How new climate change policy could impact design/construction companies

The new greenhouse gas regime presents unique opportunities for engineers and architects to be leaders in responding to and anticipating climate change challenges. Photo © BigStockPhoto
The new greenhouse gas (GHG) regime presents unique opportunities for engineers and architects to be leaders in responding to and anticipating climate change challenges.
Photo © BigStockPhoto

By Alan Ross and Krista Johanson
From Paris to provincial legislatures, big changes are coming in Canada’s greenhouse gas (GHG) regime, with Canadian companies—and large carbon-emitters across a range of industries—still determining what the impacts will be on their bottom lines. This includes design/construction companies. At the same time, the renewed public and private-sector focus on climate change will lead to increased opportunities for Canadian design professionals to implement and improve industry-leading solutions.

Nationally, there will be significant changes to Canada’s energy systems and economy, including impacts to the construction industry in areas such as infrastructure and urban development. With green energy sources likely to play a larger role, experienced renewable project developers with strong balance sheets and a low cost of capital are likely to be some of the biggest winners this year.

Companies with emissions-reducing technologies, or venture capital/private equity focused on renewable and energy efficiency project financing, are currently well-placed for success. However, even outside Alberta, de-carbonization and structural changes to various industries, will have significant commercial implications on the construction, architecture, engineering, procurement, and construction management (EPCM), and design sectors.

This year, business will look ahead to not only the implementation of provincial carbon initiatives, but also to the federal government pursuing its own climate change agenda. This involves new international obligations arising from the 2015 United Nations Climate Change Conference, as well as a commitment to set national emissions targets. This year will therefore be a watershed for Canadian business in navigating the shoals of carbon policy and economic transition. Changes are expected to be rapid and multi-dimensional, effects complicated.

The United Nations estimates buildings contribute to up to a third of global GHG emissions, primarily due to operation, rather than construction. Accordingly, the building sector is, or will be, a key industry targeted by climate change policy—one can expect to see even more changes to building codes and land use policies.

Opportunities: Reducing emissions through design
Green construction is a growth area, but sustainable building is still not the standard. According to the Canada Green Building Council (CaGBC), the green building industry generated $23.45 billion in GDP in 2014. There is wide public awareness of the council’s own Leadership in Energy and Environmental Design (LEED) program, but other rating or certification systems, which include BOMA BESt, ENERGY STAR, Built Green, and Passive House, are also gaining in popularity.

One common barrier to constructing energy-efficient buildings is the concern they are more expensive to construct. This concern can be addressed by comparing the increase in design and construction costs with the more long-term cost savings associated with a decrease in energy consumption.

CaGBC has identified as a key opportunity in greater standardization of energy modelling to assist design professionals in applying the ‘building-as-a-system’ approach. Energy modelling can assist in identifying cost- and energy-saving opportunities at a very early stage, but the modelling process, and the inputs and assumptions relied on, must be clearly understood.

In addition to increasing energy efficiency, designers need to consider the rising frequency and severity of extreme weather incidents, which will increase maintenance requirements and shorten the lifespan of buildings and infrastructure in addition to posing safety risks for designers.

Industry is also finding creative ways to fund energy-saving retrofits, such as “energy performance contracts”, in which energy service providers finance projects in exchange for a portion of the energy savings associated with the project.

Challenges: Legal and business risks are manageable but must be managed
The rumours of a pending wave of green building litigation have been somewhat exaggerated. However, design professionals should also consider, and work to mitigate, the legal and business risks posed by new green design criteria and new forms of design services.

Breach of contract claims may be brought against design professionals when projects fail to perform to environmental standards defined in the contract, or where projects fail to achieve certification from a third-party environmental certification body. These issues should be considered when drafting clauses addressing consequential and liquidated damages. Further, design professionals should address in their services agreements the increased time and cost of working to achieve such certification.

Non-contracting parties who rely on design consultants’ advice—such as owners, contractors, or purchasers—may bring misrepresentation claims against consultants where recommended or specified products or systems do not perform as described or modelled. Design professionals with specialized training or certification from green building organizations may find themselves subject to a higher standard of care.

Design professionals should also carefully review their insurance policies to understand how they cover—or exclude—green building risk.

The takeaway
The new greenhouse gas regime presents unique opportunities for engineers and architects to be leaders in responding to and anticipating climate change challenges. New opportunities bring new risks, but careful design professionals who identify risks will find that they have options to mitigate them.

(This article is for information purposes only and may not be relied on for legal advice.)

Alan Ross is a lawyer at Borden Ladner Gervais LLP (BLG). He has extensive experience in the areas of administrative law, government relations, and regulatory matters involving the oil and gas industries. Ross can be reached via e-mail at aross@blg.com.

 

KristaKrista Johanson is a lawyer with BLG. She has a commercial litigation practice with an emphasis on resolving construction and engineering disputes. Johanson can be contacted via e-mail at kjohanson@blg.com.

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