The property industry can’t afford not to adapt to climate change

Extinction Rebellion in London. Image: Getty.

From the school strikes for climate, to Extinction Rebellion protests and calls for a Green New Deal, citizens around the world are putting pressure on their governments to prevent global warming more than 2°C above pre-industrial levels.

In the UK, these efforts have met with some success – the government has declared a “climate emergency” and promised to reduce greenhouse gas emissions to net zero by 2050. Even so, scepticism persists in some quarters: former chancellor of the exchequer, Philip Hammond, has argued that the UK government’s goal may be unaffordable, based on estimates that the transition to a zero-carbon economy could cost up to £1trn.

Of course, there is likely to be significant public money spent on renewable energy transition and carbon offsetting. The costs of assets made obsolete by climate change policy – such as unexploited fossil fuel reserves – is also potentially huge.

But the problem with perspectives like Hammond’s is that they don’t balance the cost of acting now against the cost of doing nothing. In the UK and around the world, people live and work in buildings that are typically powered, heated and cooled using energy from fossil fuels. If these buildings are not retrofitted with energy efficiency measures, there is a real risk they will be rendered obsolete by policies aimed at reducing greenhouse emissions.

A valuable asset

Research at Northumbria University has examined this situation in relation to international real estate. The global value of real estate is estimated at $217trn – that’s roughly 2.7 times the GDP of the entire world. Of this, $162trn worth is residential, $29trn worth is commercial and $26ttrn worth is agricultural land.

A conservative estimate is that global real estate consumes 40 per cent of global energy annually and accounts for more than 20 per cent of international carbon emissions. So it’s hardly surprising that international agencies have identified real estate and the built environment as key contributors toward global warming and a major target of international efforts to reduce greenhouse gas emissions.

One of the most comprehensive approaches to reducing building energy use can be seen in the European Union (EU). A 2010 directive on energy performance made it mandatory for all European properties to hold an energy performance certificate and monitor energy use from heating and air conditioning. The government of England and Wales has used these energy performance certificates to enforce minimum standards of energy efficiency for privately rented family homes and commercial properties.

Since April 2018, any commercial property with an energy performance rating below E (that is, those properties with F and G ratings) has been deemed illegal to let (although there are some exemptions related to maximum cost of improvements). By 2020, the plan is for these same rules to apply to residential property – which includes shared homes, nursing and care homes and blocks of flats.


A less daunting prospect

In England and Wales, it is estimated that 10 per cent of residential property stock (worth £570bn) and 18 per cent of commercial stock (worth £157bn) does not meet these minimum standards. If these properties are not retrofitted to become more energy efficient, they will become obsolete and lose value, since the owners will no longer be allowed to let them.

Put this way, the cost of achieving an energy transition is less daunting, because the cost of not acting is equally (if not more) expensive. It’s even reasonable to expect benefits to the economy from the growing building retrofit industry.

If all international governments adopted similar minimum energy efficiency standards as the UK – and assuming the same proportions of property stock are potentially obsolete – the risk value for residential real estate property assets can be estimated at $16trn and $5trn for global commercial assets (based on their global vale, mentioned earlier).

A timely riposte

The potential cost of not acting in the real estate sector should provide a catalyst for the transition to more energy efficient buildings. It should also provide a riposte to those who worry about the cost of transitioning to net zero emissions. Indeed, there’s a clear need for investors and property owners to move beyond green-washing and reduce the carbon emissions of real estate before costly regulation and enforcement sets in.

Ignoring climate change exposes real estate assets to the risk of permanent disruption – especially now that the potential impacts of global warming are being widely acknowledged. Clean technology is becoming more affordable and consumers are adopting principles of environmental sustainability. Indeed, it’s already becoming more common for investment managers and financiers to demand that companies disclose business model exposure to climate change, while investors are starting to take advantage of exposed assets.

It makes sense for property owners to plan for the introduction of powerful new climate-related policies in the coming years. Adapting existing buildings and constructing new developments that are not reliant on fossil fuels – though perhaps costlier in the short term – can create a more resilient, and therefore valuable, asset in the longer term.

Kevin Muldoon-Smith, Lecturer in Real Estate Economics and Property Development, Northumbria University, Newcastle and Paul Michael Greenhalgh, Professor of Real Estate and Regeneration, Northumbria University, Newcastle.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 
 
 
 

Transport for London’s fare zones secretly go up to 15

Some of these stations are in zones 10 to 12. Ooooh. Image: TfL.

The British capital, as every true-blooded Londoner knows, is divided into six concentric zones, from zone 1 in the centre to zone 6 in the green belt-hugging outer suburbs.

These are officially fare zones, which Transport for London (TfL) uses to determine the cost of your tube or rail journey. Unofficially, though, they’ve sort of become more than that, and like postcodes double as a sort of status symbol, a marker of how London-y a district actually is.

If you’re the sort of Londoner who’s also interested in transport nerdery, or who has spent any time studying the tube map, you’ll probably know that there are three more zones on the fringes of the capital. These, numbered 7 to 9, are used to set and collect fares at non-London stations where the Oyster card still works. But they differ from the first six, in that they aren’t concentric rings, but random patches, reflecting not distance from London but pre-existing and faintly arbitrary fares. Thus it is that at some points (on the Overground to Cheshunt, say) trains leaving zone 6 will visit zone 7. But at others they jump to 8 (on the train to Dartford) or 9 (on TfL rail to Brentwood), or skip them altogether.

Anyway: it turns out that, although they’re keeping it fairly quiet, the zones don’t stop at 9 either. They go all the way up to 15.

So I learned this week from the hero who runs the South East Rail Group Twitter feed, when they (well, let’s be honest: he) tweeted me this:

The choice of numbers is quite odd in its way. Purfleet, a small Thames-side village in Essex, is not only barely a mile from the London border, it’s actually inside the M25. Yet it’s all the way out in the notional zone 10. What gives?

TfL’s Ticketing + Revenue Update is a surprisingly jazzy internal newsletter about, well, you can probably guess. The September/October 2018 edition, published on WhatDoTheyKnow.com following a freedom of information request, contains a helpful explanation of what’s going on. The expansion of the Oyster card system

“has seen [Pay As You Go fare] acceptance extended to Grays, Hertford East, Shenfield, Dartford and Swanley. These expansions have been identified by additional zones mainly for PAYG caping and charging purposes.

“Although these additional zones appear on our staff PAYG map, they are no generally advertised to customers, as there is the risk of potentially confusing users or leading them to think that these ones function in exactly the same way as Zones 1-6.”


Fair enough: maps should make life less, not more, confusing, so labelling Shenfield et al. as “special fares apply” rather than zone whatever makes some sense. But why don’t these outer zone fares work the same way as the proper London ones?

“One of the reasons that the fare structure becomes much more complicated when you travel to stations beyond the Zone 6 boundary is that the various Train Operating Companies (TOCs) are responsible for setting the fares to and from their stations outside London. This means that they do not have to follow the standard TfL zonal fares and can mean that stations that are notionally indicated as being in the same fare zone for capping purposes may actually have very different charges for journeys to/from London."

In other words, these fares have been designed to fit in with pre-existing TOC charges. Greater Anglia would get a bit miffed if TfL unilaterally decided that Shenfield was zone 8, thus costing the TOC a whole pile of revenue. So it gets a higher, largely notional fare zone to reflect fares. It’s a mess. No wonder TfL doesn't tell us about them.

These “ghost zones”, as the South East Rail Group terms them, will actually be extending yet further. Zone 15 is reserved for some of the western-most Elizabeth line stations out to Reading, when that finally joins the system. Although whether the residents of zone 12 will one day follow in the venerable London tradition of looking down on the residents of zones 13-15 remains to be seen.

Jonn Elledge was the founding editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.