The future of sustainability in Australia?

What will Australia’s carbon emissions policies look like come end of 2013? 

Earlier this year, President Barack Obama released a National Climate Action Plan signalling the US had entered a deliberate new phase in global emissions reduction by taking a commercially and socially driven approach, enabling “climate action” on a domestic and international level.

In his landmark speech, Obama pledged to withdraw public funding from overseas coal-fired power plants and called for individuals and businesses to “join the movement” and “remind folks there’s no contradiction between a sound environment and strong economic growth.”

Australia and the US have progressed in tandem on many environmental issues.

The residential and commercial built environment is a prominent pain point, responsible for 23 per cent of Australia’s total carbon emissions and 40 per cent of America’s total energy costs. Both nations have benefited from one another in the development of environmental upgrade finance mechanisms and mandatory disclosure requirements for building energy consumption.

The development of Property Assessed Clean Energy (PACE) finance in the US has taken some early learning’s from Australia’s Environmental Upgrade Agreement (EUA), which provides attractive finance for commercial building owners. EUAs are administered through councils or in Sustainable Melbourne Fund’s case, as a third party organisation on behalf of the City of Melbourne.

Sustainable Melbourne Fund (SMF) has maintained strong linkages with similar programs in the US, also administered by third party organisations including California First, Green Finance San Francisco; as well as PACE Now, a non-profit organisation established in 2008 to broaden the awareness and adoption of PACE programs. The evolution of PACE finance in the US to Commercial PACE (C-PACE) finance has seen adoption in 27 states.

A handful of municipalities in NSW and one in Victoria have adopted EUAs. Although more slowly adopted than in the US, EUAs have already made a significant impact in Australia.

Administered by SMF, the City of Melbourne signed its first EUA in 2011, followed by a further three deals in 2012, resulting in a reduction in annual energy costs of nearly half a million dollars for Melbourne businesses (AUD$491,000).

Our fifth and largest EUA deal signed in Melbourne City took place in late August for $7M with projected greenhouse gas reductions of 606,700kg per year, slashing an estimated $80,000 off the building’s energy bills.

Four councils in NSW (Parramatta, Lake Macquarie, Sydney and North Sydney) now offer similar EUA programs. City of Parramatta signed an $800,000 full lighting upgrade EUA in December 2012 anticipated to cut 70% off the tenant’s annual electricity bill (the first EUA to receive a tenant contribution); and City of Sydney signed a $26.5 million trigeneration plant installation EUA for thermal heating of a large mixed use development, in March 2013.

City of Newcastle launched its EUA program this month and another two councils – Penrith and Wollongong are expected to make decisions on EUA legislation in 2013.

The government of South Australia has published a business case for EUAs in April this year, outlining a third party administration model as its preferred approach. It will be a blend of the Victorian and NSW models.

So what is driving this growth in uptake of energy efficiency measures? 

The National Australian Built Environment System (NABERS) has rated 66% of Australia’s commercial office space to date. As the basis of a mandatory disclosure policy for the performance of commercial offices in Australia, NABERS is the envy of many mature commercial property markets across the globe. Similar efforts are under-way in the US being led by New York City, which will be the first of many US cities to disclose energy use data for all large buildings. This mandatory disclosure, combined with the success of Green Star has led to the creation of the Property Council’s IPD Australian Green Property Index, which in its latest report found that Green Star rated assets delivered a total annual return of 10.6% and NABERS rated assets saw a 9.9% return, both outperforming the total office sector, which delivered a 9.7% return.

The Green Property Index, mandatory disclosure and the pervasiveness of Green Star ratings are all contributing to the adoption of environmental upgrades.

Through access to attractive finance for building owners to reduce carbon emissions, energy costs and improve workplace productivity, EUAs make a compelling business case for better performing buildings and a better performing economy. The Buildings Plan released in August by non-profit organisation, Beyond Zero Emissions, states “Australia could halve its energy consumption in less than a decade to make a major contribution to reducing the nation’s carbon emissions – and save money on energy bills in the long run as well.”

Australia has undoubtedly been an innovator in the area of sustainability in the built environment with a ground swell of popular support for energy reduction and lowering emissions.

The nation will watch with keen interest as the policies of the major parties emerge in the coming months. Yet regardless of what the climate change policies within Australia become, opportunities within the built environment remain to stimulate the economy and improve environmental outcomes.