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Germany: The Coalition Agreement and the Real Estate Industry – From Climate-Neutral Heating to Mandatory Rooftop-Solar and Embodied Carbon

The upcoming traffic light coalition has published its coalition agreement and defined its priorities for the 20th legislative period in it. For the German real estate industry, there are some exciting announcements that will further accelerate the dynamic development.

One of the most striking and very concrete planned changes concerns the Building Energy Act (“Gebäudeenergiegesetz”, GEG). From 2025, every newly installed heating system is to be powered by 65% renewable energy. From 2024, the replaced parts of buildings must meet at least efficiency house standard 70 in the case of significant renovation works, conversions and extensions to existing buildings. The standard for new buildings will be KfW Efficiency House 40 from 2025. The level of ambition for the planning of calculated energy requirements will therefore be raised further. At the same time, the transformation of the national heating infrastructure will be driven forward.

Beyond that, there are a number of concrete measures to be found in the agreement:

  • Suitable roof areas are to be used for solar energy. For new commercial buildings, there will even be an obligation to install rooftop solar installations.
  • In data centers, waste heat is to be recovered. New data centers are to be operated in a climate-neutral manner from 2027.
  • The CO2 price should not fall below €60 per ton in the long term.
  • At several points in the contract, reference is made to the importance of neighbourhood solutions for the sustainable provision of heat. Heat networks are to be further expanded and 50% of heat is to be generated in a climate-neutral manner by 2030. The primary energy factors of many heat networks will benefit from this.
  • Tenants can also look forward with anticipation to the new legislative period. The construction of 400,000 new housing units, 100,000 of which are to be publicly subsidised, is to contribute to further easing the situation on the housing market. There are also concrete targets for the distribution of the additional burden of heating costs due to the additional CO2 price to be paid: The traffic light coalition wants to introduce a model that defines how the additional costs are shared between tenant and landlord according to the building energy performance certificates by June 1, 2022. The worse the EPC of the building, the higher the share of the CO2 price that the landlord has to pay. If no agreement is reached on the concrete design of this EPC-dependent model, the CO2 price is to be split 50% each between tenant and landlord from June 2022. 

Other measures announced have not yet been described in concrete terms, but they show the direction in which the coalition partners would like to steer the industry.

  • The legal and financial structuring of tenant electricity and neighbourhood concepts is to be simplified.
  • A so-called “construction, housing costs and climate check” is to be introduced. It remains to be seen what exactly is meant by this.
  • Serial construction and refurbishment are to be simplified – especially with regard to approval processes.
  • Grey energy (“embodied carbon”) and life cycle costs are to be considered more closely and stored in a digital building resource passport. This is intended to stimulate the circular economy in the construction industry. The keywords timber construction, lightweight construction and strategies for securing raw materials also come up here.
  • Renovation roadmaps are to be “widely and systematically used” and even become free of charge for condominium owners’ associations when they purchase a building.
  • The building energy certificate is to be improved and digitised. The creation of a digital building energy register is being examined.
  • ESG ratings are to be included in the credit ratings of the major rating agencies on a mandatory basis. The EU’s Corporate Sustainability Reporting Directive (CSRD) is supported and is to be supplemented by European minimum requirements.

And then the traffic light coalition has a surprisingly concrete opinion on one of the big trend topics since the start of the Covid-19 pandemic: the home office. Here, employees are to be given a so-called right to discussion (“Erörterungsanspruch“) about mobile working and home office in the future. The employer should only be allowed to object to the employee’s wish for mobile working if there are operational reasons for doing so. Mobile working should then be “possible without any problems” throughout the EU. So it appears that German offices in the future must evolve if they want to remain an attractive and productive place that attracts employees.

In some places, the coalition agreement is very precise with regard to the real estate sector and also wants to quickly follow up words with deeds. Instead of describing target values for the coming decades, some of the implementation deadlines are only a few years long. If the announced measures are actually implemented, this will provide a strong tailwind for the transformation of the real estate industry and the decarbonization of our buildings. We at EVORA very much welcome this.

Investors and developers are therefore well advised to incorporate meaningful and ambitious sustainability KPIs and ESG targets into all decisions already today. We are happy to support you!

Environmental Legislation Update

Please find below, an update on changes to Hazardous Waste Regulations, which may impact on the operation of your buildings.

 

Changes to premises registration and the consignment note number format

 

Changes have been made to the Hazardous Waste Regulations which will affect business waste management operations, if you have a premises registered with the Environment Agency as a hazardous waste producer.

As of 1st April 2016, two changes to the Regulations will be implemented:

  • Producers of hazardous waste in England will no longer need to notify their premises to the Environment Agency.
  • The format of the unique consignment note code, which appears on every consignment note will change.

 

Why have the changes been implemented?

This change has been driven by the Government’s ‘Red Tape Challenge’ – to remove unnecessary administrative burden within environmental legislation.

 

Registration 

  • If you produce or store 500kg or more of hazardous waste per year you will no longer need to register your premises with the Environment Agency from 1 April 2016.
  • You must continue to have a valid registration up until 1 April 2016
  • These changes only apply to England. It does not affect premises in Wales who should continue to register with Natural Resources Wales

 

Consignment Note Code Format

Completed consignment notes must accompany hazardous waste when moved from any premises. From 1 April 2016 the way you complete a consignment note will change.

  • To accommodate the removal of premises registration, the format of the consignment note code will change 1 April 2016 regardless of the amount of hazardous waste you produce, store or handle.
  • From 1 April 2016, if waste is produced in England, you will need to amend the first six characters of your consignment note code (currently the premises registration number), replacing them with the first six letters or numbers (not symbols) of the business name.  The producer should ensure consistent use of the organisation name in this regard.
  • ‘EXEMPT’ will no longer be used.
  • The second set of characters will continue to be five numbers or letters of your choosing. This may, in a few specified occasions, be followed by an additional letter.
  • There will be guidance on gov.uk from 1 April 2016.
  • Please check you are using the correct format of the consignment note number. Legally you are still required to use the current format on consignment notes up until 1 April 2016.
  • Make sure you do not pre-print more consignment notes using the old format, than you will use by the end of 31 March 2016.
  • If you are receiving waste from Wales into England, you should not change the consignment note code. Welsh producers will still be required to register their premises with Natural Resources Wales and use this is their consignment note number.  If the waste is moved from England into Wales, Scotland or Northern Ireland from 1 April 2016 the consignment note code will need to use the new format.

 

SIC Code

Requirement for the SIC code on the consignment note will change.

Currently the following codes are accepted: SIC 2003, SIC 2007, or NACE on the consignment note.

From 1 April 2016, the SIC codes published in 2007 should be used only. This aligns with the non-hazardous waste transfer note requirements for SIC codes. NACE can still be used (as per an Environment Agency issued Regulatory Position).

 

 

Please don’t hesitate to call EVORA if you have any questions.

Paul Sutcliffe    | t: 07557 529104 | e: psutcliffe@evoraglobal.com
Chris Bennett   | t: 07810 631599 | e: cbennett@evoraglobal.com