First report - Building to net zero: costing carbon in construction

There is no Government policy requiring the assessment or control of embodied carbon emissions from buildings. As a result, no progress has been made in reducing these emissions within the built environment. This inaction remains despite the built environment making up 25 per cent of the UK’s total greenhouse gas emissions and the UK’s Nationally Determined Contribution, made at COP26, committing the UK to achieve a 68% reduction in the UK’s carbon emissions by 2030. This is only eight years away. This is an extremely short time frame within which to start assessing and substantially reducing embodied carbon emissions. The first step must be a requirement to undertake whole-life carbon assessments for buildings so the industry can start measuring and then controlling for this carbon.

A broad cross-section of the construction industry is willing and able to undertake whole-life carbon assessments. In the absence of an approved UK national methodology, the RICS Professional Statement on WLC is used as the accepted industry methodology for WLC assessments. Alongside this, various further guidance and software tools have been developed. As a result of the lack of an approved national methodology, the variety of assessment tools and interpretations for WLC that have developed appear to have created inconsistency, have unnecessarily increased the cost of WLC assessments and have led to an uneven playing field in conducting assessments.

The Department for Business, Energy, and Industrial Strategy is currently considering the possibility of funding an update of the RICS methodology. This update is intended to make the methodology more accessible and more transparent thus addressing the concerns raised by Ministers to us about the RICS methodology. Once the national methodology and requirement to undertake whole-life carbon assessments is in place, the cost of undertaking assessments is likely to be minimal.

The UK is slipping behind comparator countries in Europe in monitoring and controlling the embodied carbon in construction. If the UK continues to drag its feet on embodied carbon, it will not meet net zero or its carbon budgets. There is significant opportunity for the UK to learn from emerging international best practice on how to introduce whole-life and embodied carbon regulations.

Local authorities are mandating WLC assessments of their own accord. Evidence so far shows that the policy is achievable and is working, with few barriers to its introduction. Introducing mandatory WLC assessments for buildings could be an easy way for the Government to dramatically reduce carbon in construction. The industry has repeatedly asked for an ambitious, clear timeframe for when whole-life carbon assessments will become mandatory. This timeline should align with the introduction of the Future Homes Standard, which should itself be brought forward to 2023. This will help bring together efforts to tackle operational and embodied carbon within the same timeframe. (Paragraph 73) 66 Building to net zero: costing carbon in construction

We recommend that Ministers immediately assign responsibility to the relevant member of the BEIS Departmental Board to monitor international policy developments in embodied carbon, with a remit to feed observations into the development of UK policy on embodied and whole-life carbon.

We recommend that the Government introduce, not later than December 2023, regulations to mandate whole-life carbon assessments for buildings above a gross internal area of 1000m2, or which create more than 10 dwellings. This requirement should be established in Building Regulations, and ought to be reflected in the planning system through national planning policy. Local authorities should be encouraged and supported to include this requirement within their Local Plans ahead of the introduction of national planning requirements.

The timeline for the Future Homes Standard should be brought forward to December 2023 to align the timeframes for addressing operational and embodied carbon. This will help provide the industry with the confidence it requires to construct low- carbon, energy efficient buildings.

We recommend that following the introduction of whole-life carbon assessments, the Government should develop progressively ratcheted carbon targets for the built environment, to match the pathway to net zero set out in periodic carbon budgets. These ratcheting targets should be reported on annually, and progress reports towards achieving these targets should be published annually as part of the Net Zero Strategy indicators.

We recommend that a clear timeframe for the introduction of mandatory whole-life carbon assessments and ratcheting targets should be set by Government by the end of this year.

In our view, the RICS Professional Statement on whole-life carbon assessments is fit for use and already familiar to UK industry. We recommend that, as soon as possible following promulgation of the planned update of the Statement, the Government should seek to establish the RICS methodology as the UK industry standard for whole-life carbon assessments. (Paragraph 79) Building materials

The National Model Design Code represents a good start to the task of improving efficiency and reducing the environmental impact of materials used in construction. Regrettably, in its current form it does not provide the ambition or detailed guidance necessary if it is to make a meaningful contribution to addressing the climate and nature crises which the country faces. The code does not provide the supporting detail which design codes require to set standards related to whole-life carbon. The definition of ‘embodied energy’ it uses is confusing, and it offers no guidance on how to assess embodied carbon or how to mitigate these emissions.

We recommend that the Government should change the term embodied energy to embodied carbon in the National Model Design Code and provide a clear definition of embodied carbon and whole-life carbon in the NMDC based on the WLCN, Building to net zero: costing carbon in construction 67 LETI and RIBA definitions. The Government should provide guidance on how to assess embodied carbon by setting a national methodology for whole-life carbon assessments, as we have recommended in Chapter 2 above.

We welcome the Government’s investment in the development of low-carbon cements as set out in the Industrial Decarbonisation Strategy. Alongside research and development, more needs to be done to raise awareness of low-carbon cements within the industry and amongst the public, to generate demand and increased investment in these products.

The Department for Business, Energy, and Industrial Strategy should invest in raising awareness within the industry and amongst the public on the existence and benefits of low-carbon cement and continue to encourage research and development into new low-carbon products.

We recommend that the Government investigate possible ways, beyond public procurement, to incentivise the use of low-carbon cement to ensure that these cement alternatives become the product type of choice by 2030. This should include an assessment of the feasibility of restricting the disposal of a range of waste products, so as to facilitate their use as clinker substitutes, as is the case in the Netherlands.

The reuse of steel components is not yet common practice in the UK. One of the main barriers to steel reuse is the collection, storage, testing and certification of used steel components. The Department for Business, Energy and Industrial Strategy and the Infrastructure and Projects Authority are already investing in how to better promote recycling and reuse of steel, alongside long-term investment in decarbonising the primary production of steel.

Mandating whole-life carbon assessments for buildings, as we have already recommended, would be a simple, material neutral way of encouraging the greater reuse and recycling of steel components.

The Government should work with local authorities to investigate effective and appropriate ways to store and catalogue steel components for reuse and to communicate the availability of components across local area networks of constructors prepared to reuse steel.

Significant obstacles to the uptake of timber products in construction remain. These include issues regarding fire risk and insurance, price volatility, securing sustainable and local supply chains, and addressing skills gaps in the use of timber. The Government has made little progress in addressing these barriers since the Climate Change Committee’s 2019 recommendation for an increase in the use of timber in construction.

The post-Grenfell prohibition on the use of combustible materials in external walls has had a disproportionate impact on the use, innovation and testing of structural timber. Material safety perceptions have also affected the availability and cost of insurance, making it near impossible for developers to use timber in high rise or medium-rise buildings. There has been a substantial delay in the Government’s response to its consultation on amendments to the combustible materials ban, 68 Building to net zero: costing carbon in construction which closed in May 2020. This delay is unacceptable: it has left the construction industry without the guidance and confidence it needs to invest in timber structures.

Whilst timber is often the most appropriate material to use to lower the embodied carbon of a building project, it cannot be assumed that this will always be the case. Timber use, from appropriate sources, should be verified as the best whole-life carbon answer to a given construction project, in comparison to other alternatives. Timber use should be seen in the context of UK, European and global forestry resources. A major increase in the use of timber in UK construction will put pressure on existing timber resources.

The Government must develop a coherent policy, joined up across Departments, to address the need for increased tree planting to address biodiversity and climate change concerns and the need for sustainable commercial plantations using appropriate tree species to meet the demand for domestic timber in construction. Government has committed to developing a policy roadmap on use of timber in construction. This should be delivered by the end of 2022 at the latest: it must comprehensively address the afforestation commitments made in the England Tree Action Plan and the need for timber construction products.

In response to this report, Government should set out how its strategies to develop green jobs will address the need for skills in timber use in construction.

The Government must invest now in further research and safety testing on the use of structural timber. The outcome of such research must inform a review of all relevant building regulations so as to render them properly applicable to modern timber materials and to ensure that fire safety regulations can take account of how modern timber materials behave in fire. The Government’s response to the consultation on proposed amendments to the combustible materials ban must now include clarification of the Government’s position of structural timber in the ban on combustible materials. The Government’s response to the consultation should be issued at the latest before the House rises for the 2022 summer recess.

There is a lack of Environmental Product Declaration (EPD) data for a wide range of materials, limiting the ability of developers to choose low-carbon materials. The UK is falling behind European counterparts where EPD data is far more widely available, resulting in developers choosing European materials over locally sourced UK products. The lack of EPD data makes conducting whole-life carbon assessments more laborious and expensive than necessary.

The Government should encourage development of a centralised national database of EPDs and, through its own procurement practices require the collection and publication of EPDs. The EPD database should be digital, freely available to end users, and user-friendly.

To limit ‘greenwashing’, the Government should introduce measures requiring suppliers who wish to make an environmental claim about a construction product to produce an EPD to substantiate it. (Paragraph 164) Building to net zero: costing carbon in construction 69

The Government should conduct a cost-benefit analysis of whether to provide advice or financial support to smaller manufacturers to enable them to produce EPDs for their materials.

There is availability of low-carbon and recycled building products to meet current demand, however there are insufficient incentives for product manufacturers to develop new low-carbon materials and for developers and designers to use these products. The Government has invested in initiatives and programmes, set out in the Industrial Decarbonisation Strategy, to encourage the development and use of low-carbon materials. This is welcome; but as there is no requirement to conduct whole-life carbon assessments of building projects, there remain limited incentives to reduce the embodied carbon of building projects and thus develop and use low- carbon materials.

In our view, the most effective way overall to encourage resource efficiency and the development and use of low-carbon materials, whether low-carbon concrete, steel, timber, or any other material, is to establish a mandatory requirement to measure whole-life carbon and introduce progressively more stringent carbon targets on buildings.

The Government should also issue its response to the consultation on the draft Waste Prevention Programme for England: Towards a Resource-Efficient Economy not later than the date the House rises for the 2022 summer recess. This will be over a year since the consultation closed. Industry and stakeholders require clear direction on future plans for waste prevention and resource efficiency now. (Paragraph 168) Government procurement

The Government has committed to using public procurement to drive demand for low-carbon industrial products and expects whole-life carbon assessments to be undertaken in respect of all public works projects. The extent to which this expectation is met, and the impact it has had on procurement practice, is unclear. Guidance that contracting authorities should consider environmental impacts when undertaking public procurement is little more than advisory.

Public procurement policy which mandates the completion of whole-life carbon assessments could kick-start the market for low-carbon construction. In time, a low- carbon standard for public works projects would help to remove the data barriers to establishing this market. The introduction of a Procurement Bill in the 2022– 23 Session provides an opportunity for the Government to legislate for whole-life carbon assessments to be included in assessment of competing tenders for publicly financed building projects. This would strengthen the guidance in the Construction Playbook.

We recommend that, in its response to this report, the Government should set out the number and proportion of public works construction projects for which whole- life carbon assessments have been undertaken pursuant to the provision in the 2020 Construction Playbook. For each project where an assessment has not been undertaken, we recommend that the justification be published. (Paragraph 182) 70 Building to net zero: costing carbon in construction

We recommend that the Infrastructure and Projects Authority establish clear guidance on the criteria for exemption from conducting whole-life carbon assessments for public works projects. We further recommend that, not later than the spring of 2023, the Government undertake a feasibility study on the introduction of a low-carbon standard for all public works projects, with a view to its swift implementation.

We recommend that the Government bring forward legislative proposals, by amending the Procurement Bill if necessary, so as to require a whole-life carbon assessment to be produced as a condition of participation in any tender for publicly financed building projects. (Paragraph 184) Retrofit and reuse of existing buildings

Retrofit and reuse of existing buildings, where practicable, should be prioritised over new build to conserve resources, minimise embodied carbon emissions, reduce demolition waste and deliver cost-effective solutions to delivering on housing demand. Local authorities and housing developers are expected to balance multiple objectives when meeting housing needs, and therefore require a coherent policy framework to support the balancing of retrofit and new, low-carbon housing delivery. The Government states it is promoting the benefits of re-using and retrofitting ahead of demolition, but we have seen limited evidence to demonstrate that this is yet the case. In some cases, reforms to permitted development rights appear to have created a perverse incentive for demolition and new-build over retrofit. We are concerned that the amendment to permitted development rights which allowed demolition and replacement was introduced without full consideration of its potential impact on sustainability and on carbon emissions. In our view, permitted development conversions should deliver low-carbon homes: regrettably, in some areas they have established a legacy of sub-standard properties that will need to be retrofitted in the future.

We recommend that Ministers urgently commission a comprehensive evaluation of the impact which recent amendments to permitted development rights have had on incentives to retrofit existing properties. The outcome of that evaluation should inform further amendments to the permitted development rights regime to ensure full alignment with the Government’s stated commitment to promote reuse and retrofit ahead of demolition.

We welcome the steps taken by the Chancellor of the Exchequer to address the inequity in the VAT regime between new build and retrofit. We nevertheless note that this differential treatment will expire in 2027 and is limited in scope, covering only Energy Saving Materials rather than broader aspects of retrofit work

We recommend that Ministers evaluate the impact of the time-limited zero- rate of VAT for the installation of certain Energy Saving Materials well before its expiry date of 2027, with a view to extending the provision beyond 2027 if it has made a demonstrable and positive contribution to meeting carbon budgets and the Government’s Net Zero objectives. We also recommend that Government go further and consider harmonising the VAT rates of new build and retrofit work. Building to net zero: costing carbon in construction 71 We have already recommended that the Government consider extending the zero- rate of VAT to innovations which improve energy efficiency, such as energy storage systems

A mandatory requirement to undertake whole-life carbon assessments when undertaking building projects will further incentivise retrofitting. This provides another justification for our whole-life carbon recommendation in chapter 2.

We recommend that circular economy statements including pre-demolition audits should be a requirement of planning applications which entail demolition of properties, as is already the case for certain applications which London boroughs are required to refer to the Mayor of London for consideration. The circular economy statement must explain why retrofit to match existing or new uses is not possible if demolition is proposed and be accompanied by a whole life carbon assessments of both new build and retrofit. This requirement should be introduced as soon as is practicable and not later than any package of reforms to the planning system which the Secretary of State for Levelling up, Housing and Communities is expected to introduce before the end of the current Parliament.

A lack of consumer awareness regarding retrofitting solutions, the perception that retrofit work is costly and/or disruptive, and consumer mistrust in the retrofit sector’s ability to deliver quality housing solutions, is creating further barriers to investment in retrofit. In our view there is a clear role for Government to support the industry in promoting retrofit installations, in particular at a time when energy costs are rising rapidly, and the running cost of heating homes and businesses could be reduced by improving energy efficiency of buildings.

We recommend that the Government work with industry to increase consumer awareness of the environmental and monetary benefits of high-quality retrofit solutions with a view to increasing the uptake of retrofit work in line with the net zero trajectory and at a time of rising energy costs. (Paragraph 220) Skills and training

The present shortage of workers in the energy efficiency and retrofit sector is chronic, given the overall timetable for decarbonisation of properties. This is a point we have repeatedly emphasised in our recent reports. Significant skills gaps also exist in the measurement of embodied and whole-life carbon and the use of low- carbon materials. On the evidence before us, the Government has not yet responded adequately to our recommendations to develop a retrofit strategy and programme to encourage the development of relevant green skills across the construction trade.

We reiterate our recommendation to develop a retrofit strategy and up-skilling programme for construction to meet the needs of net zero. This should be published before the 2022 summer recess.

Alongside a mandatory requirement to undertake whole-life carbon assessments and a national methodology for assessments, the Government should make training 72 Building to net zero: costing carbon in construction in undertaking whole-life carbon assessments accessible across all levels of education and the entire supply chain. The Government, in response to this report, should set out how the Department for Education plans to achieve this. (Paragraph 235) Building to net zero: costing carbon in construction 73