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European Green Building: EU Directive Takes Effect in 2009

The European Union is serious about climate change, and with more than 40 percent of carbon emissions attributable to commercial buildings, it has focused on building performance and energy efficiency.


Earlier this year, the Union announced it is committed to reducing greenhouse gas emissions from the region by 20 percent and to sourcing 20 percent of the region's energy from renewable energy sources, all by 2020. It has also demanded member states introduce legislation to help it achieve its energy efficiency goals.

The Union's directive to its member states, known as the Energy Performance of Buildings Directive (EPBD), was introduced in 2002. It is aimed at accelerating the "low carbon" transformation of the region's building stock, which means buildings need to consume less energy in their operation and produce more of the energy they do consume from renewable sources on or near the buildings themselves. These include photovoltaic panels, solar water heating, micro wind turbines, and ground source heat pumps, as well as low carbon sources such as combined heat and power.

The EPBD is aimed at both new buildings and existing buildings and has three main pieces. The first piece requires minimum energy performance for all new development and major refurbishments. The second piece requires a system of Energy Performance Certificates (EPCs) for all existing buildings when they are built, sold or rented. And lastly, it requires regular inspections of air conditioning systems and boilers to provide advice on how to run them efficiently.

"The EPBD does not require anybody to upgrade or improve existing buildings," explains David Short, environmental counsel for GE Real Estate. "It is first about making sure any new building is energy efficient and second about making sure that the energy performance, associated operating cost and carbon emissions are more transparent for all existing buildings."

Member states issue laws
Member states have been allowed to write their own rules and regulations for the EPBD, which must be fully implemented by January 2009. To date, the EU has taken legal action against Greece, Poland and Estonia for failure to implement the directive and lay down minimum standards.

A recent European Energy Network survey reported that by January 2008, almost 70 percent of European member states had still not developed a methodology to assess the energy performance of their buildings and only 20 percent had EPCs in place for new builds. Even fewer had made certificates for existing buildings mandatory. "Most countries are bringing requirements this year, so they're not really behind," Short says. "Many are leaving it to the last minute, and some will clearly miss the January 2009 deadline."

A recent report by the Urban Land Institute and King Sturge found there is a major challenge across Europe: Local governments appear to be far more aware of the issue of "sustainability" than central governments. The report states: "Tuscany, for example, is taking the issue far more seriously than central government in Italy, and it could be argued that the Greater London Authority, led by Mayor Ken Livingstone, is several steps ahead of national government policy in the UK, for example by introducing legislation to levy a car congestion charge in central London."

Legal standards on design and build quality of new buildings across Europe are nothing new. In fact, most EU countries already had such requirements and many specifically covered energy or insulation issues. "However, the rate for these requirements has increased and will continue to increase until at least 2015 as a result of the EPBD," Short points out. "When planning a refurbishment or new development, as well as having to meet the current legal standards, we should bear in mind that new higher standards will likely be introduced in or around 2010 and 2015."

In the UK, for example, the 2006 requirements (Building Regs Part L) are 28 percent higher in terms of modeled carbon emissions than the 2002 requirements. They will be increased again in 2010 and again in 2015. Therefore the rate at which build quality (in terms of energy performance) is increasing is probably higher than ever before in history. "Some developers are already going well beyond current legal standards so their buildings will compete with assets built to the (near) future legal requirements," Short says.

Building rating system required
When it comes to EPCs, all EU countries are expected to implement this part of the Directive by January 2009. Though France started early (November 2006 for commercial property), most EU countries will implement EPCs at some point this year or in 2009, Short says. For example, the UK requirement for EPCs for commercial property comes in between April and October 2008, while Sweden is requiring EPCs at the end of this year, and Germany will require EPCs for commercial property by July 2009.

EPCs are not a sustainability rating - sustainability covers a wider range of factors and EPCs are just an energy or carbon rating. Across Europe, they will have the following common features: a sheet that looks a lot like the energy label currently applied to fridges and freezers and other appliances. The EPC will have a letter rating: from A (meaning very good) to G (meaning very bad). France's rating system, however, runs from A to I.

In general, the EPCs will have a numerical value and comparison with one or two benchmarks - for example, the average for the country's building inventory or the value that would be achieved by an identical building built to current building code standards.

However, variation in methodology and reliability between countries, and the commonality of EPC systems across Europe does not extend much beyond letter ratings and numerical values. "Each EU country is responsible for working out the detailed methodology for calculating energy performance and the format of EPCs," Short notes, adding that dramatic differences have already been seen between the methodologies adopted by France and the UK.

One reason for the differing methodologies is the differing climatic conditions across Europe. For example, a well-performing building in Rome will be very different from one in Stockholm. But, the difference means that the building ratings between countries cannot be compared. Furthermore, some country systems will be far less reliable, and therefore, less useful than others. As a result, investors and property owners and developers may pay far less attention to EPCs in some countries than in others.

For example, the French EPC rating system involves far less analysis and is far less reliable in telling you anything about a building than say the UK system or the German system. On the flip side, it also costs a fraction of the price.

"In the absence of any other widely used sustainability or environmental rating for buildings, EPCs may come to be seen by many as an overall "green" rating. They will also give an important signal as to likely energy costs associated with occupying the building," Short notes. "Both of these have potential to impact on the desirability of the building."

Short suggests that national or local governments may introduce tax measures or financial instruments that will make the EPC rating have a much greater financial impact for owners or tenants. For example, in the UK there is talk of stamp duty (property transfer tax) being lowered for higher rated buildings or business rates (paid by the occupier) being differentiated according to EPC rating.

While this is pure speculation at the moment, the UK government has already announced that new build residential homes that are carbon neutral will have a zero rate of stamp duty on sale (as opposed to up to 3 percent). The UK has also announced an emissions trading scheme starting in 2010 that will cover all large occupiers of commercial property.

"Many companies in the EU have made public commitments to reduce their carbon emissions, and these companies are likely to see the EPC rating of buildings they occupy as more than just a financial cost issue," Short notes. "It will affect both their ability to meet their corporate responsibility commitments and their public image and brand."

For example, companies wishing to project a "green" public image are unlikely to want to occupy a low EPC-rated building. "The ability to let assets to certain types of tenant or the speed at which vacancies are filled could be affected by the EPC rating," Short notes.

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