Australia: The Climate For Change, Sustainability And Building Green: What Is Required To Develop A Green Building? Part 2

1.4 Commonwealth Legislation

(a) Energy Efficiency Opportunities Act:

• The Commonwealth Energy Efficiency Opportunities program (EEO program) was introduced in April 2006 to encourage companies to improve their energy efficiency.

• It does this by requiring large energy users to assess their energy use and identify and report publically on energy saving opportunities. The EEO program is implemented by the Energy Efficiency Opportunities Act 2005 (Cth) (EEO Act) and the Energy Efficiency Opportunities Regulations 2006 (EEO Regulations).

• The EEO Act applies to corporate groups that use more than 0.5 Petajoules (PJ) of energy per year. If the total energy used by the members of a corporate group exceeds this threshold in a financial year it is mandatory for the "controlling corporation" to apply to register under the EEO program with the Department of Resources, Energy & Tourism (DRET). The controlling corporation's group includes the controlling corporation itself and certain subsidiaries, joint ventures and partnerships.

• Certain exemptions are available for companies whose main business involves the generation, transmission or distribution of electricity or gas.

• Once a company has registered under the EEO program, it must provide an assessment and reporting schedule to DRET. The schedule must cover a 5 year assessment cycle and outline how and when the company intends to conduct assessments and report on outcomes.

• The company must then carry out energy assessments in accordance with the requirements of the EEO Act, the EEO Regulations and the its assessment schedule.

• The company must publically report on the outcomes of its first assessment, including the company's response. The company will then provide annual updates of further assessments and business responses. The public reports must contain the information specified in the EEO Regulations. The company must also report to DRET by the time its first public report is made, and again within 6 months of the end of the assessment cycle.

• Where a controlling corporation's group exceeded the threshold in the first year of the EEO program (05/06 financial year), the corporation must have registered by 31 March 2007 and must make its first reports to the public and DRET by 31 December 2008.

• On 9 May 2008, the Federal Government released the Energy Savings Measurement Guide. This best practice guide provides practical guidance for companies on meeting their obligations under the EEO program. It contains worked examples from five key industry sectors: mineral processing, mining, manufacturing, commercial buildings and transport. It contains guidance on:

• Developing an energy baseline;

• Estimating the energy savings from a potential energy efficiency opportunity

• Evaluating the full costs and benefits for each energy efficiency opportunity;

• Measuring energy use and energy savings; and

• Tracking the progress and performance of implemented opportunities.

(b) National Greenhouse and Energy Reporting System (NGER System):

• The NGER System aims to be a streamlined national reporting point for greenhouse gas emissions and energy data for all programs across jurisdictions. The first reporting year commenced on 1 July 2008 with first reports due by 31 October 2008. The NGER System is designed to collect data to be used in the proposed national Carbon Pollution Reduction Scheme (CPRS). The legislative framework for the NGER System is provided by the National Greenhouse and Energy Reporting Act 2007 (Cth) which commenced in September 2007.

• The NGER System requires companies at the top of their corporate group in Australia ("controlling corporations") to register and report on behalf of their group. Whether or not a controlling corporation has to report will depend on whether energy use and emissions from "facilities" under the "operational control" of the corporation and entities in its group exceed the relevant threshold.

• There are "corporate level thresholds" and "facility level thresholds" for both GHG emissions and energy production and consumption. The energy consumption threshold for the first reporting year (08/09) is 500 TJs for corporate groups and 0.1PJ for individual facilities. It is expected that all companies that participate in the EEO program will meet energy consumption reporting thresholds and have to report under the NGER System.

• One of the aims of the NGER Act is to establish a single reporting scheme that removes the duplicative reporting burden currently experienced by some companies as a result of multiple Commonwealth, State and Territory energy and emissions reporting schemes.

• Although the NGER System and the EEO program have different purposes, there is duplication as both schemes require companies to measure and report their energy use. To help streamline reporting obligations under these two Commonwealth schemes, the Federal Government has proposed amendments to the EEO Regulations. The amendments are to take effect from 1 July 2008 to coincide with the commencement of the first reporting year under the NGER System.

1.5 Energy Efficiency Government Funding

(a) The New South Wales Climate Change Fund (the 'Fund')

The Fund was established in July 2007. This new program is currently being developed to increase: residential rebates for hot water systems, insulations and rainwater tanks and $40M to support develop Renewable Energy to some commentators are unhappy with the preferences to "residential": and "Commercial/Industry".

• $100 million Residential Rebate Programhot water systems, insulation and rainwater tanks

• $30 million NSW Green Business Program

• $30 million Public Facilities program

• $40 million Renewable Energy Development Fund

• $20 million School Energy Efficiency program

• $100 million Recycling and Stormwater Harvesting Program

• $20 million Rainwater Tanks in Schools program

The fund will total $310 million over five year and will include rebates, education and grants. In addition, the Climate Change Fund provides $2 million a year for the Central Coast Water Savings Fund

The Climate Change Fund was established under the Energy and Utilities Administration Act 1987. It incorporates the Water and Energy Savings Funds, the Climate Action Grants Program and funding from the Environmental Trust.

(b) Federal Government Funding

The Australian Government is supporting renewable energy through a range of initiatives that compliment the RET Scheme, including:

• $500 million Renewable Energy Fund which will develop, commercialise and deploy renewable energy in Australia

• $150 million for solar research and clear energy research; and

• More than $500 million for the Solar Cities, National Solar Schools and Green Precincts initiatives.

For more information on these initiatives or the RET see www.climatechange.gov.au

1.6 Possible Government Incentives

• Link energy efficiency to Council Rates/Tax (UK concept) which levies a charge for efficiency by Rating of Building.

• Regulate (draconian) reinvestment of Permit Revenue.

• Phase out Energy Efficiency Obligation when CPRS introduced.

• UK ETS (CPRS) in the UK does not incentivise Technological Development to reduce Co2.

• Don't phase out the RET 1.7 UK Examples

• June 2007 the UK Energy Efficiency Action Plan was published setting out in detail the policy framework for improving efficiency across all sectors of the economy in order to meet the national 9% energy saving target under the EU Energy End-Use Efficiency and Energy Services Directive. The Action Plan policies are projected to deliver energy savings of 18%, double the target.

• Merton Rule (20%) Renewable Energy Generation of New Builds by Local Authorities).

• Specific Renewable Energy Planning Guidance: PPS Climate Change/Renewable Energy.

• CERT (Carbon Emissions Reduction Target) where suppliers of electricity have obligations to invest around $Aus 5.5 billion over the next three years in improving energy efficiency of homes.

• ACT ON CO2 Calculator enabling individuals (not business) or households to calculate their carbon footprint and generation of a carbon plan. Apart from offering free advice from the Energy Savings Trust, it provides offers from energy companies who are required to provide practical help to reduce energy use at home as well as listing regulated companies who can install Energy Efficient Technologies.

• Building a Greener Future: a Policy Statement: all new homes to be zero carbon from 2016 with a progressive tightening of the energy efficiency standards in building regulations by 25% in 2010 and by 44% in 2013 up to the zero carbon standard in 2016.

• Voluntary Code for Sustainable Homes: six star rating for new homes providing an incentive and framework for developers who want to market properties as having high environmental standards.

• Energy Performance Certificates (EPCs) for domestic homes as part of the Home Information Packs. The EPC provides energy efficiency ratings from A-G and recommendations for improvement. It is law to have an EPC when selling a domestic property and includes newly built homes and large commercial properties. From October 2008, all buildings whenever sold, built or rented will need an EPC.

• From October 2008, Display Energy Certificates (DECs) will be required for larger public buildings enabling everyone to see how energy efficient public buildings are.

Bracing for green litigation

The courts in NSW are now gradually moving towards generally recognising that climate change impacts and greenhouse emissions should be taken into account in applying and considering ESD principles in planning building projects. However, the regulatory environment for green building energy efficiency requirements and is still taking shape.

With building green, you not only need to consider what property development would do to the environment but conversely, with the judicial recognition of consideration of global warming and climate change impacts, what the environment might do to a proposed development.

There is still uncertainty and speculation about green buildings and their potential exposure to climate change-related litigation risk arising from a failure to minimise potential liability for environmental damage or failure to reduce a building's significant environmental 'footprint'. To date, in NSW, there has been little guidance on how the courts will respond to green litigation issues. The few cases related to climate change that have arisen so far have mostly been challenges to planning approvals or some planning approval process under the Environmental Planning and Assessment Act 1979 (NSW) or the Environment Protection and Biodiversity Conservation Act 1999 (Cth), rather than actions brought against green building developers or owners. Various policy, causation and liability apportionment principles have not yet been developed through the courts.

Areas of Concern

Where there is ignorance of green building, energy efficiency or ESD principles or , just a little knowledge (which is always a dangerous thing), litigation will likely develop. The basis for litigation will be as simple as a breach of contract, but the essence of the breach will likely result from a specific term that requires a builder to deliver a building that has a certain GBCA rating. A task which is fraught with difficulty, it is similar to retaining an architect to warrant that he/she design a building that will meet Council's approval or otherwise you will sue.

There are today instances where major contractors are signing contracts whereby they provide a bank guarantee for not an insignificant amount of money that they will deliver a 5 star Green Star rated building, failing which the principal is entitled to a call upon the guarantee.

A close examination of the GBCA Green Star rating tool will reveal three major considerations:

It would be to a contractor's folly to sign a contract with such a provision, especially if the tenant involved does not buy into the project and wants certain modifications.

Major contractors who have a very small appreciation of the requirements under GBCA system are agreeing to clauses which simply could not be achieved. This is a big concern.

For example a standard warranty clause in a head contract or a subcontract could read as follows:

The Contractor warrants in addition t o ay other warranty given or obligation assumed that all the Works and all the items and materials will in every respect be fro for the purposes made know to the Contractor and for all purposes for which the Contractor could reasonably expect they may be used.

If at the time of negotiating the agreement the Contractor was made aware that the building was to be a 5 Star Green Star rated building it is therefore arguable that this warranty clause could be relied upon by the Principal to achieve this outcome.

In Walker v Minister for Planning [2007] NSW LEC 741, the approval given to a proposed concept plan by the Planning Minister was held void for failing to consider climate change flood risk, a factor deemed to be one of public interest and which the Minister was obliged to consider. This case highlights the need for developers and consent authorities to consider and account for the effects of climate change on proposed developments.

Whereas most expect litigation about green buildings to arise from environmental law and regulation with its focus on consideration of environmental impacts (such as greenhouse gas emissions or biodiversity protection) in environmental assessments at the project approval stage, it is reasonable to expect that litigation activity may more readily arise from tort-based, trade practices and corporations law claims in the future.

Tort law actions in negligence, perhaps even product liability or nuisance claim, may feature as specific causes of action in green building litigation.

Likely claims would be based on allegations that the defendant made an unreasonable contribution to climate change impacts, caused or materially contributed to adverse climate change impacts, failed to take reasonable measures to reduce their GHG emissions or energy consumption, failed to meet their green marketing claims in practice or failed to adequately report a listed company's financial exposure to issues arising from climate change or exposure to reputational damage. Claims might be brought by plaintiffs or class actions seeking compensation for damage caused or by environmental or public interest groups seeking to prevent further harm being caused by climate change factors (such as increased greenhouse gas emissions).

US cases suggest that tort-based actions claiming that the defendant contributed to GHG emissions will likely encounter serious obstacles and evidentiary burdens and have low prospects of success. However, cases alleging inadequate or misleading disclosure of required information on energy consumption, pollution reduction or energy efficiency measures or insufficient disclosure of adverse climate changerelated risks, particularly where they impact on corporate reputation or on share value, will have greater prospects of success.

Cases:

Anvil Hill Project Watch Association Inc v Minister for the Environment and Water Resources [2007] FCA 1480 Walker v Minister for Planning [2007] NSW LEC 741 Drake-Brockman v Minister of Planning & Anor[2007] NSW LEC 490. Gray v The Minister for Planning & Others [2006] NSW LEC 720

Swaab was recently named winner 'Best Law Firm in Australia (Revenue < $20m)' and 'Attribute Award for Exceptional Service (Australia Wide)' and at the 2008 BRW- Client Choice Awards.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.