Initiative 1 – Developing and promoting zero carbon building leases

This initiative will take the learnings from the Green Lease, first developed in Melbourne 20 years ago, that now has a 94 per cent uptake in the premium office market.

This level of market buy-in could be harnessed to create a simpler and clearer product – a Zero-Carbon Building Lease. This will provide a mechanism for tenants to demand zero-carbon space, as well as ways for building owners to ensure tenants do what is needed to produce whole of building zero-carbon outcomes.

Case study – 60L Green Building Melbourne

The Green Lease was a mechanism developed for the 60L green building project in the mid-2000s. It was seen as a mechanism to enable tenants to be accountable by building owners for their behaviour in the building but also as a way for tenants to be able to hold building owners accountable for the environmental sustainability of their tenancies.

“The 60L Green Building, almost 20 years on still performs as well as it did when it was first opened.” Alan Pears AM

Initiative 2 – Developing and promoting carbon risk assessment tool

This initiative will work with industry to develop a simple carbon risk tool that can provide decision supporting data for building owners simply, quickly and effectively.

This will help building owners and investors to understand the future risk of carbon of their buildings and support retrofit decision making. It will enable investment decisions to be made around the impact on building value of its carbon footprint.

We envisage a ten minute tool that could include looking at aspects of regulation, ESG requirements, climate risk and carbon pricing. CRREM is a tool from Europe as an example.

Case study - CRREM

In Europe a free online tool has been created to help building owners understand the carbon performance of a property. It will enable owners to make decisions on retrofit options and inform purchase priorities.

Initiative 3 – Incentivising periodic commercial building disclosure

Commercial Building Disclosure (CBD) is a national regulatory program that requires sellers and owners leasing commercial office spaces over 1000m2 to provide energy performance using the NABERS energy rating system.

This initiative proposes a program for City of Melbourne to incentivise voluntary periodic reporting. Incentives and support will assist new starters in overcoming hurdles, such as the cost of assessors, in their uptake of NABERS. This will help building owners be of the front foot, as the CBD program broadens.

Case study - Buildings renovation passport example in Australia – Building Fitness Program Cundall

The Building Fitness Program, is a process that maps out a program of staged upgrades and improvements to a building.

The aim is to reduce emissions but also enhance the experience, comfort and wellbeing of occupants, add measurable market value and ensure the building is positioned to remain viable and valuable into the future.

Case study - Workzone East - Perth

Knight Frank and RF CorVal engaged with Cundall to produce a five-year sustainability roadmap. The implementation of this resulted in the reduction of GHG from 535,355 kg CO2 in 2017 to 349,960kg CO2 in 2021 taking the NABERS Energy rating from 4.5 Stars to 5.5 Stars. They used NABERS to guide the reduction of their consumption and the Australian Government’s Climate Active Carbon Neutral Standard for Buildings the achieve carbon neutral accreditation. As a direct result, Workzone East was rated as the first zero carbon commercial building in Perth

Image: The Workzone East building at 1 Nash Street in the Perth city center. Image: Knight Frank.

Initiative 4 – Facilitation of aggregation of buildings for joint procurement

The City of Melbourne has led Australia in bringing together business and government to decarbonise through joint procurement of renewable energy through the Melbourne Renewable Energy Project (MREP).

This initiative proposes to bring together like buildings, to enable them to build capacity and carry out retrofits together.

It addresses the problem of smaller buildings' capacity to access professional services, advice and capital to retrofit their buildings. Aggregating buildings into similar categories – hotels, storage, parking, and unrated office buildings, 1970s brutalist, etc. – could help them to solve issues together.

In addition, a group of buildings undergoing lighting, HVAC, insulation and electrification works jointly will lead to economies of scale for investment and purchasing.

Case study - Melbourne Renewable Energy Project (MREP):

The City of Melbourne has facilitated a power purchase agreement for businesses across the city, as part of the second wave of the Melbourne Renewable Energy Project (MREP 2). This is the second purchasing group we have brought together, and includes seven large energy users: RMIT University, Deakin University, CBUS Property, ISPT, Fulton Hogan, Citywide Asphalt, and Mondelez International.

Where MREP 1 established a new wind farm and saw many local councils and cultural institutions become powered by renewable energy, in facilitating MREP 2, the City of Melbourne is educating and empowering large energy users to understand the role they can play in achieving our ultimate goal: for all of Melbourne to be powered by 100 per cent renewable energy. The challenges for these MREPs were the initial negotiations and partnership development. Further, Council reduced the innovation cost for the private sector as well as proving a model where transaction costs could be shared amongst a group, reducing costs for participating organisations.

Initiative 5 - Convening zero carbon building retrofit teams

The concept of building teams is that a building owner sets up a team tasked with looking after the building over a defined period of time. A building team could be a consortium of experts from different parts of the industry, and could include owners, tenants and managers of the building with a dedicate planner from council, engineers, architects, etc.

Together the building team determine a trajectory over that time to achieve zero carbon, and beyond. This trajectory maps asset replacement plans, ensuring a steady rate of investment into the building. In addition, the team builds a relationship with the building and its stakeholders. The team will be more agile and responsive to change, monitor and learn from initiatives, and respond more quickly and effectively to adaptation needs.

Case study – Placemaking Town Teams

The ‘teams’ concept is starting to emerge in other sectors. For example in placemaking, Town teams is a concept that developed out of Western Australia, it is where a community works with a council and local industry to plan local revitalisation. Having all the decision makers in the room reduces barriers, increases opportunities and supports effective innovation.

Initiative 6 – Incentivising performance through rates

The City of Melbourne could use its rate charging ability to encourage emissions reduction, leveraging from anticipated future expanded Commercial Buildings Disclosure requirements, as demonstrated by improvements in NABERS energy ratings. An economic and emissions analysis was carried out demonstrating that differential rates can drive emissions reduction from the mid-tier office sector.

This would mean a targeted rate-in-the-dollar reductions (over 10 years) for buildings that undertake upgrades to increase their NABERS ratings. This is funded by maintaining - or in some scenarios increasing - the rate-in-the-dollar applied to buildings who do not participate, rather than reducing this rate as property and rental values increase.

Initiative 7 - Introduction of an emissions cap through a local law

To encourage building owners to reduce emissions, an emission ceiling could be set. Buildings exceeding their emission target will pay an emission fee that could be used to support the upgrade programs.

Case study – New York City emissions cap

In 2019 New York City Council brought Local Law 97 setting emissions limits for buildings. The first level of emission limits apply from 2024 until 2029, with tighter limits from 2030 to 2034.

The law has brought in a penalty of $US268 (around $A358) for every metric ton (tonne) of CO2e above the limit. The value was determined as the “social cost” of carbon. The strategy will reduce greenhouse gases 80 per cent by 2050 of all of NYC’s building stock. This is part of NYC’s Climate Mobilisation Act of 2019 and aims to achieve by 2030 a reduction of 6 million metric tons of CO2e, create 26,700+ jobs, and improve health outcomes.