South China Morning Post

Five steps to climate goals

Mark Hinnells says Hong Kong needs to begin decarbonis­ing its buildings and a good way to start would be to introduce a mandatory energy label for all premises, residentia­l and commercial, and follow the EU’s performanc­e model

It has been over five months since more than 110 countries at the Cop28 UN climate change conference agreed to double their energy efficiency improvemen­ts to an annual rate of 4 per cent as part of a deal towards meeting the Paris Agreement. What has Hong Kong done since?

In many areas of environmen­tal policy, the city has followed internatio­nal practice. It recently adopted a taxonomy for sustainabl­e finance, seeking consistenc­y with guidelines issued by Beijing and the European Union. This covers lending for building refurbishm­ent and includes standards for listed firms reporting their climate change impact and risks.

Back in 2009, Hong Kong introduced a mandatory energy efficiency labelling scheme for household electrical appliances similar to the EU standard. The city has a long history of harmonisat­ion on environmen­tal issues. But not yet in buildings. And this is where the urgent action to meet Cop28 targets could be taken.

The EU introduced its energy performanc­e certificat­e (EPC) system for sold or leased buildings in 2002, with A being the best and G the worst. Larger public buildings, which are never sold or leased, must carry a display energy certificat­e (DEC) to show what they actually use.

There is an important point here. A rating on a building (modelled under idealised circumstan­ces) can be very different from its actual use when occupied. Arguably, both EPCs and DECs are needed, especially for larger buildings. Buildings are all too often over-cooled and over-lit, with lights left on in empty rooms.

Recently, the EU decided to revise its Energy Performanc­e of Buildings Directive, requiring all new buildings to be net zero by 2030 and setting a timescale for decarbonis­ing existing buildings. Is it time for the city to follow suit?

The city’s policy on energy use in buildings is weak. In Hong Kong, buildings account for over 60 per cent of carbon emissions, much higher than the global average of around 39 per cent. Yet the city is only targeting 2050 (not 2030) for all new buildings to be net zero, and appears to have no timetable for refurbishi­ng existing buildings.

Confusingl­y, Hong Kong has several voluntary building energy labelling schemes, including the Building Research Establishm­ent Environmen­tal Assessment Method, Leadership in Energy and Environmen­tal Design and Zero-Carbon-Ready Building Certificat­ion Scheme – all competing for new buildings and refurbishm­ent. Improving new buildings only reduces the rate at which emissions increase. To get emissions down, Hong Kong must focus on all buildings.

So what does Hong Kong need? First, it needs a mandatory building energy label applied at the point of sale or lease. A mandatory label is the basis for tracking changes in building efficiency in the market.

It is the basis for other policies, like taxing the worst buildings more and the better buildings less, or subsidy schemes for retrofitti­ng. And the label can be used to signal that the worst buildings cannot be rented or sold unless brought up to energy efficiency standards.

Earlier this month, Climate Bonds Initiative published a report titled “20 Policy Levers to Decarbonis­e Buildings in Europe”, building on the foundation of the mandatory energy label with measures from education, skills and training, to financial incentives, public procuremen­t initiative­s and green mortgages.

Quite simply, without a mandatory energy label for buildings, there is no market in efficiency, and there will be little progress towards the Paris climate targets.

Second, there needs to be a more informed conversati­on between the owners and occupiers of commercial buildings, driven by tax incentives (which can be designed to be neutral to the taxpayer). This means performanc­e ratings and asset ratings as well as a “green” lease framework where the party that benefits from energy efficiency is incentivis­ed to drive it, whether through investment or behavioura­l change.

Third, the implicatio­ns of an energy label for every residentia­l property are not trivial, when there could be more than 100 flat owners, a high proportion of tenanted units, and a building owner/ manager. Some of the options for improvemen­t would apply to the whole building, and some to the individual flat (like air conditioni­ng and lights). Suppose the tax paid on rent or sale varied based on efficiency. Wouldn’t that encourage change?

Fourth, Hong Kong needs to refresh its mandatory energy labelling scheme for electrical appliances. There are many more product categories that could be covered, and there are loopholes and ways around the labelling that need to be closed – for example, by improving test protocols to make them more consistent with real-life use and educating retailers and consumers.

Fifth, buildings also create greenhouse gas emissions in constructi­on. Across the world, this is 11 per cent of emissions. In Hong Kong, the proportion is likely to be higher given the speed and scale of constructi­on. The basic model of constructi­on has not altered in decades. It’s time to account for carbon in constructi­on and create market incentives – informatio­n, financial incentives, regulation – to drive it down.

Hong Kong can’t leave improvemen­t to the market, it needs the right combinatio­n of informatio­n, incentives and regulation acting together to transform markets. The EU’s recent revision of its Energy Performanc­e of Buildings Directive is a good model. It is necessary to meet the enhanced energy efficiency commitment­s made at Cop28, or we won’t meet the Paris Agreement.

In Hong Kong, buildings account for over 60 per cent of carbon emissions, much higher than the global average