Background
The sector and carbon emissions
New Zealand has committed to net zero carbon emissions by 2050. The building and construction sector currently produces around 20% of New Zealand’s emissions. The Government is looking to reduce the sector's emissions by decreasing the carbon emitted in the manufacture, transport, construction, maintenance and deconstruction and disposal of buildings (also known as whole-of-life embodied carbon), by requiring the sector to report on, and eventually placing a cap on, whole-of-life embodied carbon. Other countries (such as France and Sweden) have already introduced regulations that mandate consideration of embodied carbon.
Regulatory framework
In 2020, the Government consulted with the sector on a Whole-of-Life Embodied Carbon Reduction Framework (Framework) which would introduce mandatory measurement and reporting requirements and eventually caps for whole-of-life embodied carbon.
The Framework is structured so that:
- Initially, the embodied carbon of buildings will be reported on as part of the building consent process
- Subsequently, buildings will be required to remain under a mandatory embodied carbon cap to obtain a building consent. This cap will be progressively lowered to reduce emissions as required by the National Emissions Reduction Plan.
Feedback from the building and construction sector showed support for the Framework with the biggest perceived barrier being the lack of an agreed method for undertaking embodied carbon assessments. In February last year, the Ministry of Business, Innovation and Employment (MBIE) published a technical methodology for assessing the whole-of-life embodied carbon of buildings in New Zealand.
Timeline
MBIE is currently developing more detailed regulatory proposals to bring whole-of-life embodied carbon requirements into the Building Code. It has scheduled mandatory reporting on embodied carbon in buildings to be introduced in 2025. Caps on embodied carbon are scheduled to be introduced in 2026 and will be progressively lowered thereafter until 2030. MBIE will consult on the regulations next year.
Sector considerations
Considering that whole-of-life embodied carbon is a new concept for much of the sector, and that the proposed regulations will reshape the way the sector does business, there are plenty of practical considerations for the sector and MBIE to work through. What actions should the Government, councils, manufacturers/importers, builders, developers, and designers take to be ready come 2025?
MBIE
MBIE will need to actively support the sector to ensure it is informed and competent to comply with the regulations when introduced. This process will need to begin before the regulations are introduced, with the 2024 scheduled consultation being a good opportunity to educate the sector and increase carbon literacy. As part of this consultation, MBIE has indicated it will provide guidelines on how to source the necessary data for reporting and develop a method for building designers to calculate embodied carbon to ensure fair comparisons can be made. The Construction Sector Accord can also play a part here.
Councils
Embodied carbon information for buildings will need to be reported during the building consent process. While Councils already review details of structural and building elements at the consent stage to demonstrate Code compliance, Councils will be required to process this new reporting information and have ways to ensure it is fit for purpose and of an acceptable standard.
Councils will therefore need to develop the skills to review embodied carbon information to check that it has been calculated and submitted in accordance with the incoming regulations and/or MBIE guidelines. MBIE will need to help Councils upskill and guide them on which data Councils can be confident relying on.
Manufacturers and importers
Once embodied carbon caps are introduced, the demand for low carbon solutions is likely to increase, and the demand for less carbon efficient solutions is likely to decrease. Manufacturers and importers can help drive that shift in demand by developing easily understood embodied carbon information about their products. To further support, MBIE has recognised that it will need to clearly define how embodied carbon assessments are completed and which carbon emissions and removals are to be reported on and provide templates for presenting that information to the public.
Builders
Calculating and reporting on embodied carbon at building consent stage means that quantities and embodied carbon factors will be taken from design information, rather than as built data. However, MBIE has indicated that further data may be required at practical completion, as a condition of receiving a Code Compliance Certificate (to ensure the actual embodied carbon is captured accurately). Accordingly, builders will need to have detailed knowledge of the embodied carbon associated with each project, keep track of what is used in the project to ensure that the cap is not exceeded and be able to report on the finished build's embodied carbon. Further consideration by MBIE is needed to understand what happens if the embodied carbon at completion exceeds the amount calculated at the time the building consent was granted but the building is otherwise code compliant.
Developers and homeowners
Land developers may need to ease restrictive covenants to allow homeowners to construct with a broader range of carbon efficient materials. The Government could consider requiring developers to permit the use of carbon efficient materials which are typically prohibited in subdivisions, such as recycled materials. Conversely, homeowners will need to pay closer attention to any restrictive land covenants and assess whether a material prohibition is likely to create consenting issues.
Designers
Designers will need to equip themselves with a database of carbon efficient alternatives and use design methods that ensure structures are conducive to material and carbon efficiency.
While MBIE has stated that it will develop a simplified calculation tool that can be used for small buildings (that are likely to use standard forms of construction), for larger projects, designers may need to incorporate their own software solutions for calculations. MBIE has noted that assumptions and data sources that have been used will need to be stated clearly.
Conclusion
The building and construction sector has a small window to get ready for proposed regulations mandating consideration of embodied carbon in buildings. There will be an opportunity (next year) to provide feedback when MBIE consults on the Building Code compliance pathways for embodied carbon requirements. Please contact one of our construction lawyers if you have any questions about the proposed regulations.
This article was co-written by Bassam Maghzal (special counsel) and George Taylor (solicitor).
