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VAT SHOULD BE REASSESSED TO SUPPORT ENERGY EFFICIENCY, SAYS JOSEPH KILROY, POLICY AND PUBLIC AFFAIRS MANAGER, CIOB IRELAND, SCOTLAND AND WALES... Time to financially incentivise retrofit over demolition to achieve net zero
U rgent policy intervention is needed to decarbonise the built environment sector at the scale and pace required to achieve Northern Ireland’s net zero target. Buildings account for 49% of the UK’s carbon emissions. Heating, cooling and lighting buildings – operational carbon – account for the majority of this; however almost half of these emissions are attributable to embodied carbon. Embodied carbon emissions result from mining, quarrying, transporting and manufacturing building materials, in addition to construction activities, repair, renovation and final disposal of buildings. Embodied carbon emissions in the built environment sector are rising and require a firm policy response if Northern Ireland is to achieve its climate ambitions. As the CIOB wrote in our recent response to DAERA’s carbon budget consultation, if we are to meaningfully act on the Climate Change Committee’s advice to ‘develop a plan to improve energy efficiency and reduce reliance on fossil fuels’ in buildings there needs to be a recognition that existing policy and legislation is acting antagonistically to achieving this goal. Specifically, there needs to be a reassessment of VAT so that it is equipped to deliver both improved energy efficiency in buildings and reduce the embodied carbon footprint of the built environment. 75% of a building’s total emissions from a typical 60-year lifetime can come from embodied carbon. Under the UK’s current tax structure, a reduced rate of 0% VAT is applied to demolition projects, while 20% VAT is applied on most repair and maintenance projects. This creates
High embodied activities of demolition and replacement have been given taxation priority over sustainable repair and restoration.
a perverse environment where the embodied-carbon-hungry activities of demolition and replacement are given taxation priority over the sustainable repair and restoration of Northern Ireland’s built environment. This contradicts the principles outlined in the Climate Change Act (NI) 2022 and the 2022 Circular Economy Strategy for Northern Ireland. Given that UK-wide tax reform appears unlikely, to remedy this the CIOB is proposing that when the Assembly returns, the Northern Ireland Government use its devolved powers to implement a demolition levy; one that bypasses the current devolution settlement around tax to level the unequal playing field that threatens the sustainability of our built environment. New build projects remain an essential component of the built environment, but the replacement of buildings should not be prioritised over repair as retrofit buildings will often outperform new in terms of overall lifetime carbon emissions.
Furthermore, the demolition of existing buildings creates challenges such as appropriate disposal of waste, dust exposure and greenhouse gas emissions. Regulatory measures have been proven effective in undergirding similar types of sectoral culture shifts internationally. Landfill taxes and the application of an aggregate levy facilitated a 70% decline in the amount of Construction and Demolition Waste (CDW) disposed to landfills in the UK. Studies in Spain concluded that levies were more effective at CDW mitigation than financial incentives, achieving the targeted 30% reduction in CDW two years sooner with the co-benefit of generating a new revenue stream. When the current political impasse is resolved, we urge the returning Northern Ireland Assembly to consider the value that a demolition levy could bring to the sustainability of our built environment, the economy and Northern Ireland’s construction sector.
Joseph Kilroy, CIOB Policy and Public Affairs Manager, Ireland, Scotland and Wales. T: +353 (1) 5138950 - M: +353 (0) 871194475 - E: - jkilroy@ciob.org www.ciob.org
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