The UK Net Zero Carbon Buildings Standard: The One Standard to Rule Them All?

There is global understanding that between now and 2050 significant carbon reductions are required for the built environment, which is responsible for almost 40% of global energy-related carbon emissions. Indeed, many key players in the real estate industry have set ambitious targets to become net-zero by 2030.

Key to achieving this is common language regarding what is a 'net zero carbon building' and how it can be measured, but to date there has been a lack of agreed methodology. But that is all to change in the UK with the much-anticipated publication of the pilot version of the UK Net Zero Carbon Buildings Standard (the Standard) on 24 September 2024.

What is the purpose of the Standard?

The Standard has been in development since 2022 led by a cross-industry group, representing stakeholders across the built environment including UKGBC, the Better Buildings Partnership (the industry body behind the Green Lease Toolkit), RICS, RIBA and the Institution of Structural Engineers.

The aim of the Standard is to provide a new single and clear definition of net zero carbon for all building types against which buildings can be verified. This should provide uniformity in claims of net zero buildings and drive the decarbonisation of the built environment to help achieve the UK's net zero carbon target by 2050.

There are many existing sustainable building standards and schemes working towards the same net zero goals and a key aim of the Standard is to create alignment with these other industry standards and schemes, such as NABERS UK, by having a single set of measurement for carbon such that achieving one standard can help buildings to achieve another.

How does it work?

Key features of the Standard are:

• it is science-led. It is based on enabling the UK built environment to stay true to its share of the national carbon and energy budgets that are required to meet the UK's carbon targets based on the 1.5°C trajectory;
• it is both “top-down” and “bottom-up”. The Standard sets out specific, measurable requirements for buildings to be considered net zero carbon and these carbon limits combine: (i) top-down budgets based on carbon budgets for the UK to reach net zero carbon by 2050; and (ii) bottom-up analysis regarding what can be practically achieved based on in-use information from the industry;
• it adopts a whole life carbon approach. The Standard includes both embodied carbon (carbon emitted during the non-operational phase of a building, including emissions caused by manufacturing, construction, retrofitting, deconstruction and end-of-life) and operational carbon (the carbon emitted while the building is occupied e.g. heating, cooling, ventilation and lighting);
• it is sectoral. The Standard is applicable to both existing and new buildings in the following sectors, which each have their own carbon limits and targets: commercial residential, culture and entertainment, data centres, healthcare, higher education, homes, hotels, offices, retail, schools, science and technology, sport and leisure and storage and distribution;
• it is in-use. Buildings can only claim to be verified against the Standard once they have been occupied and in-use for at least a year, with actual (not predictive) data. Verification of the Standard will be managed by third party verifiers (you cannot self-verify); and
• it permits voluntary carbon offsetting. Carbon offsets may be used to complement, but not replace, the mandatory elements of the Standard, and may be used to achieve net zero carbon at the asset level. The carbon offsets are not restricted in type or location but the vintage (year) of the carbon credits must be no more than five years before or after the reporting period.

What does it not cover?

As a building can only be verified against the Standard after the accumulation of one year of data and occupation, you cannot verify a building against the Standard at the design stage or at practical completion. However, the initiative behind the Standard have said they are investigating options to demonstrate that building projects are on track at practical completion.

The Standard does not cover buildings that cannot be classified into the sectors listed above nor infrastructure projects. The Standard also does not cover buildings located outside the UK although in due course it is hoped the methodology can be used to develop limits and targets in other geographies.

What are the next steps?

Key dates for the diary are:

• the pilot testing scheme is expected to launch in early 2025 to test a range of buildings from different sectors; at different stages of design, construction and occupation; and in both new build and retrofit; and
• Version 1 of the Standard is expected to be published in late 2025. Once it is launched, buildings will be able to be verified as meeting the Standard. Version 1 is expected to include:
  • the methodology by which a third-party verifier will verify a building against the Standard. A claim of conformity associated with the Standard is an expression limited to a 12-month period and, if a building later falls below the requisite targets, it can no longer use the net zero claim except by reference to prior compliant years;
  • for verified projects, guidelines on how it should be communicated that a building has met the Standard, including mandatory disclosure requirements; and
  • a delineated approach to buildings so, for example, the Standard is able to differentiate between areas and responsibilities in a multi-occupied office or retail building.

Once published, the Standard will be updated periodically to bring the limits in line with the UK's real-time carbon emissions and remaining budgets. Beyond the Standard's current pass/fail metrics, there are further metrics (including life cycle embodied carbon) which in Version 1 need to be reported, for which they ultimately intend to set limits.

How will it impact real estate transactions?

If embraced by the industry, the Standard should help stakeholders work towards, and deliver, lower-carbon outcomes in relation to both new and existing buildings.

It is estimated that 80% of buildings that will be standing in 2050 have already been built, which illustrates the need to address existing buildings. The work undertaken by the Standard has shown that a significant uptake of energy retrofit to existing buildings is required. As you would expect, the Standard prioritises the reuse of existing buildings and assets and it will be interesting to see whether this accelerates the increase in retrofit developments within the sector. Our article of May 2024 discusses the increased focus on retrofitting and the novel issues to consider when retrofitting existing buildings. 

It is yet to be seen whether the Standard will impact on the planning process, with many areas already subject to development plan policies which drive towards the achievement of net zero. However, as a new UK wide industry standard, it would not be surprising to see the need to meet the Standard and evidence ongoing compliance captured through the planning process. We expect that the initiative behind the Standard is hopeful that compliance becomes required by some form of regulation to achieve increased application, and planning may be one target to achieve this. 

It will be exciting to see how the industry implements the Standard on buildings being designed, constructed and those already operated. On the legal side, we expect to start seeing references to compliance with the Standard, either as a goal or as a strict legal requirement. We are part of a legal working group on the Standard and are at the forefront of working on how, once launched, the Standard should be reflected in legal documents, including agreements for lease, leases, development funding agreements as well as real estate finance loan agreements.

ESG is a key focus area for both our firm and our clients, and we continue to advise our clients on how they can achieve their ESG goals, both in relation to their new and existing buildings, and be ESG leaders in the real estate legal market.