Price Carbon; Shift Houses?

This carbon–price–Kyoto–global–warming–issue just won’t go away, will it? If only it would! If only there wasn’t a real problem to deal with; but alas there is, and there’s rarely been a more difficult one. Responding to the threat of climate change is an international conundrum of the highest order. It ropes in many old issues – population growth, energy security, the old world v the new, industry and technology policies – as well as the obvious environmental ones. Josh Dowse, independent consultant and commentator on sustainable business, peers into the future to see how this may impact housing prices, and the real estate Industry.

It may or may not surprise you that every prediction on global temperatures, ice melting and sea–level rises has actually been exceeded by reality. And there is now no doubt that these changes are “anthropogenic”, or human–induced. Governments haven’t stopped worrying about it since scientists put it firmly on their doorstep back in 1990, when the first international scientific report was published. Since then, the data has just got worse and worse.

What’s that got to do with the housing industry?

Overall, greenhouse gas emissions in the developed world have to be reduced by 60% to 80% by 2050. Other countries – the US, the UK, Germany, France, Spain and the rest of Europe, China, Japan, Korea, Brazil and the list goes on – have all made commitments to make cuts with that goal in mind. Australia is still debating what it can manage but, ultimately, if it wants to continue to trade long–term with Europe, China the US, we will need to do something. (Besides, as those countries are demonstrating weekly, doing so is driving energy security, new technologies and new markets. They no longer need convincing; the only question is how best to engage in these new opportunities.

Housing is a major part of the solution. Residential energy use contributes about 10% of Australia’s greenhouse gas emissions. Estimates suggest that this figure could easily be reduced by the 60% to 80% needed. Accordingly, governments are looking at household energy efficiency as a major contributor to reducing emissions. More reductions will come from our housing than from transport or agriculture, though not as much as from commercial buildings, power generation or forestry.

Importantly, if the policies and incentives work properly (a large factor given recent debacles), the reductions from residential and commercial buildings can be achieved at negative cost – that is, owners and occupiers can keep their lifestyles, reduce their emissions and save money all at the same time. Some new habits, new technologies and new materials may be needed, but more than enough are available now, and more and more are becoming available.

Why would we change?

Governments will therefore continue to target the energy efficiency of residential housing – reductions are necessary, achievable and financially viable, so they will be pursued with regulation. They won’t be working alone, because others will also be trying to reduce energy use in homes.

Homeowners will be among the first. Energy costs are rising far in excess of our wages, and it’s got nothing to do with climate change or a carbon price. The price of household energy is literally going through the roof – rising 39% above the CPI in our 8 capitals since September 2006. That’s primarily due to under–investment in infrastructure through the 1980s and 90s, so utilities are playing catch–up and hitting us with the bill.

What’s more, our use of energy is also increasing with air–conditioners, plasma screens, computers and iPods. There have been a great many innovations and a great number of efficiencies in appliances, yet energy consumption per person has increased by 20% since 1990. (For example, our modern fridges are 3 times more efficient than those of 40 years ago, but we have on average 3 times as many per household.)

Add the price and usage together, and household energy bills are cutting deeper. The CSIRO’s research suggests that over 41% of households will “definitely” try and reduce their household energy, and another 36% are “likely” to.

Homeowners are not alone. New to the market are household smartmeters – devices that monitor energy use and prices, and switch appliances on and off when the price is low or high. Some banks are investigating having discounts on mortgage rates tied to a house’s energy performance. Councils are investigating linking property rates to energy performance, particularly where energy performance is subject to building standards or disclosure on sale.

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