carbon limited

Developers are taking a hard look at their pipelines in an effort to find savings and many projects are grinding to a halt. Redrow, Taylor Wimpey, Bovis, Barratts, Persimmon – each laying off thousands from their workforce. There’s no doubt that the credit crunch is taking a deep bite out of the construction sector. In addition, oil and energy prices are exacerbating the situation, rising continuously for the foreseeable future.

All this comes at a time when the UK is looking to new build projects to help it meet a significant proportion of its carbon and renewable energy targets, some of which are legally binding and carry fiscal penalties for failure.

If ever there was a time for investment in renewables and low-carbon energy, this is it. But the mechanism for delivery, specifically the regulatory requirements for new build such as the Code for Sustainable Homes, is dependent on a robust programme of building in the housing sector. Under the current model, you can’t have the low and zero carbon technology without the new homes to attach them to.

Government will find it difficult or impossible to walk away from its carbon and energy obligations. Meanwhile developers will struggle to stay afloat, never mind carry the additional costs of meeting Code requirements. A compromise will be necessary and the Code certainly won’t survive in its current incarnation.

I’ve got two predictions on what might happen next:

1. RSL’s (housing associations) will step in to pick up some of the slack. £8.4 billion has been earmarked for housing provision over the next three years and will be spent to provide a boost to the development sectors in an echo of the 1990’s, either paid to directly to RSL’s or as a subsidy to private housebuilders who then hand over the completed homes to the RSL sector. In either case, the homes are likely to adhere to the Housing Corp’s more stringent requirements for energy and carbon.
2. The Code for Sustainable Homes will become more flexible. The UKGBC report on the zero carbon definition suggested that a community buyout fund should be introduced for use on projects where it’s not feasible to go beyond Code level 5 (i.e. 100% reduction in regulated emissions). I think we’ll see this concept adopted by the CLG and the threshold will eventually be set at Code 4 (44% reduction in emissions) rather than Code 5.

The timing of the credit crisis is ironic: just at the moment when we most need to focus on delivering emissions cuts in the built environment and just when energy prices are making low and zero carbon energy much more attractive. With some foresight and flexibility we may still be able to meet targets while encouraging construction.