Prepare for Increased Carbon Offset Payments

The GLA’s carbon offset price of £95/tonne of carbon dioxide for regulated emissions now looks low, with other local authorities charging almost ten times more.  Development costs for a typical 2-bed flat increase by as much as £9,000 when prices already adopted by other local authorities are applied in place of the GLA’s price.

Although we understand that the GLA has no immediate plans to increase their price, Figure 1 outlines how local authorities in London and elsewhere have already set significantly higher prices in their Local Plans and supplementary planning documents.  These reflect updated guidance on carbon prices from central government.

Figure 1

Changes in the way carbon is valued explain some of these increases.  Another reason is that it is becoming more costly to implement carbon offset measures.  A simple example is that it now requires almost 4 times more solar PV to offset the same amount of carbon as it did 2-years ago, due to rapid decarbonisation of grid electricity (according to simple Part L calculations).  In addition, some local authorities are expanding the scope of their offsetting requirements to cover unregulated energy (appliances and other plug loads), which has the potential to double the quantity (and cost) of carbon to be offset.

Developers should consider the impact of potential changes on sites where carbon offset costs are not agreed or where there is potential to trigger a renegotiation.  Offsetting costs have the potential to weigh far more heavily in viability assessments, increasing the need to carefully consider alternative approaches to further reducing or offsetting carbon emissions either onsite or offsite.