Below is a comment piece based on his presentation:
How can we incentivise embodied carbon reduction in the housebuilding industry?
Over the last couple of years, there’s been an increasing clamour for the regulation of carbon in construction. The UK government have a policy of regulation reduction. So it’s hard to see when this regulation might come about. Last week’s overturning of the governments repeal of zero carbon regulations gives a glimmer of hope that all is not lost in that regard for carbon in use. When we look at embodied carbon though, there is less room for excitement.
It is clear that the choice of construction materials in housebuilding is important for a number of related reasons:
- Health and wellbeing of suppliers, fitters and users,
- Responsible sourcing and social welfare,
- Lifecycle costs,
- And my particular interest – lifecycle carbon.
There are some altruistic clients and homebuilders who, having seen that these are important issues, invest to deliver benefits in these areas to interested builders and clients. But for the many volume housebuilders, there is no strong business case for using sustainable materials just because they are sustainable.
Carbon dioxide: A commons problem
We have, in Carbon Dioxide, a classic commons problem: it’s (currently) free to emit, but emission in pursuit of rational self-interest leads to disaster. There are 3 broad ways in which you can change behaviour around the commons problem we see in the use of carbon:
- A bottom up approach: People take to the streets demanding lower embodied carbon. My personal dream… However, given the costs of land and the shortage of affordable housing in this country, for the majority, sustainability is a nice to have. Affordability is the bigger driver of house purchases for most people. A grass roots uprising seems unlikely, unfortunately;
- A top down change: Change the law, other regulatory constraints, or require the pricing of carbon. However, by removing regulation and the opportunity for planning constraint, the government has made the assumption that the third approach – change from within – will work just fine;
- So in the absence of regulation we’re left relying on change from within, developers ‘doing the right thing’. But as we have seen with zero carbon, they sometimes have other priorities.
Who will move first?
The UK Green Construction Board’s routemap to the delivery of construction’s share of the 2050 Climate Change Act goal suggests that the industry needs to deliver around a 40% reduction in embodied carbon emissions. If we’re to address these issues, housebuilders, designers, contractors and material suppliers will need to adopt new approaches to the design and delivery of their buildings. But where’s their incentive?
The first companies to adopt these new technologies and approaches are likely to incur significant development and learning costs; their margins will be hit…. Their competitors will also benefit from their investment as prices of the technology fall. Everyone waiting for the others to blink first until… it’s too late. How long does it take to develop new products which can demonstrate a 10 year warranty?
It is only by giving new products and approaches the time they need to mature and for their production processes to benefit from economies of scale that they can be adopted without disrupting the current profit margins of the housebuilders. But for that to happen, they need adoptions. It is a Catch 22 situation.
If technologies aren’t given the time to mature, then there is likely to be a significant dislocation in the market where either untested new products have to be adopted in a hurry, or industry output falls sharply to meet the legislated carbon limits.
The need for regulation
It’s in the interests of the government, industry and the housebuilder to recognise and act to address this stalemate by introducing graduated regulation. This sort of regulation slowly ratchets up the challenge of embodied carbon reduction, much as we’ve seen with Part L. This has 3 key advantages:
- It provides the sector with an escalating minimum benchmark to which they MUST work. This removes the commercial disincentive to implement sustainability.
- It shares the investment burden across the industry and, more importantly, time. These costs are going to hit margins at some point. Spreading them in this way reduces the burdens in one year and on one company.
- It also gives material producers the certainty they need to invest in the creation of new, cost effective solutions for industry.
Alternative approaches might be to replicate these cost distributions over time by the formation of a funded coalition to explore these issues on behalf of the key players, or the development of some form of industry shadow carbon pricing scheme. Both approaches though require for the dogma of deregulation to be overcome, allowing practical solutions to develop over time to deliver our common future.