PRIORITISE RESTORATION OVER DEMOLITION
Incentivising repair and restoration over demolition would reducing the embodied carbon footprint of Ireland’s built environment, says the CIOB
Urgent action is needed to reduce the number of buildings being demolished instead of refurbished in Ireland and Northern Ireland in order to meet net zero targets, says construction industry body The Chartered Institute of Building (CIOB).
The built environment accounts for 37% of Ireland’s carbon emissions and 49% in the UK with heating, cooling and lighting buildings, known as operational carbon, being responsible for the majority. The remainder is attributable to embodied carbon – emissions resulting from mining, quarrying, transporting and manufacturing of building materials, in addition to construction activities, the repair, renovation and final disposal of buildings.
CIOB’s proposal for Ireland
Under Ireland’s current tax structure, a reduced rate of 13.5% VAT is applied to demolition projects, creating a perverse environment where the embodied-carbon-hungry activities of demolition and replacement enjoy taxation parity with the sustainable repair and restoration of Ireland’s built environment.
CIOB says this contradicts the principles outlined in the Circular Economy and Miscellaneous Provisions Act 2022, the Climate Action and Low Carbon Development (Amendment) Act 2021 and the EU Taxonomy Regulation 2020 – an EU-wide classification system for sustainable activities.
The organisation is proposing the Government use the tax system to incentivise repair and restoration over demolition, thereby reducing the embodied carbon footprint of Ireland’s built environment. It is calling for demolition to be charged at the standard rate of 23% VAT, while repair and renovation activities remain at the reduced rate of 13.5%.
CIOB’s proposal for Northern Ireland
Currently in the UK, renovation and retrofitting costs are subject to the standard 20% VAT, but demolition and new build is not, often making it more financially attractive to raze buildings to the ground than restore them, despite restoration usually being the more sustainable option. This has serious negative impacts on decarbonisation, with both demolition and new build generating significant levels of embodied carbon as well as pollution, noise, traffic, disruption and waste, most of which ends up in landfill or incinerated. The UK’s lack of VAT on demolition makes it an outlier compared with most other nations.
CIOB says 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, CIOB is proposing that, when the Assembly returns, the Northern Ireland Government uses 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 the built environment.
CIOB’s view
Joseph Kilroy, Policy and Public Affairs Manager for Ireland, Northern Ireland, Scotland and Wales at CIOB, said: “We hear about the need to move away from a throw-away society and upcycle and recycle when it comes to things like clothes and furniture, and this needs to be extended to buildings too. At a time when so many decisions are cost-based, it’s wrong that carbon-intensive options can be more financially beneficial than more sustainable options. With the construction and operating of buildings accounting for large proportions of Ireland’s and Northern Ireland’s carbon emissions, incentivising refurbishment and renovation needs to be a priority for both Governments in order to reach net zero by 2050.”
CIOB says reforming VAT in Ireland and introducing a demolition levy in Northern Ireland would also generate revenue, which could be used to fund initiatives that support energy-efficient upgrades to housing, help vulnerable households cope with the cost-of-living crisis and preserve historic buildings. Kilroy added: “Charging full VAT for demolition in Ireland, while maintaining the reduced rate for repair and refurbishment and introducing a levy for demolition in Northern Ireland, would create tax environments that reflect the principles of existing climate legislation and the urgency of the national net zero by 2050 targets.”
Key points
• 37% of carbon dioxide emissions come from buildings. This means that the built environment sector has a significant role to play in achieving Ireland’s net zero ambitions and tackling the climate crisis
• Rather than incentivising sustainable construction practices, Ireland’s VAT structure places demolition and rebuild on a parity with renovation and retrofit by charging both at the reduced rate of VAT – 13.5%. This is facilitating a culture of demolish and replace, rather than add, transform and reuse in the construction sector
• New build projects are an essential component of the built environment, but the replacement of buildings should not be given taxation parity with repair as retrofit buildings will often outperform new in terms of overall lifetime carbon emissions. Further, the demolition of existing buildings creates challenges such as appropriate disposal of waste, dust exposure and greenhouse gas emissions
• Regulatory measures have proven effective in undergirding similar types of sectoral culture shifts from demolish and rebuild to repair and reuse. For instance, 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
• International studies concluded that levies were more effective at CDW mitigation than financial incentives, achieving the targeted 30% reduction in CDW two years sooner and have the co-benefit of generating a new revenue stream.
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Michael McDonnell Managing Editor of Irish Construction Industry Magazine & Plan Magazine
Email: michael@irishconstruction.com WWW.MCDMEDIA.IE