COAG Energy Strategy Sets New Challenges for Building Industry Stakeholders

Master Builders, the peak body for the building and construction industry, believes that building industry stakeholders, particularly building owners and new home buyers, will face new challenges from energy efficiency measures announced yesterday by the Council of Australian Governments’ (COAG).
Master Builders welcomes a number of outcomes from yesterday’s COAG meeting, including the national approach to reduce inconsistencies between state jurisdictions, and the greater clarity around the process of introducing new measures.
The decision to incorporate energy saving hot water systems and lighting into the star ratings system, as suggested by Master Builders Australia, will also allow overall energy targets to be achieved more efficiently and in a more flexible way.
Master Builders also welcomes moves stipulating greater consumer information about energy efficiency, noting that better informed choices are likely to lead to improved environmental outcomes.
Master Builders particularly welcomes the commitment for all proposed changes to be subject to a regulatory impact assessment. This is necessary to ensure that the costs and benefits of any change are properly tested and debated.
While the COAG strategy provides greater clarity about implementation processes Master Builders has identified a number of key policy areas that require further detailed research and analyses particularly in the area of costs to the community and the end consumer.
Master Builders believes that the focus of efforts to reduce energy consumption and thus greenhouse gas emissions should be on increasing the energy efficiency of existing buildings.
Since new building replaces only about 2 per cent of the stock each year, Master Builders strongly recommends that the Government’s policy focus should be on retrofitting the nearly $3 trillion ($3,000 billion) of the existing stock of buildings to make them more energy efficient and therefore less carbon intensive.
Master Builders believes that there is more scope for the Government to examine tax incentives such as accelerated depreciation for major capital improvements to achieve this aim.
Master Builders is also concerned that the mandatory imposition of more onerous standards will detract from housing affordability and stifle building activity in the middle of an economic recession.
We support the aim of reducing carbon emissions to deal with climate change, but believe that the most efficient way of doing this is through a comprehensive emissions trading scheme giving price incentives.
More onerous standards will improve the energy efficiency of those buildings that are built, but the higher cost of construction will tend to lead to fewer and smaller buildings being produced – an outcome that may conflict with community aims for affordable housing.
The outcome for residential houses is a likely increased cost of building of around $10,000 through more expensive materials and more onerous building design requirements.
More onerous standards will also, as the Productivity Commission has indicated, make no impact on reducing overall carbon dioxide emissions, as they merely transfer emissions reduction burdens from one sector to another with precisely the same overall emissions target.
COAG’s decision risks transferring part of the burden of emissions reduction from the heavy emitters and places that greater burden on new home buyers and businesses building new buildings.
Moreover, as the Productivity Commission has pointed out, the overall impact of inefficient mandatory abatement measures will mean that the same overall emissions targets will be achieved but at a greater cost to the economy through inefficiency.
Master Builders is concerned that measures complementary to the Government’s CPRS are being scoped with limited information on (1) how they will impose costs on industry and (2) their effectiveness in delivering any actual benefits in the form of green house gas abatement.
Master Builders is very concerned that the Government should avoid developing poorly designed policies that have the strong potential to impose costs to the industry with little social benefit. Australia has a sorry record of regulatory measures implemented without proper cost/benefit analysis.
Master Builders has previously estimated the cost of emissions abatement in moving to mandatory five star building standards would be significantly higher than the abatement costs under the proposed Carbon Pollution Reduction Scheme which is predicted to be in the vicinity of $45 per tonne of carbon dioxide.
Master Builders notes that the previous Regulatory Impact Statement associated with the change to five star standards was criticised by the Productivity Commission for inadequate rigour, a point with which the Master Builders agrees.
The Building Code of Australia (BCA) will be the instrument through which the building efficiency elements in the draft Strategy will be instituted. The ABCB already has a major and important workload. The Government must therefore ensure that the ABCB be provided with the necessary funding and resources to do this.
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