§ Mr. Clive Efford (Eltham)
Timing is sometimes a problem when initiating such debates, but this time it has been fortuitous. Only this week, the Intergovernmental Panel on Climate Change added weight to the issue of energy efficiency by publishing its report on climatic change. It makes grim reading and suggests that global warming will be more severe than previously thought.
Launching the report yesterday, the head of the United Nations environment programme, Dr. Klaus Toepfler, said:The scientific consensus presented in this comprehensive report about human induced climate change should sound alarm bells in every national capital and every local community.The report itself says that the present concentration of carbon dioxide in the atmosphere is now a third higher than in 1750, a concentration thathas not been exceeded during the last 420,000 years, and likely not during the past 20 million years.The report also reveals that scientists believe that man is involved in climate change and sets out the impact of such change, which is also expected to be worse than previously thought. Sea levels might rise by up to 88 cm, which could have a devastating impact on tens of millions of people who live in low-lying areas. The need to take the issue seriously could not be made clearer.
I know that the issue of saving energy in offices in the United Kingdom is a narrow aspect of the climate change agenda, but I hope that that background gives an idea of the importance of relevant policy. I decided to initiate the debate because the report "White-Collar Co2", which was published by the Association for the Conservation of Energy, made me fear that energy consumption in offices has recently been neglected, both in terms of recognition and scrutiny of the problem, and of the application of policies and programmes to solve it. I hope that the debate will begin a process that moves us towards improving energy conservation in offices.
The rate of growth in energy consumption in the past 25 years has been approximately three times greater in the commercial sector than in the domestic sector. Energy use in the commercial sector is projected to exceed growth in all other sectors, except transport. The warning from the IPCC yesterday, and the Government's commitment to reduce carbon dioxide by 20 per cent., show that we cannot afford to continue to ignore the commercial sector.
The growth in energy consumption is partly explained by rapid expansion. Offices occupied twice as much floor space in 1994 as they did in 1970. There has also been an increase in information technology and other equipment, which, of course, require electricity. Demand for air conditioning has grown rapidly, causing a dramatic increase in CO2 emissions. However, regardless of the increase in the area that offices occupy, the figures still show an unusual failure. Whereas newer homes, appliances and machinery tend to be more energy efficient than earlier versions, office buildings have bucked the trend. A modern office today is likely to use more energy than it would have used 20 years ago to make the same contribution to the economy.
216WH The prospects for saving energy in offices have benefits beyond reducing CO2 emissions. Just as improving energy efficiency in homes leads to improved comfort and, in the most extreme cases, even saves lives, improving energy efficiency in offices also pays off in other ways. Improvements to worker comfort can produce healthier and productive working environments, and carrying out improvements to offices can also create jobs.
However, there are significant barriers to energy efficient construction and retrospective fitting in the commercial sector. Although fuel bills represent a single proportion of occupancy costs, occupiers are usually tenants and generally pay an overall service charge that is based on occupied area. That leaves people who run offices unaware of their energy consumption and they are unlikely to be keen to spend money to improve the fabric of a building that they do not own.
Furthermore, large institutional investors who take a hands-off approach to managing their assets own almost half the UK's commercial property stock. They have been unconcerned about energy consumption in their properties because they can simply pass the cost on to the occupiers. Ironically, many offices are owned by the very insurance companies that bemoan the fact that climate change will force them to increase premium prices; yet the buildings in which they have invested money are the only part of the UK economy that is getting less energy efficient and, therefore, making the situation worse.
There is an historic lack of interest, formidable hurdles to action and a failure by big players in the relevant industries to see the logical benefits of such action. It will take a determined effort by the Government to turn that around. There are various ways in which they can do that. They need to commit themselves to providing the tools that allow us to monitor and address the problem.
The problem with the commercial sector is masked by the way in which energy consumption data are compiled by the Department of Trade and Industry. In the annual digest of UK energy statistics, the commercial sector is included in the category of other final users, which also includes public administration and agriculture. The Department reported that other final users increased their energy use far less than other sectors. That use rose by 16.6 per cent. between 1973 and 1998, compared with 22.5 per cent. in the domestic sector and 62.5 per cent. in the transport sector. Understandably, given those figures, offices have been given little attention.
However, the figures hide the problem of offices because the aggregation of other final users combines the commercial sector, which is rapidly growing, with the agriculture sector and the public sector, which are growing very slowly, or even falling. The commercial sector's final energy consumption grew by 65 per cent. between 1973 and 1996, but that incredible increase was hidden in the figures. It grew faster than even the transport sector and compares with just 1 per cent. growth in the energy consumption of public sector services.
Most critically, the commercial sector has shown no improvement in what the experts call energy intensity for well over 10 years. That is defined as energy consumption divided by contribution to gross domestic 217WH product, and effectively measures the energy efficiency of an entire sector. The sector has, therefore, become less efficient in its use of energy. While there has been a rapid growth in economic output from the service sector, energy consumption has increased just as rapidly.
Indeed, according to the energy consumption guide for energy, there has been a significant deterioration in the energy intensity in the UK tertiary sector. In 1995, it consumed 30 per cent. more energy per unit of value added to the economy than it did in 1990. However, those facts have not been spotted, reported or addressed. My first suggestion is that the Government commit themselves to publishing additional figures that identify the increase in energy use in the commercial sector. We must prevent the figures from masking the problem and therefore hindering action.
My second suggestion is that the Government encourage specific programmes to promote energy efficiency in offices. As far as I am aware, the only programme to encourage energy efficiency in offices is the lightswitch programme, run by the Energy Saving Trust Ltd, which promotes the use of energy-efficient lighting in small and medium-sized enterprises. I hope that the Minister will inform me that there are more schemes, but I confess that I have not found them.
Detailed research as part of the best practice programme has shown the scope for saving energy in offices. It found that typical offices use 60 to 90 per cent. more energy than the minority of offices that follow good practice. The Government should ensure that the EST and, indeed, the new Carbon Trust, when it is in operation, have the resources necessary to run promotional schemes that encourage and publicise energy in offices. The EST has had a considerable success with its domestic schemes. That must be built on and extended to introduce the necessary shifts in the commercial sector.
The Minister must also address the major barriers in energy efficiency in offices, the biggest of which is probably the classic landlord-tenant barrier. Tenants are understandably reluctant to invest in energy efficiency measures for a building which they do not own, and landlords are reluctant to invest to save money on tenants fuel bills or service charges. Only 10 per cent. of offices are occupied by the freeholder. All these factors constitute an important barrier to energy conservation.
Although the climate change levy will send a small signal to the market about the need to save energy, it will not help to overcome that barrier. The Association for the Conservation of Energy has suggested that an obligation should be placed on freeholders of commercial properties to ensure that their buildings meet a minimum energy efficiency performance standard. The obligation to undertake an energy audit and improve energy efficiency should be enforced every five years, or whenever the building is sold, re-let or subject to rent review. The average period between rent reviews in the United Kingdom is five years.
218WH The policy should be framed so that it sends to those developing new properties a clear signal that prevention is better than cure—in other words, that from the outset the building should be designed for low energy consumption. There should be a requirement for consultation with occupiers and unions before refurbishment plans are made for existing buildings. Consideration should be given to ways in which the costs and financial benefits of energy efficiency improvements can be shared among owners, occupiers and energy service companies.
This idea is ambitious, but it should be considered seriously by my right hon. Friend the Minister. Much detail would have to be sorted out, but the principle that freeholders should take responsibility for ensuring that their buildings meet minimum standards seems sensible. There is a similar requirement on private car owners, who must ensure that their cars meet certain emission standards in the annual MOT test. An equivalent measure is essential for the commercial sector, which over the past two decades has outstripped the transport sector in environmental impact.
Finally, it is worth pointing out that the insurance industry, which owns almost £40 billion worth of the commercial property assets in the UK—15 per cent. of the total value—has in a few cases begun to improve energy efficiency in its property stock. Prudential Property Portfolio has called for legislation to ensure that every commercial building is audited every five years, and that the recommendations are implemented before the next audit.
Prudential has already taken steps to assist its tenants to save energy, in particular by making efforts to ensure that all tenants receive individual bills based on their energy consumption, rather than on floor area alone. That is a positive step, but only a limited amount of energy can be saved until attention is turned to the building fabric and the heating and cooling systems. Improvements to those should be the responsibility of the freeholder.
The insurance industry is concerned about the impact of climate change, especially as extreme weather events could lead to heavy insurance claims. In a position paper dealing with the framework convention on climate change, which was presented by member companies of the United Nations Environment Programme on 9 July 1996, the industry stated:Man made climate change will lead to shifts in atmospheric and oceanic circulation patterns. This will probably increase the likelihood of extreme weather events in certain areas. Such effects carry the risk of dramatically increased property damage, with a serious implication for property insurers.The paper continued thatwithout political initiatives, market forces alone may not result in the efficient use of investment potential.If the industry itself believes that nothing will happen without political intervention, we must act.
I hope that my right hon. Friend will seriously consider policy ideas to effect change, and will particularly study the possibility of regular surveys and improvements to offices. I thank him for coming to listen and take part in the debate, which I hope will be the beginning of a more careful look at energy efficiency in offices and commercial buildings. As I said, we need new data to highlight the problems and new policies to address them.
§ Mr. David Chaytor (Bury, North)
I congratulate my hon. Friend the Member for Eltham (Mr. Efford) on securing the debate. Although the subject does not have a high political profile at present, as the attendance this morning indicates, it is important and will become increasingly so as the nature of service economies changes and the demand for energy triggered by increasing use of new technology in offices results in a continuing increase in emissions from the commercial sector.
In the past two or three years, since the Government announced their intention to introduce the climate change levy, it is striking that in the manufacturing sector there is a growing understanding of the significance of climate change, of the urgency for manufacturing to increase the efficiency of its energy use, and of the opportunities for manufacturing industry to save money by investing in energy efficiency.
In my discussions with the Engineering Employers Federation in the north-west during the past few weeks, I have been struck by the extent to which the opportunities provided by the drive for greater energy efficiency are now understood. That is not to say that all manufacturers are enormous fans of the climate change levy. Clearly, there are reservations about and particular difficulties in the implementation of the levy, but the intellectual argument with manufacturing has been won, and more and more manufacturers see financial and business opportunities in moving to more energy-efficient forms of production.
In the commercial sector, that is not yet the case, with a few honourable exceptions. In many ways, that is understandable. The reasons highlighted by my hon. Friend make sense: the fact that responsibility is split between the landlord and tenant in commercial premises; the fact that in the commercial sector, the proportion of the business cost consumed by energy is comparatively low, and in recent years the unit cost of energy has fallen year on year, even though the total demand has increased; the fact that accountancy practices often write off investments in conservation over a shorter period than the full physical lifetime of the investment; and the lack of awareness of best practice in many offices.
There is little discussion of energy efficiency in the commercial sector, in contrast with the manufacturing sector. That is evident in the parliamentary estate. The last Adjournment debate that I attended in Westminster Hall took place last week. I estimate that the temperature in the Chamber was about 80 deg, so even in Westminster Hall, where the design and fittings are new, there are still problems with the control of temperature.
If we look around the parliamentary estate, with the honourable exception of Portcullis House, we can all see examples of the profligate use of energy. Sometimes the only way to maintain a balanced temperature in a room is to open a window, because the radiators do not have adequate controls. There are lessons to be learned by Government in the management of the parliamentary estate.
In the commercial sector, rents are often determined by location, rather than by the performance of the building. For obvious reasons, people will pay more to 220WH be in the city centre, regardless of the energy efficiency of the building that they choose. Energy service charges are usually incorporated into the overall rent, and are thus somehow invisible to the tenant. These factors make it entirely understandable that, in the commercial sector, energy efficiency has not had the highest priority.
As the service economy becomes more important, as the balance between services and manufacturing shifts, and as a greater proportion of our overall economic output is in the domain of the service sector, practices will need to change. I mentioned the huge increase in equipment in the service sector in recent years. The growth of computers, fax machines and now the internet is escalating at a rate that we could not have anticipated 20 or even 10 years ago. The consumption of energy will increase continuously, so the issue cannot be ignored. It must be confronted.
The matter has been highlighted yet again by yesterday's report from the Intergovernmental Panel on Climate Change, to which my hon. Friend referred. We cannot afford to ignore the startling results of the IPCC's second report, and the fact that the IPCC has revised its figures upwards by such a significant amount. The IPCC now predicts that the average temperature of the planet may increase by up to 6 deg C over the next 100 years. In its first report, the IPCC put that rise at a maximum of 3.5 deg C. Current estimates are therefore 80 per cent. higher than previously.
In addition, the IPCC now says that climate change and global warming are almost inevitably the result of human activity, whereas in its first report it said that human activity had a discernible influence. The science of analysing the causes of climate change is becoming more secure. It is rare to hear people dispute that climate change is taking place, or that its main cause is human activity and the burning of fossil fuels.
The IPCC report published yesterday should concentrate all our minds. It means that actions taken by Governments on the basis of the first report, and of the Kyoto agreements, need to be revised. To their enormous credit, the British Government published their climate change strategy towards the end of last year, but the assumptions on which it was based are now out of date and obsolete. We should consider how it can be adjusted to take account of the latest evidence and statistics contained in the second report from the IPCC.
Policies need to be developed to deal with energy efficiency in the commercial sector. Implementing some of those policies may need primary or secondary legislation, but others could be implemented by means of codes of practice. I shall offer several examples of what could be done.
It would be possible to place a duty on freeholders, when new leases are granted or rents reviewed, to undertake an energy efficiency survey of their property. They would then be required to provide the details of the results to their tenants. In the domestic sector, the importance of such an idea is close to being accepted. A lively debate is taking place in connection with the Homes Bill about whether the energy efficiency survey should be part of the seller's pack, and whether that requirement should be written into the Bill or it is adequate for it to appear in later regulations.
If the argument that energy efficiency ratings should be documented and available to purchasers or tenants of a property is accepted as sound in the domestic sector, it 221WH should also be so accepted in the commercial sector. The same responsibility should be placed on commercial freeholders.
Another possibility would be to extend the duties on councils as energy conservation authorities under the Energy Conservation (Housing) Act 2000 to include all offices in their areas. Again, that would transfer a principle already accepted in the domestic sector to the commercial sector.
It would be possible to require each public limited company to publish a statement in its annual report setting out its fuel consumption per square meter. An increasing number of the major private companies include an environmental element in their annual reports. Some have taken a lead and have produced a separate environmental report, in which energy efficiency is a key performance indicator.
A slightly more aggressive tactic would be to target those freehold companies that have an especially poor energy efficiency record. Adopting a name-and-shame policy with regard to the most profligate users of energy in the commercial sector would be newsworthy and would concentrate the minds of other companies in a beneficial way.
There is clearly no shortage of ideas and policies to help increase energy efficiency in offices, which could be implemented without the need for a lot of new primary legislation. I shall conclude with three points that I hope my right hon. Friend the Minister will consider, in the context of the commercial sector and of ensuring that our overall climate change strategy is properly monitored and, in view of yesterday's second IPCC report, adequately updated.
First, does my right hon. Friend have any plans to update continuously the Government's climate change strategy? I accept that it was published only recently, after a long period of consultation, but would it not make sense to revisit the strategy to take account of the new figures contained in yesterday's IPCC report?
Secondly, does my right hon. Friend agree that it would be valuable for the House to have an annual debate on the Government's overall sustainable development policy? I suspect that he will agree, given his response to an Adjournment debate last week. Such a debate would provide an opportunity to discuss the annual progress of the climate change strategy, and to look in detail at issues such as energy efficiency in the commercial sector. It would also give hon. Members the opportunity to check progress and to generate new ideas for further policy change.
Thirdly, will my right hon. Friend discuss with ministerial colleagues the question of a formal review of energy efficiency throughout the parliamentary estate? I appreciate that the Government do not have direct responsibility for management of the estate, but the House of Commons Commission would be likely to take the matter of energy efficiency more seriously if the Government set objectives and took the lead in raising the issue.
Finally, we need to secure in the commercial sector the sort of change of thinking that has already been secured in the manufacturing sector. The commercial 222WH sector must be encouraged to understand that investment in energy efficiency is not a cost and that introducing it should be not be done grudgingly or as a result of Government diktat. Energy efficiency can bring about significant financial savings, and it will also help us to meet our carbon dioxide emissions targets. Achieving those targets is even more important in the light of yesterday's IPCC report.
§ The Minister for the Environment (Mr. Michael Meacher)
I support what my hon. Friend the Member for Bury, North (Mr. Chaytor) said in congratulating my hon. Friend the Member for Eltham (Mr. Efford) on securing this debate. It is true that the Chamber is not exactly crowded, but there is no doubt that this subject is very important and that its significance goes far beyond the number of people present for the debate.
My hon. Friend the Member for Eltham was right to place the debate in the context of climate change. Arguably, climate change is the greatest challenge facing the world. It is certainly the greatest environmental challenge that we have to meet.
The latest Intergovernmental Panel on Climate Change report estimates that temperatures will rise over the next 100 years by 5.8 deg C. That compares with that organisation's previous estimate of a rise of 3.6 deg C. The figures may appear small, but their implications are massive. For example, 150,000 years ago, a fall of only 5 deg C meant that an equable climate became an ice age, in which ice came down from the north to cover Siberia, the northern European plain and north America. An increase of some 6 deg C from current levels is not without precedent in the Earth's history, but it is without precedent in the recent history of mammals, including human beings. The wider consequences are totally unpredictable. In those circumstances, the Government take the view, which I am sure is right, that we certainly should make a very precautionary response.
We know the causes of the increase in carbon dioxide. The first is the profligate use of energy—much of which is wasted extensively into the environment—by the domestic and industrial sectors. The second is the increasing number of vehicles, not only in this country but throughout the world—including the developing world, which will, in the next 50 years, rapidly move to our levels of mobility by vehicles. The third cause is the continuing, massive use across the world, especially by industry, of fossil fuels, with the consequent need to shift to renewable sources of energy.
My hon. Friend the Member for Eltham was right to point out that, in the 200 years since industrialisation began, in the late 18th century, concentrations of CO2 in the atmosphere have increased by about a third, from about 270 ppm to between 360 and 365 ppm. That increase is highly significant in such a short time; in geological time, 200 years is the twinkling of an eye. The key point is that concentrations of CO2 are not cyclical, like the economy; the upward trend will continue unless we reverse it.
As my hon. Friend the Member for Bury, North rightly said, the IPCC report draws attention to the fact that there is not just a discernible anthropogenic influence, but that the scientific community—this report 223WH is underpinned by 2,000 or 3,000 scientists worldwide—is increasingly sure that, although it may not be the only influence, man-made global warming is certainly a significant, and perhaps an increasingly dominant, influence on our climate, with all the consequences.
My hon. Friend asked whether we would review the climate change strategy in the light of the most recent figures. We must of course take them into account and review our programmes. I shall set out the immediate programmes.
First, we must reach the agreement that we narrowly failed to achieve at The Hague, so that the countries of the world agree on the steps to achieve at least the Kyoto protocol of a 5 per cent. reduction in CO2 emissions compared with those for 1990. We have not done so yet. The climate change programme in the United Kingdom is not in place yet, although I believe that we are probably more advanced than any other country in setting in quantified form the range of measures that will be necessary to deliver our commitments. Legally, those are a commitment to reduce CO2 and other greenhouse gases by 12.5 per cent. from 1990 levels, and our own domestic target to reduce CO2 by 20 per cent. by 2010 compared with 1990. We are very close to achieving that, and I firmly believe that we will do so.
We will of course review those figures. It is more in the international field that the message of urgency and the need for rapid action by all the countries of the world needs to be heard, when we resume after what I hope was the temporary failure at The Hague. I believe that the message will have a major impact.
I should have liked to be able 1o tell my hon. Friend the Member for Bury, North that we would hold an annual debate on sustainable development. I was in this Chamber only a week ago when we were discussing greening government, and there is an admirable recommendation that we should hold an annual debate on that subject. The decision to hold such a debate lies not with me but with my colleagues collectively and with the Leader of the House, but I am only too pleased to convey the request emanating from this debate for such an annual discussion on the Floor of the House. I shall respond to my hon. Friend's request for a report on the energy efficiency of the parliamentary estate a little later.
My hon. Friend the Member for Eltham, entirely appropriately and with great force, has focused on the role of the commercial sector. Undoubtedly, its role in generating climate change is greater than many people—and many people who own offices—realise. It shocked me when I was first informed that the increase in greenhouse gas emissions generated by the commercial sector in the period up to 2010 was expected to be greater than that for the iron and steel sector or the chemical sector, which are widely recognised to have a major impact. That is the collective aggregate of the effects of buildings and equipment, which may be small individually but which are widely spread across the country. Thus the commercial sector is very important.
I paid careful attention to my hon. Friend when he said that the way in which we present the statistics conceals the role of the commercial sector. I hope that he will accept from me that that is not the intention, but that form of presentation is not helpful and we will look into it to ensure that the generators of climate change are properly identified.
224WH My hon. Friend is right to say that it is not very informative to have a category of other final users that shows a net increase of about 16 per cent. which is made up of a much bigger increase on the commercial side and a small or even negative impact on agriculture and the public sector. That compares with the really big increases of more than 60 per cent. in transport, and 22 per cent. in the domestic sector. I shall certainly see whether we can present the statistics more meaningfully.
§ Mr. Efford
To re-emphasise the point, there is a 16.6 per cent. increase across the other user sector, but a 65 per cent. increase in the service sector alone. Although I have no figures to prove it, that suggests that in the agricultural sector and the public sector there are likely to be owner-occupiers, who are more closely attuned to the costs of heating, lighting and fuelling equipment in their properties, whereas in the service sector, rentals are dominant, and businesses are likely to be unaware of the specific costs of running the premises and equipment that they rent.
§ Mr. Meacher
That is a fair point, which I shall come to shortly.
My hon. Friend urged that a discrete figure be published for the commercial sector; I will look at that.
On encouraging energy efficiency in offices, I hope that the remarks that I am about to make will persuade my hon. Friend that there is more than one driver; there are a range of measures here. They may not yet be sufficient, but they are reasonably extensive. My hon. Friend also wanted the Energy Saving Trust Ltd. to have a remit to promote energy efficiency in offices. I undertake to look into that. That is not its main thrust, but I understand my hon. Friend's arguments entirely.
My hon. Friend has a track record, and an honourable history, in this area. He introduced a private Member's Bill—the Energy Conservation (Housing) Bill—to require mortgage lenders, as part of any survey carried out, to provide mortgage applicants with information on the energy efficiency—the standard assessment procedure rating—of a dwelling, and a practical means of improving it.
In the Homes Bill, my hon. Friend the Minister for Housing and Planning has made clear the Government's commitment to ensure that energy efficiency information will be part of the home condition report produced as part of the seller's pack. I hope that the long and determined efforts of my hon. Friend the Member for Eltham to ensure that that is finally achieved will secure their goal.
May I refer to the point that my hon. Friend has just made about barriers? Key barriers are a lack of commitment from the freeholder and the barrier to occupier action caused by leasing arrangements. Through the energy efficiency best practice programme, we encourage freeholders to carry out energy audits on their building stock. Advice and support are certainly available to them through the programme, but perhaps my hon. Friend wants rather more direct measures. That is beyond the Government at the moment, but it is not as though we neglect the matter. We encourage tenants to ask their freeholder about the energy performance of the buildings when rent reviews and changes to the 225WH leasing conditions are carried out. Again, it is not automatic that that will happen at such moments, but we are trying to secure an agreement from both sides that it should happen regularly.
§ Mr. Efford
Have any targets been set in relation to those measures to achieve a reduction in an area that has experienced substantial growth in consumption?
§ Mr. Meacher
At the moment, there are no targets and no strategy requirement for a rent review. Those matters are entirely a contractual arrangement between the landlord and the tenant, but we can and should look at that issue further if we do not secure the objective of the exercise.
I deal now with the detail of what we are trying to do. Retail premises, hotels, commercial offices, non-industrial warehouses and sports and leisure facilities are collectively responsible for about 10 million tonnes of carbon emissions every year. That needs to be set against total emissions in this country of about 160 million tonnes of carbon as of 1990. That is roughly the ceiling that we have to reduce by about 12.5 per cent. or, in the case of CO2, 20 per cent. The figure of 10 million tonnes is therefore significant.
Savings of 20 per cent.—the figure used in the report of Lord Marshall, an ex-president of the Confederation of British Industry—are certainly achievable if businesses adopt cost-effective measures. I think that my hon. Friend the Member for Bury, North said that energy efficiency does not impose a cost burden on business; it does not saddle them with further bureaucratic requirements. It is about getting them to make changes that are in their own interest. Although there is a capital outlay at the outset, savings in a relatively short payback period—three to five years in most cases—are considerable. Measures that would, for example, reduce considerably typical office fuel bills of up to £30 a year per square metre of treated floor area fall within the range of 20 per cent. savings in energy use.
A commercial building that is designed, commissioned and built to appropriate high energy efficiency specifications will, as I said, bring business benefits through its use and maintenance. As my hon. Friend the Member for Eltham said, the beauty of that is not just an environmental gain—it is a win-win situation. The resulting energy savings benefit the environment, and the consequential social benefits of improved comfort and productivity are good for business and create jobs. There are few examples of necessary reform which bring together so neatly benefits across the piece. We highlight those opportunities in our sustainable construction strategy "Building a better quality of life" which, my hon. Friends will recall, was published last April and identifies 10 key areas for action, including energy in construction processes and energy in building use.
My hon. Friend the Member for Eltham is right to say that there are barriers, to which I have already referred. We are not going to achieve 100 per cent. improved energy efficiency in commercial buildings overnight—no one is suggesting that—nor should we expect to, as there are real cultural barriers to overcome. The 226WH Property Advisory Group identified the inherent inertia among most owners and occupiers in its 1998 report "Sustainable Development and Buildings". It is a good report, and I am grateful for the considerable work that went into it. Lack of awareness and a perception of associated higher costs undoubtedly pose additional barriers, which the Government cannot overcome alone. Frankly, they will be overcome only if industry bites the bullet.
The report considers the contribution that commercial buildings could make to sustainable development in a broad sense and acknowledges that many existing commercial buildings are inefficient in their use of energy. As I said, inertia, lack of awareness, and scepticism about the financial advantages of energy efficiency are barriers to be overcome. The report makes specific recommendations. Building regulations, for example, are to reflect best practice—we are tackling that through the current review of part L of the building regulations and through initiatives such as the energy efficiency best practice programme. If I have a chance, I shall say a little about that before I finish.
The report recommends that the Government consider the scope for a compulsory environmental audit—again, that point has been made today. The energy efficiency best practice programme actively encourages greater use of energy audits. The report recommends appropriate taxation to encourage more environmentally friendly use of buildings which, of course, the climate change levy is designed to tackle. It also encourages more information sharing on environmental issues among stakeholders, which we are addressing through our support for more extensive and fuller environmental reports. I am still considering whether that should be made statutory, but that is not our current intention. However, we will have to look at that if we do not get much further with companies that are outside the FTSE 100. We are also encouraging information sharing through MACC2—Making a Corporate Commitment 2. That is how those barriers can be overcome.
I shall now talk a little about the legislative framework. We shall provide an appropriate underpinning legal framework. Our proposals to amend the energy provisions of the building regulations—the part L proposals—would raise fabric insulation, heating and hot water efficiency standards and introduce new lighting and air conditioning standards. My hon. Friend the Member for Eltham mentioned lighting, but it is not just about the light switch programme. Our proposals would introduce standards for the commissioning, testing and provision of operation and maintenance information, and would widen the application of technical requirements to encompass more work on existing buildings.
I underline the fact that the anticipated maximum construction costs of £10 extra per square metre that those more demanding requirements could place on commercial buildings would be more than offset by future fuel cost savings. I do not deny that there is a significant cost, but, for the benefit of the environment, jobs and, above all, of business and its energy bills, those costs are well worth incurring, given the longer-term gains.
227WH We hope to make first amendments in the summer, but those changes are just a first step. We want to raise performance standards even further in the next 10 years and grant new powers to regulate building energy performance in use.
My hon. Friend asked how we will achieve those goals and what measures will be used. I shall therefore now say a little about the economic instruments that offer an additional and important lever for change. The most important instrument, of course, is the climate change levy, which will provide a major incentive for greater energy efficiency in the business sector. It will increase awareness and encourage a step improvement in energy management, and I think that that makes it worth it.
As a result of privatisation, the industrial costs of energy, both electricity and gas, have been very substantially reduced. The effect of the reduction is that industrial energy costs as a proportion of total costs are relatively small. Therefore, although I would not say that energy costs are not on the radar screen for a busy departmental manager, senior manager or chief executive, they do not feature very strongly. The whole purpose of the levy is to ensure that those costs register significantly, so that action has to be taken.
The levy package is expected to save at least 5 million tonnes of carbon annually by 2010. As we have to reduce carbon emissions by about 25 million tonnes, that reduction is a substantial part—about one fifth or one sixth—of total savings.
The levy package will be a burden only to those who refuse to seize the opportunities for action and greater competitiveness, and the Government will certainly facilitate those opportunities in the supporting package. We shall, for example, be introducing a 100 per cent. first-year capital allowances scheme to encourage investment in energy saving technologies, such as good-quality combined heat and power and energy efficient lighting systems and boilers.
Awareness is another widely recognised barrier. Far too few people realise the significance of wasted energy in their own homes, in industry and in offices as a cost to them, as damaging to the environment and as a generator of climate change. The Government therefore provide, and will continue to provide, easy access to a wealth of information aimed at encouraging business to become more energy efficient.
Our energy efficiency best practice programme, for example, promotes strategies to motivate the different players in the commercial property sector in a suite of publications setting out best practice in design, construction, occupation and energy services. The publications are really trying to challenge conventional thinking. They are trying, for example, to encourage people to ask themselves whether full air conditioning is really needed. I was present for the debate, last week, when the temperature seemed to be 80 deg; it was certainly clammy. It is absurd to raise the temperature to such a level as it is costly, uncomfortable and wasteful of fuel and it affects the environment.
We have to get people to understand that energy efficiency considerations really have to be taken on board at the design stage. As proper consideration of those factors will create long-term fuel savings, it is in people's own interests to consider them. Another issue is whether building services have user-friendly and appropriate controls.
228WH How do we get all those points across to people? Reaching out to business by direct contact is fundamental to the programme. We have workshops, seminars, boardroom briefings and site visits, all of which—I hope—offer valuable opportunities to increase awareness in a targeted manner. It is not a matter only of advertisements—whether on radio and television or in newspapers—but of going and talking to people on site. However, there is a vast number of business premises, and getting through to the small and medium-sized enterprises—of which there are between 2 million and 3 million—is extremely difficult.
The topics that are dealt with range from strategic advice on the merits of energy audits to detailed information on energy-efficient lighting options. An excellent example of our hands-on approach is the design advice service which offers tailored energy efficiency guidance for larger construction and refurbishment projects. So far, more than 700,000 sq m of commercial building space has benefited from the scheme. We still have a long way to go, but the measures to achieve the objectives are steadily being put in place. I believe that, in the next 10 years, they can have a major impact.
We are seeking in the best practice programme also to develop voluntary agreements with organisations that can commit to energy saving for specific sectors. We have, for example, an agreement with the very important hospitality sector. Other sectors are beginning to consider whether the approach would work for them, and we are doing our best to get them to respond.
Just as we need to drive forward industry action, of course the public sector has to get its own house—or offices, such as Portcullis House—in order. My hon. Friend the Member for Bury, North took us to task on energy efficiency on the Government estate, and there is no doubt that there is plenty of room for improvement there. I should say that we inherited from the previous Government a commitment to reduce energy use by 20 per cent. between 1990 and 2000. The latest information we have is for 1999, and it shows that the reduction had reached 19 per cent. I am sure that, in future years, we can probably double that figure. Nevertheless, we are making progress, and there is something to build on.
Departments have signed up to an action plan that was prepared by the Government construction clients panel and published last year by the Office of Government Commerce under the title "Achieving sustainability in construction procurement". All new construction procurement should have targets for energy consumption that at least meet current best practice. Within three years, all projects are to be reviewed after completion to measure and report on their performance against established energy consumption benchmarks.
I also for my sins chair the Green Ministers Committee, and maintenance of the Government estate in an environmental manner, let alone the application of environmental policy in policy making, is one of its essential roles. The Committee deals not only with energy efficiency, but with waste generation, water consumption and transport impacts. However, there is no doubt that energy efficiency is central to the Committee's work. The application of that work to 229WH Government offices plays a large part in the figures that we produce annually for each Department and non-departmental public body. We compare those figures with our current targets, and we will be comparing them with the tougher targets that we are setting, particularly on energy efficiency.
I believe that energy efficiency in commercial buildings is an exceptionally important subject, and I shall certainly follow through on the eminently sensible recommendations pressed on me by my hon. Friends the Members for Eltham and for Bury, North. Perhaps when I have reviewed the debate, I shall follow it up with a letter setting out in detail precisely how the Government will respond.
We need a major shift in the way that energy is used in commercial buildings; that is absolutely correct. However, I believe that the framework is in place in legislative, fiscal and promotional support. In this pre-Budget period, we always discuss with the Treasury how fiscal and other promotional measures can be introduced, and I am sure that that will continue for many years.
We shall continue to enhance and strengthen the underpinning drivers. However, achieving the potential for energy savings will require a commitment from industry, not only from the small companies but particularly—as we have been discussing today—from the commercial sector. We need a commitment also from the public sector, including central Government, local government and the domestic sector.
I am grateful to my hon. Friend the Member for Eltham for drawing the issue to the House's attention. The Government agree with the thrust of his argument, and we shall follow through on the recommendations that he has made.