BILLS DIGEST NO. 63, 2014–15              3 December 2014

Building Energy Efficiency Disclosure Amendment Bill 2014

Dr Alexander St John, Science, Technology, Environment and Resources Section

Juli Tomaras, Law and Bills Digest Section

Date introduced: 22 October 2014

House:  House of Representatives

Portfolio: Industry

Commencement:  1 July 2015.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

Purpose of the Bill

The purpose of the Building Energy Efficiency Disclosure Amendment Bill 2014 (the Bill) is to amend the Building Energy Efficiency Disclosure Act 2010 (the Act)[1] which requires energy efficiency information to be disclosed in most cases when commercial office space of 2,000 square metres or more is offered for sale or lease. The Bill makes changes to the national Commercial Building Disclosure program (CBD), including expanding the list of exemptions and amending procedural requirements. The changes will:

•       allow transfers of commercial office space between wholly-owned subsidiaries to be excluded from disclosure obligations

•       provide exemptions to building owners who receive unsolicited offers for the sale or lease of their office space which is of 2,000 square metres of more

•       permit a commencement date for a Building Energy Efficiency Certificate (BEEC) which is later than the date of issue

•       remove the requirement for six pages of standard energy efficiency guidance text on the BEEC, replacing this with live and interactive online information about improving energy efficiency for office buildings and

•       remove the requirement for new owners and lessors to reapply or pay the application fee for fresh exemptions if there is a valid exemption currently in place for a building.

Structure of the Bill

The Bill has one Schedule, with two parts. Part 1 of Schedule 1 amends the Act to make minor changes to the operation of the scheme. Part 2 of Schedule 1 provides for transitional and saving arrangements associated with the amendments in Part 1.

Background

The CBD requires that energy efficiency ratings are provided when offering to rent or sell commercial office space of an area of 2,000 square metres or greater.[2] Building vendors or lessors are required to provide prospective tenants with a BEEC, which includes the building’s rating under the National Australian Built Environment Rating System (NABERS), an assessment of the lighting in the area to be leased (a tenancy lighting assessment) and general information about energy efficiency.[3] The aim of the CBD is to improve the energy efficiency of Australia's large office buildings and to ensure prospective buyers and tenants are informed. It was to provide people with a basic practical tool to assist them in reducing their carbon footprint. The CBD requirement was established by the Act, as part of the Commonwealth’s response to the Council of Australian Government’s National Partnership on Energy Efficiency. This agreement included that:

19. The Agreement will contribute to the following outcomes: …

(b)              [a] substantial growth in the number of highly energy efficient homes and commercial buildings;

(c)               consumers and businesses that are well‐educated on energy efficiency and able to make cost‐effective energy use decisions;[4]

The CBD provides market participants with information enabling them to make decisions about the energy efficiency of commercial premises. If market participants choose to take energy efficiency into account when making decisions about leasing or purchasing commercial premises (and are able to do so through having the information available), then demand for energy-efficient commercial buildings could increase. In turn, this could provide an incentive for builders, developers and lessors of commercial real estate to make improvements to the energy efficiency of their space. There is some evidence to suggest that this is occurring; amongst buildings that were issued more than one BEEC in 2012–13, 28 per cent of these buildings recorded an increase in energy efficiency rating, with the average improvement being about three-quarters of an energy efficiency star.[5]

In many countries, energy used by buildings represents up to 40 per cent of national energy use; making energy efficiency improvements to buildings remains one of the most cost-effective ways of reducing energy use, with consequent greenhouse gas emission reduction.[6] The International Energy Agency (IEA) estimates that energy efficiency improvements to buildings could reduce greenhouse gas emissions by as much as 12,600 million tonnes of carbon dioxide by 2050, equivalent to around 23 times Australia’s total emissions.[7] The IEA argues that building energy certification is an important part of reducing energy consumption in the building sector:

Energy performance certification is a key policy instrument that can assist governments in reducing energy consumption in buildings. It provides decision makers in the buildings industry and the property marketplace with objective information on a given building, either in relation to achieving a specified level of energy performance or in comparison to other similar buildings. As such, certification can help governments achieve national energy targets and enhance environmental, social and economic sustainability in the building sector.[8]

The original introduction of the scheme was supported by all parties.[9] For a more extensive discussion of the policy behind the disclosure program, refer to the Digest for the Bill that established the scheme.[10]

This Bill makes relatively minor changes to the operation of the Act; these changes are being made in response to industry stakeholder requests, according to the Government.[11] The Scheme is currently being reviewed in its entirety by consultants ACIL Allen. This review is:

… to assess the CBD Program’s objectives, the effectiveness of the program in promoting energy efficiency and its interaction with the Emissions Reduction Fund.  The review will provide recommendations on the merits for continuing the program and any options for its future funding, including cost recovery if appropriate.[12]

Should significant policy change be effected as a result of this review, further legislation will presumably be required.

Committee consideration

At the time of writing, this Bill had not been referred to any Parliamentary Committees for enquiry.

Policy position of non-government parties/independents

The original Act was non-controversial. It was introduced by the Labor Party, and supported by the Coalition and the Greens.[13] At the time of writing, there have been no statements by non-government parties on this Bill.

Position of major interest groups

There does not appear to have been much discussion of the Bill amongst major interest groups. Industry stakeholders, such as the Property Council of Australia are reportedly relatively supportive of the program, although they have argued for some changes to the scheme.[14] According to the Government, the changes in this Bill are being made at the request of stakeholders.[15]

Financial implications

The Bill does not seem to have any financial implications for the Australian Government; the Government claims that the changes made by the Bill will ‘lead to an estimated $600,000 worth of reduction in regulatory burden on businesses’.[16] It is not clear how this estimate of savings was arrived at.

Statement of Compatibility with Human Rights

The Statement of Compatibility with Human Rights can be found on page two of the Explanatory Memorandum to the Bill. As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.

Key issues and provisions

The Bill makes a number of what the Government characterises as relatively minor changes to the operation of the Commercial Building Disclosure scheme, through amendments to the Act. The majority of amendments made by the Bill are minor and administrative in nature, and are explained satisfactorily in the Explanatory Memorandum to the Bill. The following are some issues which may merit consideration.

Proposed section 5A (item 13) makes the transfer of commercial building space between wholly-owned subsidiaries of commercial entities exempt from the requirements of the Act.[17] Where tenancies or property is transferred between parts of a company, it could be assumed that any existing energy efficiency information could be transferred between the subsidiaries, and that the decision to transfer tenancies or property would relate to contractual obligations or business needs, rather than energy efficiency. This makes a mandatory report (which has a cost in the order of several thousands of dollars)[18] an expense which may not be justified. (Of course, this does not prevent a rating being obtained voluntarily.) However, it might be of merit to require that any transfer of property or tenancy exempted by this section be accompanied by a transfer of any existing energy efficiency information.

Item 15 of the Bill changes the requirements for issuing BEECs, such that the certificate may be issued for a period beginning either on the issue date of the certificate, or for a period starting on a date later than the issue of the certificate. The Government may also make any other requirements for the issue of such a certificate through a legislative instrument issued by the Secretary of the Department of Industry under proposed paragraph 13(3)(c) of the Act. Although this clause may allow building lessors to be proactive in maintaining a current certificate, the Bill does not appear to impose a limit on how far in advance certificates may be issued. It may be sensible to include such a limitation (such as two or three years), so that certificates are not issued for a period in the future when potential changes to the building or the rating system could make such a certificate misleading or invalid.

This item also removes the requirement for certificates to include standard guidance on how energy efficiency might be improved, and allows the responsible Secretary to specify information to be included on certificates.[19] The Government insists that more up-to-date, interactive information will be available via a website.[20] However, there is no guarantee that any information specified to be included by the Secretary will be of equivalent utility to assist building lessees or owners in improving energy efficiency. It is conceivable that information, previously provided on building efficiency certificates, could become more difficult or more expensive to access, as assessors could conceivably charge occupants or lessors to provide information which was previously provided as a part of the assessment process. If this is the outcome of this change then it would seem to defeat one of the key objects of the CBD.

Item 20 of the Bill changes the requirements for granting exemptions from the operation of the Act’s requirements to have a current energy efficiency certificate. Ostensibly, this is so that exemptions may be granted for the specific circumstance where building owners receive unsolicited offers to purchase or lease commercial premises for which an energy efficiency certificate would otherwise be required.[21] However, proposed paragraph 17(3)(c) allows circumstances for exemption is to be specified by regulation. If the intention is to exempt only this specific circumstance, it could just as easily have been included in the Act. It is notable that no principled basis is provided to justify why an unsolicited offer to purchase or lease a building should be treated any differently from a solicited offer in terms of meeting the requirements of the Act. Using the solicited/unsolicited distinction does however, provide another basis for an exemption and so reduces the capture of the scheme.

Items 21 to 27 alter the information gathering power of energy efficiency assessors. Currently, accredited assessors may request building owners, lessees or sublessees to provide information in relation to an energy efficiency assessment under section 18 of the Act, and provides for civil penalty provisions if a person does not comply with the request. These items change the operation of section 18, so that assessors may only request that the responsible Secretary gather the required information, which the Secretary is not obliged to do. Civil penalties will only be available if a person does not comply with a request made by the Secretary, rather than by an assessor.

Item 34 of the Bill inserts a new provision to allow the responsible Secretary to determine by legislative instrument circumstances under which buildings or portions of buildings will be automatically exempt from the operation of the Act, without the need to apply for an exemption. The circumstances in which the Secretary may prescribe automatic exemptions are not limited or guided by the Act.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

© Commonwealth of Australia

Creative Commons

With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.

In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.

To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.

Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.

Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.

Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.

[1].              Building Energy Efficiency Disclosure Act 2010, accessed 3 December 2014.

[2].              Commercial Building Disclosure (CBD), ‘What is CBD?’, CBD website, Department of Industry, accessed 27 October 2014.

[3].              Ibid.

[4].              Council of Australian Governments (COAG), National Partnership Agreement on energy efficiency, COAG, July 2009, accessed 10 November 2014.

[5].              Department of Industry, CBD second year of mandatory disclosure – statistical overview, Department of Industry, Canberra, 2014, p. 5, accessed 10 November 2014. NABERS energy efficiency ratings are expressed in terms of stars, on a scale of one to six stars, with six stars being market-leading performance and zero stars being poor performance.

[6].              International Energy Agency (IEA), Energy performance certification of buildings: a policy tool to improve energy efficiency, IEA, Paris, 2010, p. 5, accessed 29 November 2014.

[7].              Ibid

[8].              Ibid

[9].              Australia, Senate, ‘Building Energy Efficiency Disclosure Bill 2010’, Journals, 129, 24 June 2010, p. 3710, accessed 29 November 2014.

[10].              A Talberg and E Karlsen, Building Energy Efficiency Disclosure Bill 2010, Bills digest, 152, 2009–10, Parliamentary Library, Canberra, 2010, accessed 13 November 2014.

[11].              B Baldwin, ‘Second reading speech: Building Energy Efficiency Disclosure Amendment Bill 2014’, House of Representatives, Debates, 22 October 2014, p. 11669, accessed 13 November 2014.

[12].              Commercial Building Disclosure (CBD), ‘CBD review 2014/15’, CBD website, Department of Industry, accessed 13 November 2014.

[13].              Australia, Senate, ‘Building Energy Efficiency Disclosure Bill 2010’, Journals, op. cit.

[14].              T Perinotto, ‘CBD program up for review – and axing’, The Fifth Estate, (online edition), 16 September 2014, accessed 29 November 2014.

[15].              B Baldwin, ‘Second reading speech: Building Energy Efficiency Disclosure Amendment Bill 2014’, op. cit., p. 11669.

[16].              Ibid.

[17].              Building Energy Efficiency Disclosure Amendment Bill 2014, Schedule 1, item 13, accessed 29 November 2014

[18].              Green Pass Australia Pty Ltd, ‘NABERS ratings’, Green Pass Australia Pty Ltd website, accessed 29 November 2014.

[19].              Building Energy Efficiency Disclosure Amendment Bill 2014, Schedule 1, item 15, proposed section 13A.

[20].              B Baldwin, ‘Second reading speech: Building Energy Efficiency Disclosure Amendment Bill 2014’, op. cit., p. 11669.

[21].              Explanatory Memorandum, Building Energy Efficiency Disclosure Amendment Bill 2014, p. 6, accessed 29 November 2014.