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Does the UK’s net zero future need the EU ETS?

The 2008 Climate Change Act already commits the UK to an 80% reduction in emissions compared to 1990 levels by 2050. However, the unwritten long-term target hopefully is, or at least should be, to achieve complete carbon neutrality.


Since its inception in 2005, the European Union Emissions Trading Scheme (EU ETS) has been Europe’s flagship climate policy. It has two stated aims, namely:

  • To reduce greenhouse gas emissions in an economically efficient manner.
  • To promote investment in low-carbon technologies and energy efficiency improvements.

Approximately 15400 installations, accounting for around 45% of EU greenhouse gas emissions, are now covered by the Scheme, over 1000 of which are in the UK. However, with the Brexit negotiations looming, the UK’s place in the EU ETS is under threat.

As an EU member, the UK is currently subject to the Emissions Trading Directive, but this is unlikely to be the case by the end of the negotiation process as such a position is not compatible with the incumbent government’s Brexit rhetoric of removing European Court of Justice (ECJ) jurisprudence.

The only obvious option for the UK to remain involved in the EU ETS, whilst avoiding ECJ jurisprudence, would be to create a UK ETS and then negotiate a unilateral or bilateral linkage. Switzerland has been undergoing just such a process over the past decade, culminating in a technical-level agreement in January 2016 that is awaiting ratification.

Before beginning to debate how a UK-EU ETS relationship should be formed however, the question that we should be asking first is: is it worth it?


This seemingly simple question has a rather more complex answer. The UK economy is large enough to have an emissions trading scheme of its own, however being part of a larger trading scheme with more participants carries efficiency benefits, through increasing the volume of available low-cost abatement options and through increasing market liquidity and stability.

What is not clear is the extent to which the UK receives these benefits. Given that the EU ETS is now in its twelfth compliance cycle, there seems to be remarkably little research into the extent of the benefits the Scheme produces. With the March 2019 Brexit negotiation deadline fast approaching, the Government should give serious consideration to commissioning such a study for the UK.

The EU ETS is also far from perfect which, to be fair, is to be expected given that it was the first, and continues to be the largest, emissions trading scheme in the world. The large surplus of allowances, a lingering remnant of the 2008 financial crisis, and the persistently low and unstable allowance price are the stand out issues, and add up to mean the EU ETS is not functioning as well as it could.

[clickToTweet tweet=”The majority of the EU ETS’ regulatory design features could be replicated in an independent UK ETS” quote=”The majority of the EU ETS’ regulatory design features could simply be replicated in an independent UK ETS”]

If the UK Government wishes, the majority of the EU ETS’ regulatory design features could simply be replicated in an independent UK ETS. Therefore, the decision of whether to remain involved in the Scheme boils down to weighing the aforementioned economic efficiency benefits against the issues the EU ETS is facing and the challenges of negotiating an acceptable linkage deal for both parties.


The UK business community should seek to take greater ownership of this issue, firstly by pushing the Government to conduct the necessary research to make this decision properly, and secondly by each firm reflecting themselves on what the EU ETS does or does not do for them in the pursuit of carbon neutrality. As the global threat of climate change grows, stricter environmental regulations are inevitable, but high costs don’t have to be. Emissions trading schemes are a proven mechanism for producing low-cost emissions abatement, but to get the most out of them they must have the right design. Is the EU ETS right for the UK? This is something we need to work out.

This blog was originally published on Edie.net

Net Zero and carbon reduction targets: To what extent will it help us achieve them?

This blog is part of our Net Zero series for World Green Building Week 2017 – read more here.


The UK target of Net Zero Buildings (NZB) means that new buildings and major renovations should have a net zero impact on carbon emissions from 2030 onwards. This sets the tone for our buildings of the future but what does this mean for our existing buildings? Projections are that half of the existing building stock will still be around in 2050. Even at a reasonable rate of major renovations this still leaves the property industry with its work cut out.

Policies such as the MEES regulations should definitely help to improve efficiencies in existing buildings through refurbishment works and upgrades to take building spaces up to E rating or better. The MEES regulations have undoubtedly got more companies thinking about cost-effective improvements to commercial properties. However, one of my gripes with the whole EPC scheme is that the rating approach is based on theoretical design performance –  the elephant in the room of course being that actual energy consumed doesn’t feature at all.

This means that it’s entirely possible to have a good EPC score on an office and it still be energy inefficient. This is something I wrote about a few years ago with the Better Buildings Partnership and found it was not an isolated example. Furthermore, there are certain types of energy use not captured by EPCs which only potentially complicates the problem. Let’s not forget that addressing actual energy usage is fundamental to succeeding in meeting national and international carbon reduction targets.

[clickToTweet tweet=”Let’s not forget addressing actual energy usage is fundamental to meeting carbon reduction targets.” quote=”Let’s not forget that addressing actual energy usage is fundamental to succeeding in meeting national and international carbon reduction targets.”]

This discrepancy between design intent and actual energy usage has been written about extensively under the banner of a concept most of you will hopefully be familiar with – the ‘performance gap’. Studies suggest that this difference between how we think buildings perform and how they actually perform could be underestimated by as much as 50%.

This brings me to one of my main points. Of course, actual energy consumed is significant but so too is the source of that energy; if energy is consumed we need it to be from renewable or ideally carbon neutral sources. Therefore, yes energy efficiency needs to be addressed but so too does the decarbonisation of those supplies.


Decarbonisation targets are likely to be missed, so what does this mean?

The UK Government has targets to improve the decarbonisation of grid energy supplies but research suggests that this is likely to be missed. Also, with the Government limiting financial support for certain types of renewables, investors are hardly getting the certainty that would really help to boost the market. We’ve seen a number of renewables/solar companies going into liquidation, however, demand on the whole for onsite renewables seems to be maintaining (?)

Clearly, in addition to the grid energy mix there’s a role for decentralised green energy generation. Two trends which will be significant in terms of the overall trajectory of the energy sector are the decentralisation of energy generation and energy storage. These are predicted to both increase rapidly.

[clickToTweet tweet=”Two trends which will be significant are the decentralisation of energy generation and energy storage. ” quote=”Two trends which will be significant are the decentralisation of energy generation and energy storage. “]

So what does this all mean for strategies of property owners and investors? Clearly, there’s a business case for investment in energy efficiency because of the financial impact of operating costs. As a proportion of overall costs of occupation, this can be hugely variable depending on the organisation, but can relate to factors such as the regional location of property as an example. Nonetheless, DEFRA/DECCs energy price forecasts are that they will continue to rise faster than the rate of inflation so the costs are not going to reduce. Overtime, the cost of renewable energy should become more competitive but there’s little sense in consuming green energy profligately. This means that the property industry really needs to make decarbonisation of energy in existing property portfolios part of its strategy.

[clickToTweet tweet=”The property industry needs to make decarbonisation of energy in existing property portfolios part of its strategy.” quote=”This means the property industry really needs to make decarbonisation of energy in existing property portfolios part of its strategy.”]

As my colleague, Paul Sutcliffe,  has said Science Based Targets is an approach that is gaining more momentum and rightly so. However, what’s fundamental to achieving the carbon reductions required is an honest assessment of what can realistically be delivered, at the industry-level, through building efficiency and what will be achieved through greening energy supplies.


To speak to the EVORA team about how we can help your organisation, please contact us.

Net Zero and Science Based Targets – Connecting the Dots

This blog is part of our Net Zero series for World Green Building Week 2017 – read more here.


I was recently asked how Science Based Targets are connected to Zero Carbon Buildings – hmmm, I thought, interesting question.

Let’s start with the definitions.


Science Based Targets

In response to mounting environmental, social and political pressure, organisations have recently begun setting science-based GHG emissions reduction targets (‘science based targets’ or SBTs). In doing this, companies are committing to bringing their operational activities and resultant emissions in line with the level of decarbonisation required to keep global temperature increases below 2oC compared to pre-industrial temperatures. Optional third-party approval of alignment to approved methodologies is managed by www.sciencebasedtargets.org, which is supported by the WWF, CDP, UNGC and the WRI.

The SBT approach is being adopted by companies across multiple sectors as the basis for setting long-term goals for GHG emissions reductions. Importantly, in the long-term the SBT approach may be adjusted to reflect advances of climate science and economic modelling (e.g. to target a 1.5oC increase in global mean temperatures).

[clickToTweet tweet=”A SBT approach may be adjusted to reflect advances of climate science and economic modelling” quote=”A SBT approach may be adjusted to reflect advances of climate science and economic modelling”]

Net Zero Buildings

Net zero buildings are highly energy-efficient buildings which uses on or off-site renewable energy sources – to achieve net zero carbon emissions. This definition encompasses all asset classes:  homes, offices, shops, stadiums and theatres of the future.

WorldGBC support the ‘Advancing Net Zero’ project – its aims are to ensure that:

  • All new buildings and major renovations should be net zero starting in 2030, meaning no buildings should be built below net zero standards beyond 2030. All buildings should be net zero by 2050
  • 75,000 professionals are trained on net zero building design and operation by 2030, and 300,000 by 2050.

Laudable – and I can see the 2030 target working with a combination of innovation, creativity and targeted regulation (a carrot and stick approach).  However, the aspiration to ensure that all buildings are net zero by 2050 if a big one.  We are less than 33 years away from this deadline and buildings are designed with much longer life-spans.  The speed of conversion and renovation must therefore increase significantly.  In the UK, Minimum Energy Efficiency (MEES) legislation will ban the leasing of buildings with F and G ratings from 2018.  However, net zero buildings have EPCs of A+ not D.  So, in short, at least in the UK, there is a long way to go.


The Connection?

I believe in SBTs – they require that organisational carbon targets are set in line with the global context and can be all encompassing, covering operational, supply chain and even embodied carbon emissions. However, it should be noted that at least for commercial property, the SBT approach doesn’t actually require that all properties become zero carbon by 2050; rather, a minimal level of carbon emissions performance must be achieved (e.g. ~13kgCOe/m2 by 2050).

As such, a science based target is actually – relatively speaking – less stretching than a net zero building.

Furthermore, science based targets are set at the fund, portfolio or even company level, whereas the net zero buildings agenda is targeting all buildings. SBTS are therefore more flexible.  SBTs can be met based on the average performance of a portfolio, with some inefficient and other efficient assets, which on balance are in line with a 2oC world.

In my opinion though, net zero buildings are a very worthy aspiration and will support any organisation in its aim to achieve performance in line with internationally agreed emissions targets. Certainly for new builds, I think we should be targeting net zero carbon. For existing assets, the challenge is substantial; however, one that we as an industry should be grabbing with both hands.

Net zero buildings are a very worthy aspiration and will support any organisation in its aim to achieve performance in line with internationally agreed emissions targets.

We need a joined-up approach, supported and incentivised by Government, as refurbishing all existing assets is a massive job and should be considered as a national infrastructure project.  However, delivery will ultimately need to be managed by both Government and Business working in partnership.

[clickToTweet tweet=”For existing assets, the challenge is substantial; however, one that we should be grabbing with both hands.” quote=”For existing assets, the challenge is substantial; however, one that we as an industry should be grabbing with both hands.”]

We need:

  • A strong approach from Government– balancing regulation with incentivisation
  • Visionaries – organisations prepared to lead, to continue to progress the sustainability agenda
  • Communication and voice – organisations like the WorldGBC,  UK-GBC and the Better Buildings Partnership to promote and
  • Adoption

Now, as they say, ‘that’s a big ask’.

However, so much [read everything] is at stake

Come on Property Industry – let’s take the lead!