Government Changes to Carrot and Stick

“Anyone involved with design and construction of property will have been pleased to see the update to Part L of the Building Regulations, finally issued last week [13 September 2005] by the Office of the Deputy Prime Minister as draft Approved Documents” says E3 Consulting’s MD, Alun Oliver. The much delayed revisions will come into effect on 6 April 2006 and are intended to reduce carbon emissions and encourage better conservation of fuel and power, although as ‘working drafts’ they may be subject to alteration.

Controlling heat losses or excessive solar gain as well as wider un-controlled heat gains or losses from pipes, ducts, etc is its principal aim. Alun Oliver says the government is expecting the impact to the substantial, “The government estimates that annual reduction in carbon emissions in 2010 resulting from Part L revisions will be 0.98million tones (MtC)”.

By setting maximum carbon emissions, rather than prescriptive use of certain technologies, for example, solar panels or wind generators, these changes will enable designers to maintain full flexibility in how they achieve the necessary carbon emission performance. Alun believes though that, “The level of permitted emissions will create a strong incentive to designers to consider Low and Zero Carbon (LZC) technologies”. Some in the industry fear that these changes will significantly increase construction costs in the pursuit of more sustainable properties. Alun thinks this need not be the case, as “The ‘carrot’ side of the equation is that capital allowances tax relief is available against many energy efficient technologies and environmentally beneficial plant and machinery assets”.

Approved assets, those that meet the tax criteria, are registered on the Energy Technology Product List and Water Technology Product List and so attract tax relief at 100% in the year the expenditure is incurred rather than drip fed over time at the standard plant and machinery rate of 25% pa on a reducing balance basis. These accelerated allowances are known as ‘Enhanced Capital Allowances’. The most recent editions of the Technology Lists have just come into force [22 September 2005].

The Energy List has been updated and clarified, but, three new technologies have been added to the Water List; efficient membrane filtration systems for the treatment of wastewater for recovery reuse, cleaning in place equipment and efficient showers.

Other existing technologies eligible for the 100% enhanced capital allowances include combined heat & power, boilers, motors, drives, refrigeration, lighting, solar heaters, compressors, radiant & warm air heaters, leak detection, flow controllers, taps, toilets and grey water systems.

Alun concludes, “The government’s approach to moving the market onto sustainable property development is both through the ‘stick’ of tighter regulation and the ‘carrot’ of tax relief to help meet the additional costs of these new LZC technologies.” He adds, “Property owners are also now considering the impact on their brand equity or their corporate social responsibility standing from the properties they occupy, purchase or develop”.