Can we alter the market in favour of energy efficiency?

At first glance reducing worldwide energy use appears to present a solely ideological battle between climate change deniers and advocates. But, the real obstacle to promoting environmental sustainability is how incompatible it is with foundation of the global economy.

While climate change advocates campaign for minimising use of energy and materials, the global market touts increasing profit and maximising growth. So long as sustainability does not amount to increased profit, there will be little consumer demand because favouring cheaper, energy inefficient options will lead to the greatest financial rewards. Without addressing this key issue, environmental responsibility will endure to be a fruitless enterprise that is confined to only to the fringe of society.

For the past 16 years the European Commission (E.C.) has been attempting to address the issue of demand by their introduction of Energy Performance Certificates (EPCs). During the early 2000’s the E.U. was met with the task of reducing greenhouse emissions from the building sector which, at the time, was responsible for over 40 per cent of global emissions.

While the energy efficiency of new builds could be tackled directly with new building regulations, inefficient buildings presented a greater challenge. The E.C. needed to find a way of promoting home owners to improve their properties in a way that would not cost the E.C. money directly and would promote on-going change within the market. With Energy Performance Certificates, they found their solution.

EPC’s are documents specific to a single property produced by a qualified assessor. During a survey of the property, the assessor inspects aspects of the property involved in energy use and loss. This includes how (or if) the property is insulated, what electrical fittings are used, the shape and dimensions of the building, as well as window glazing and heating apparatus.

Using this information, the assessor creates a detailed report containing an estimate of the energy that is lost from the property, the costs associated with running it and a lettered energy efficiency grade in which A is the most efficient and G is the least.

In addition, the document contains recommendations for actions that can be made to improve the properties energy efficiency, and how much money can be saved by improving the properties grading. These actions may include expensive additions such as double glazing windows or loft insulation or inexpensive actions such as switching to energy efficient light bulbs or electrical fittings.

Through the Energy Performance Building Directive (EPDB), prior to the sale or lease of any property in E.C. member states, would-be buyers were legally required to be provided with an EPC document. The rationale was this: by making the cost of inefficient buildings public information, the E.C. anticipated that buyers would favour properties that were more energy efficient because of the lower running costs.

Thus, introducing EPCs would leading to a self-perpetuating financial incentive for homeowners to factor energy efficiency into their purchasing decisions, and to then work on their own EPC score.

So, did it work?

Initially, the directive was met with considerable support. Over 70 per cent of EU surveyed homeowners reported that they would be interested in receiving EPC reports for their own homes and over 60 per cent reported that utility costs were a major factor in their property lease/purchase decisions.

But sadly, given over a decade of its use confidence in the directive has dropped considerably. Sadly, buyer’s behaviour does not appear to have been significantly influenced by the introduction of EPC’s. Contrary to early predictions, while location and price remain the two highest contributing factors, only 5 per cent of U.K. and 10 per cent of Dutch households factored energy efficiency in their purchasing decision. Moreover, although 80 per cent of German homeowners were aware of EPC’s more than 50 per cent did not trust awarded grades.

Where previous hopes were high, now it’s initial proponents are claiming “lacklustre response” by member states or that there were problems in implementation. But it really might be worth asking whether faith is being lost prematurely. While energy performance surveys reveal that there has been little change in how homeowners value energy efficiency, the market tells a different story.

Just as the E.C. were anticipating, good EPC ratings have been shown to impact sales prices. An improvement on efficiency grade by just one level increases property price by 4 per cent in Belgium and 2.8 per cent in the Netherlands.

Although, it’s true, price increases could potentially be linked to other factors, EPCs have also been found to influence behaviour post purchase, with over 22 per cent of homeowners reporting that the EPC report encouraged them to carry out changes to their property that improved their efficiency.

These are encouraging figures. While public opinion may not have changed considerably yet, it may simply be too early to tell whether the market is set to shift more dramatically given more time. For more information, please visit EPC For You.

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