KNOWLEDGE

Achieving net zero emissions in buildings - what can we expect?

Morton Fraser Trainee Solicitor Jee-Young Song
Author
Jee-Young Song
Trainee Solicitor
PUBLISHED:
05 April 2022
Audience:
Real Estate
category:
Article

It is becoming increasingly clear that buildings contribute significantly towards greenhouse gases and fuel costs; they account for 40% of annual CO2 emissions globally, and within the UK alone they account for 34% of total UK greenhouse emissions. Whilst the energy efficiency of Scotland's properties is improving, around 55% are still rated below the recommended EPC.

Scotland's current position - Action Plans 

The current position in Scotland is that, other than for social housing, there are no set minimum standards which regulate the energy efficiency of properties. Instead, for non-domestic properties, the less stringent Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016 ("Regulations") have been in force since 1 September 2016. The Regulations require owners of certain non-domestic properties over 1000 m2 to assess and improve the energy efficiency of their buildings, and where applicable, an owner wishing to sell or let their building must provide the buyer or tenant with an 'action plan', free of charge, in addition to an EPC and EPC recommendation report. An action plan identifies energy improvements for a building, and sets out the improvement measures required to meet these targets - such as the upgrading of low energy lighting and better roof insulation. 

 

Whilst the current position does incentivise improving energy efficiency, it is notable that it is possible to defer the carrying out of any improvement works by instead opting to report annually on the operational energy ratings of a building. In addition, once action plans are registered in the Scottish EPC register, there is currently no obligation to obtain a subsequent action plan on any further sale or letting of the property. 

 

Proposed Changes - Minimum Standards 

As such, the Scottish government have now proposed an overhaul of the existing system. On 7 October 2021, the government published its new Heat in Buildings strategy, setting out how they aim to introduce new legislation to reduce emissions from buildings -  including through a 'milestone' approach of stricter minimum energy performance standards. When the legislation is introduced, the rules in Scotland will be more in line with England's existing Minimum Energy Efficiency Standards ("MEES") Regulations, and a significant step will be taken along the path towards the Scottish government's goal of being net zero by 2045.

 

To summarise, the government have proposed the following minimum standards: 

 

Residential Properties 

Minimum EPC 'C' or equivalent by 2025 

Private residential homes seem to have the poorest track record in terms of energy efficiency, perhaps due to the fact that previous legislation has been targeted at non-domestic buildings; in particular, 20% of private rented housing have EPC ratings of E, F or G. It can therefore be seen from this target that there is a sense of expediency here; the aim is to introduce regulations in 2025, that will ensure that from 2025 onwards all private housing must achieve minimum standards equivalent to EPC C at respective trigger points, where technically feasible and cost effective to do so  and there will be backstop dates of 2028 (for the private-rented sector ) and 2033 (for owner-occupiers) for the above target to be met. 

 

Social Housing 

Minimum EPC 'B' or as energy efficient as practically possible by 2032 

Social Housing is already leading in terms of energy standards, with 89% of social rented homes now working at an EPC C rating - it follows that the target is higher here. 

 

Mixed-Use 

Proposed: good level of energy efficiency, equivalent to EPC C rating and zero-emissions heating supply by 2040-45 

Mixed used buildings include a mix of residential housing and non-domestic premises, and so these properties are more difficult to regulate, and multiple ownership can pose as a barrier to installing energy efficiency improvements. As such, no specific dates or targets have been introduced yet, and the government will continue to consult; it is worth noting that the standard will most likely apply to the whole building, rather than to individual units. 

 

Commercial Buildings 

Consultation due in 2022 on proposed regulatory approach

In contrast to residential housing, definite targets have not been introduced for commercial buildings - instead the government will consult on the most effective regulatory approach for non-domestic buildings, taking into account the diversity of building uses and energy demands. The government intend to introduce regulations by 2025 to require owners to make energy efficiency improvements, and install a zero-emissions heating supply. Backstop deadlines are expected to be between 2035 and 2045. In terms of when these standards will become enforceable, the government have suggested a range of trigger points - such as upon a change of tenancy, or the point of sale. 

 

Public Sector Buildings 

Similarly to commercial buildings, no set targets have been introduced for public sector buildings, perhaps due to the difficulty in decarbonising high-energy buildings such as hospitals. The government has committed to introduce phased targets starting from 2024, and most notably have proposed that all publicly owned buildings meet zero-emission heating requirements by 2038.

 

Some Reflections 

Reducing emissions from our homes and buildings is one of the most important things we can do to slow down climate change and the above proposals are a major step forward in working towards achieving the Scottish Government's 2045 net zero emissions target.  

The introduction of strict minimum standards may seem burdensome, particularly from a costs perspective, but it is perhaps worth reminding ourselves that these are not strict standards - the goal is to improve energy efficiency on a cost-effective basis, and the minimum standards will not be absolutely enforced if the improvements are not feasible. It is also an incentive for landlords to reduce heating bills, and overall lower the running costs of buildings, perhaps even increasing the market value of their property. Above all, it is a step forward in an age where the climate crisis should arguably be at the front of everyone's minds. 

Disclaimer

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers.  Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.