DECARBONISING THE BUILT ENVIRONMENT

Looking ahead through 2025 and beyond, global law firm Taylor Wessing considers how we can overcome barriers and embrace opportunities.

Addressing decarbonisation within the built environment is a pivotal challenge on the sustainability journey but one significant barrier remains: the ‘split incentive’ issue. This is where those who invest in energy efficiency do not necessarily reap the financial benefits in the short term (for example, developers and landlords typically bear the costs of improvements, while tenants enjoy reduced energy bills). This misalignment of stakeholder interests can hinder progress.

Recent strategies are making strides in bridging this gap however. Collaborative frameworks and innovative financing mechanisms support change. Used effectively, green leases align interests by sharing responsibilities and benefits between landlords and tenants. Additionally, government incentives and subsidies can offset initial costs, making sustainable infrastructure investments more viable for property owners.

Buildings account for nearly 40% of global greenhouse gas emissions, meaning they have a crucial role to play in tackling climate change. Reducing operational carbon is a ‘low-hanging-fruit’ when it comes to solutions. Despite their flaws, Energy Performance Certificates (EPCs) are vital for assessing potential sustainability within the built environment. By attributing ratings between A and G and offering recommendations for improvements, they provide valuable comparables for an asset’s sustainability credentials for investors and lenders alike. Removing ambiguity in regulatory KPIs will also ensure that operational efficiency is investible.

A new government consultation on reforming the EPC regime seeks input on ‘5 Critical Areas’, including: updating the input metrics, improving data management protocols, and strengthening quality control. The existing metrics are routinely assumed to be flawed, and so views are invited on a series of alternative metrics (energy cost; carbon emissions; energy use; fabric performance; heating system and smart readiness) with any changes to EPC creation metrics to be introduced in the second half of 2026.

Policy evolutions are crucial to supporting decarbonisation efforts. Stakeholders are encouraged to participate in this critical conversation on modernising EPC frameworks before the consultation closes on 26 February 2025.

Taylor Wessing recognise that innovation is the cornerstone of a greener future and we are inspired by the numerous initiatives within the Liverpool City Region. We are committed to guiding our clients through the multifaceted challenges and opportunities associated with creating a more sustainable built environment and we are proud to be part of this ongoing journey within Liverpool.