How Melbourne Is Selling Commercial Property Owners on Green Retrofits
If city rankings are your thing, Melbourne has you covered. It has been pegged as a top Global University City and a top Global Innovation City. Last month, Melbourne took the number one spot in the Economist Intelligence Unit's Liveability report, for the third year running. The Economist calls it the "Melbourne supremacy."
That stronghold owes much to the city's active stance on sustainability. In 2002, Melbourne established the self-explanatory "Zero Net Emissions by 2020" program, and the city was certified carbon neutral by the Australian government in April. (For perspective: Copenhagen aims to be carbon neutral by 2025. Seattle wants to be carbon neutral by 2050. New York's goal is to cut emissions by 30 percent by 2030.)
The obvious challenge to those efforts is a familiar urban planning dilemma. "We have virtually no jurisdiction over buildings not owned by the City of Melbourne," writes Michele Leembruggen, senior sustainability officer for the City of Melbourne, in an email.
So Melbourne developed a program that encourages the owners of commercial buildings—which account for over 50 percent of the city's emissions—to improve energy efficiency. It's called 1,200 Buildings, a reference to its goal: convince two-thirds of the city's roughly 1,800 office buildings to retrofit their structures with state-of-the-art energy and water technology. This month, 1,200 Buildings won Melbourne top prize at the C40 & Siemens City Climate Leadership Awards in London, triumphing over Berlin and New York City, whose own building emissions efforts we reviewed here last week.
Melbourne, Australia's second-largest city, experienced a boom in post-war building that has produced a number of excellent candidates for retrofitting. According to Leembruggen, office buildings with over 5,000 square meters of leasable space that were constructed between 1950 and 2000 are prime targets for decreasing energy use by 38 percent, the program's goal.
Convincing them to install eco-friendly chillers, solar panels, and the like is another story. When the city debuted the program, five years ago, it sensed three obstacles in addition to its own non-authority over private property energy use. First, there was a general lack of knowledge about either the implementation or rewards of retrofitting. Second (this was peak credit crunch), a difficulty in procuring financing for the projects. Third, the so-called "split incentive": owners are wary of making improvements whose primary benefits—utility cost savings from capital investments—are transferred to tenants.
The first issue was perhaps the easiest: Melbourne is now a clearinghouse for information on benchmarking, auditing, costs, consultants, and other issues surrounding what can be a daunting process, particularly for the individual/family/small business-owned buildings that make up 25 percent of the city's office space. The city offers seminars, and posts tutorial videos, fact sheets, case studies, reports and more on its website.
To make the financial case for retrofitting stronger, the city developed an unusual agreement with the government of the State of Victoria. Essentially, the city acts as an intermediary between owners and banks, facilitating the loan process. These "environmental upgrade agreements" (EUAs) also include a provision to share costs between owners and tenants, thus solving the "split incentive" problem.
This year, the city has brokered five EUAs with a value of $12.6 million. It's "a bit of a slow start," Leembruggen concedes, "however, the mechanism is a new concept and might take a while to build momentum."
The city has estimated that 140 buildings underwent retrofit operations in 2011, and the results of a biannual retrofit survey will be released in two months. If the city can coax 38 percent energy use reduction from 1,200 of Melbourne's office buildings, the savings would amount to 383,000 tons of greenhouse gas emissions per year.
In true 1,200 Buildings fashion, Melbourne has put that emissions target in terms a layman can understand: 7.6 million black balloons.