Property corporations in Hong Kong are involved a few proposed change to accounting guidelines below the Science-Primarily based Targets initiative (SBTi), which they are saying will make assembly net-zero targets nearly inconceivable for the constructing and building sector in most of Asia.
SBTi, which verifies decarbonisation targets in step with the Paris Settlement goal of capping international warming at 1.5°C, might amend their guidelines to permit actual property corporations to report solely Scope 2 electrical energy emissions reductions within the locations the place they eat vitality – an method often called location-based accounting – in the newest draft of its constructing sector steering.
This might make compliance prohibitively tough in Asian territories with fossil fuel-based electrical energy grids, in keeping with a gaggle of property corporations lobbying towards the revision. Hong Kong’s electrical energy grid is especially powered by coal, pure gasoline and oil.
SBTi’s proposed rule change might imply it might not recognise actual property corporations’ electrical energy emissions reductions by means of market-based carbon discount programmes, comparable to shopping for renewable vitality certificates (RECs) and clear vitality energy buy agreements.
The rule change is aimed toward nudging actual property corporations to focus extra on vitality discount and effectivity somewhat than renewables procurement to curb emissions.
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We do perceive that – within the context of renewable vitality procurement – SBTi should take care of considerations associated to double counting or inflated claims of emissions reductions. We share these considerations.
A press release from Hong Kong actual property corporations
John Haffner (far proper) talking on a panel on company decarbonisation on the ReThink sustainability convention in Hong Kong on 14 September 2023. Picture: ReThink
Talking at a panel dialogue in Hong Kong final Thursday, John Haffner, deputy director for sustainability at property developer Cling Lung Properties, stated his firm had been planning to purchase renewable vitality as a significant a part of its net-zero technique, however SBTi’s revised sectoral steering would imply the agency “wouldn’t have the ability to account for renewable vitality procurement”.
Vitality effectivity measures alone wouldn’t be enough for the emissions reductions wanted to attain net-zero emissions by 2050 in Asia, he stated.
“We’ve got considerations round that. We all know that others share these considerations as effectively,” he stated at the ReThink sustainability occasion on the Hong Kong Conference & Exhibition Centre this month.
Cling Lung Properties grew to become the primary actual property firm in Hong Kong and mainland China to obtain approval by SBTi for its near- and long-term emissions discount targets in step with the SBTi Web-Zero Normal at first of this 12 months. SBTi’s proposed tips on Scope 2 reporting might have an effect on progress in the direction of reaching these targets.
Cling Lung Properties is one in every of a gaggle of corporations together with Sino Group, New World Growth and Swire Properties which have taken SBTi to job in regards to the proposed new guidelines, backed by the World Inexperienced Constructing Council, a non-profit that helps inexperienced constructing councils around the globe.
An government representing the actual property corporations stated in an electronic mail shared with Eco-Enterprise that the group agrees that vitality effectivity ought to be the precedence, however SBTi ought to proceed to present corporations the choice of market-based reporting.
In jurisdictions like Hong Kong and mainland China that lack “a transparent and sufficiently aggressive” near-term grid decarbonisation pathway, renewable vitality procurement is essential to creating renewable vitality provide, he stated.
The proposed new guidelines would additionally imply that actual property corporations in Hong Kong and mainland China would lack an incentive to pursue market-based renewable vitality preparations, and funding in renewable vitality could be slower consequently, he stated.
It could additionally discourage corporations from setting science-based targets in any respect, since they’d have problem convincing their boards of the feasibility of the decarbonisation pathway required primarily based on vitality effectivity alone, he stated.
Inflated claims and double-counting
Issues over permitting corporations to obtain renewables as the first technique of reaching Paris-aligned net-zero targets partly stem from a perceived over-use of RECs. A research in Nature Local weather Change discovered that RECs threaten the integrity of science-based targets, as RECs are unlikely to result in further renewable vitality manufacturing.
Hong Kong actual property corporations are main consumers of RECs from mainland China as a way of working in the direction of net-zero targets. Beneath the proposed new SBTi guidelines, actual estates corporations might solely purchase RECs in Hong Kong, the place there’s a restricted provide, to satisfy science-based targets.
The buildings sector contributes to 37 per cent of worldwide carbon emissions, with oblique emissions from electrical energy and warmth consumption accounting for 3 times the sector’s direct emissions.
The group consultant stated that Hong Kong actual property corporations perceive considerations over double-counting and inflated emissions discount claims with renewables procurement, however recommend including additional steering to make sure good governance somewhat than eradicate market-based reporting altogether.
Among the many group’s options to “make sure the credibility” of market-based reporting for renewables is for corporations to be required to reveal their vitality effectivity targets as a subset of their total SBTi targets, to make sure that this precedence is maintained alongside procured renewable vitality.
Corporations also needs to be required to show “unique possession” of any renewables devices they purchase to keep away from double-counting, and that procurement is aligned with the ideas of RE100, an initiative for corporations dedicated to purchasing solely renewable electrical energy.
The World Inexperienced Constructing Council stated it has supplied suggestions to SBTi and welcomed an prolonged timeline to handle the suggestions acquired.
SBTi stated that obligatory location-based accounting for Scope 2 emissions is just one proposal amongst a quantity steered, and that every one session suggestions can be taken under consideration when creating the ultimate steering, which can be launched “within the coming months”.
