The information in this article could be out-of-date or no longer relevant.
The existing building challenge
Each year, only around two per cent of Australia’s buildings are considered ‘new’. The remaining 98 per cent presents one of the key challenges of the built environment; making our existing stock more resource efficient, healthy, productive and sustainable. More Information
To help meet this challenge, the Green Building Council of Australia (GBCA) has developed the Green Star – Performance rating tool, in collaboration with key stakeholders to assess the ongoing operational performance of existing buildings. The Green Star – Performance rating tool allows building owners and operators to measure their building’s holistic performance against industry benchmarks and set targets to improve energy and water efficiency, and improve factors that influence productivity, health and learning such as indoor environment quality.
Australia’s commercial and residential built environment accounts for 23 per cent of our greenhouse gas emissions, but it also represents the biggest opportunities for greenhouse gas emissions. ClimateWorks’ Low Carbon Growth Plan, updated in 2011, argues that Australia can reduce its greenhouse gas emission to 25 per cent below 2000 levels by 2020 at an average annual cost of AUD$185 per household, and that this reduction can be achieved using technologies that are available today. The most cost-effective abatement opportunity, according to ClimateWorks, is retrofitting commercial buildings such as offices, shopping centres, schools and hospitals.
While a number of building owners have undertaken environmental upgrades, several significant barriers stand in the way of building owners taking this step.
Overcoming barriers
The GBCA has often called for closer collaboration between industry, government and NGOs / industry associations in order to help address key problems. More Information
Such information asymmetries (where a lack of knowledge increases the fear of making an adverse selection), split incentives (where the costs and benefits of energy efficiency investments go to different parties), unpriced externalities (where the costs or benefits of an economic activity are born by a third party), bounded rationality (where too much information can lead to decisions being based on ‘micro’ factors rather than ‘macro’ gains), regulatory problems and the time lag which can occur between substantial investment in energy efficiency gains and the corresponding financial returns.
Access to capital and/or affordable finance options is still an issue for many building owners. Without access to grants, tax relief or alternative financing options, many building owners will find it too difficult to invest in upgrades to their buildings and the potential of the built environment to make significant contributions to Australia’s emissions reduction efforts will go unrealised.
However, one of the biggest barriers facing building owners remains the issue of split incentives. Recognising that overcoming this barrier will unlock opportunities that will benefit building owners, tenants and the environment, several state and local governments are enabling building owners to access Environmental Upgrade Agreements as a way to overcome finance obstacles and split incentives.
What is an Environmental Upgrade Agreement?
An EUA is a tripartite agreement between a building owner, a local council and a finance provider. More Information
Such information asymmetries (where a lack of knowledge increases the fear of making an adverse selection), split incentives (where the costs and benefits of energy efficiency investments go to different parties), unpriced externalities (where the costs or benefits of an economic activity are born by a third party), bounded rationality (where too much information can lead to decisions being based on ‘micro’ factors rather than ‘macro’ gains), regulatory problems and the time lag which can occur between substantial investment in energy efficiency gains and the corresponding financial returns.
Access to capital and/or affordable finance options is still an issue for many building owners. Without access to grants, tax relief or alternative financing options, many building owners will find it too difficult to invest in upgrades to their buildings and the potential of the built environment to make significant contributions to Australia’s emissions reduction efforts will go unrealised.
However, one of the biggest barriers facing building owners remains the issue of split incentives. Recognising that overcoming this barrier will unlock opportunities that will benefit building owners, tenants and the environment, several state and local governments are enabling building owners to access Environmental Upgrade Agreements as a way to overcome finance obstacles and split incentives.
Who is offering EUAs?
A number of states, cities and organisations are offering financial solutions. More Information
Victoria
A change in Victorian legislation now allows all Victorian councils to offer EUAs (which could previously only be offered by the City of Melbourne through the City of Melbourne Act 2001). The amendments came into effect in November 2015. They give all Victorian councils the power to offer EUAs, but do not require them to do so.
New South Wales
The NSW Government passed legislation in 2011 allowing local governments in NSW to enter into EUAs with owners of eligible buildings and finance providers as a way of funding upgrades to existing buildings.
The City of Sydney, Parramatta City Council and North Sydney Council all now offer EUAs for building owners within their local government areas and several more councils in NSW, including Lake Macquarie Council are planning to offer EUAs.
South Australia
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