation of a building, i.e. reduce the performance gap and optimise the performance of a building.

As well as focusing on a building’s energy in use, embodied carbon will have an increasing role as buildings look for more innovative ways to reduce emissions and developers understand the value of assessing carbon across the building’s whole lifecycle.

To assess embodied carbon, careful material choice is becoming ever more important and products that have an Environmental Product Declaration are regarded favourably due to their transparency of lifecycle environmental impacts including greenhouse gas emissions.

Since the UK’s referendum vote to leave the EU, uncertainty has been introduced for many businesses, including those in the building and construction sector. This had the potential to disrupt any initiatives for emissions reduction as many considered that environmental considerations had been put on the back burner during the political upheaval.

The minister of state for the newly formed Department for Business, Energy and Industrial Strategy (BEIS) stated that climate change would be at the heart of the BEIS, and the UK’s fifth carbon budget was passed after Brexit, both introducing a degree of certainty for the low carbon economy and sending a signal that the UK intends to stay on track to meet long term climate targets despite being outside the EU.

It is anticipated that there will be a vast number of business opportunities in alternative investment and sustainable development as a result of the Paris Agreement, which is already shaping public policy and corporate action with the energy, utility, oil, gas and financial sectors considering the viability of business models in a low carbon economy.

Initiatives such as science based targets are tasking businesses with setting emission reduction targets in line with climate science and will likely see an increased uptake in the future as businesses and asset owners see the benefits that can be achieved from improving carbon intensity throughout their business.

Recently, Land Securities became the first commercial real estate company in the world to announce they had set a science based target for carbon reduction, thus putting them at the forefront of sustainability innovation in the UK property sector and it is hoped that their example will encourage others to follow suit.

The Paris Agreement is an ideal opportunity to introduce much needed new policy in the property and development sector in line with the CCC recommendations, such as requirements for improved energy performance, management and use of renewable technologies.

There are also increasingly more reporting initiatives under way such as the Global Real Estate Sustainability Benchmark (GRESB), resulting in an emphasis on project teams to design for greater thermal efficiency, use materials with lower embodied carbon, specify more efficient building services and provide better monitoring of energy within buildings.

In the absence of direct policy, there are examples of organisations in the built environment setting their own sustainability agendas and targets: A recent publication by the Better Buildings Partnership identifies some core provisions to drive sustainability amongst building managing agents, this includes guidance to procure energy reviews and the benefits this can have for the company.

In the past year, an increasing number of businesses within the built environment have begun to use demand response whereby they are paid to curtail energy usage during periods of peak demand or high electricity prices, resulting in reduced energy demand and operating costs across their buildings.

COP22 begins in Morocco this week with the aim of establishing the detail of the climate pledges, assessing how progress can be tracked, providing support for developing nations and the financing of initiatives.

It is hoped that this summit will culminate in a more detailed plan from the highest level of how the Paris Agreement can be worked towards, thus providing a framework for governments to develop national policies and businesses to establish action plans to reduce their emissions.

It seems, therefore, that whilst the overarching direction from new policy drivers is, as yet, not forthcoming, there are encouraging signs that businesses and organisations are putting in place their own initiatives that will futureproof buildings to meet the Paris Agreement standards.