HIA’s submission to the Department of Climate Change on the Carbon Pollution Reduction Scheme (CPRS) Green paper in September 2008 for example,  noted the embodied energy within the construction materials used to build a new home generated 160 tonnes of carbon dioxide emissions (CO2-e) and an additional 80 tonnes for infrastructure associated with a new residence.

At a carbon price of $20, the submission estimated the additional cost to a new (house and land) residence would be calculated from a base quantum of $4,800. The estimates in the CPRS submission did not include the multiplying impact of taxes and charges, inventory holding costs, transport costs and other imposts which take the total additional cost above $6,000 per new home.

Following the Federal Government’s announcement in February 2011 that a carbon price would be introduced from July 2012, further analysis was undertaken. The analysis was revised and enhanced following the Government’s announcements on Sunday 10 July 2011.

Embodied energy in home building materials

Earlier research by the CSIRO estimated the average house contains approximately 1,000GJ of embodied energy in its building material inputs. The actual embodied energy will vary depending on the size of the home, bulk construction materials, surface finishes, fixtures, fittings and a range of other technical specifications. While more recent process-based analysis suggests the embodied energy is lower than the CSIRO estimate, studies undertaken for HIA using input output-based analysis indicates the embodied energy for all upstream and downstream inputs is significantly larger, and in fact using a hybrid analysis the total embodied energy is over 2,500GJ.

Material extraction, transportation and manufacturing processes will impact significantly on the embodied energy of the building materials, products and systems specified in a new house. Many building products undergo multiple phases of processing and manufacturing. For example, windows involve separate raw material extraction and transport; float glass processing; glass toughening and other treatments (including solar and thermal performance enhancing); aluminium, timber or other framing manufacturing; composite window assembly and fitting of hardware, hinges, rollers, etc. Similarly, the mortar used in masonry construction and concrete used in floor/garage slabs and driveways undergo a number of processing, production and transport phases before their use in concrete slab, piers and footings. The bulk materials commonly used in building a new home include steel, reinforced concrete, bricks, mortar, timber framing and roofing, steel beams, columns and lintels, roofing tiles, glazing and windows, plasterboard wall and ceiling linings, wall and ceiling insulation and sarking, wall and floor tiles and cabinetry (in kitchen, bathrooms, laundry and wardrobes). The embodied energy within these inputs alone does not properly define the aggregateembodied energy of a new home.

All other inputs must be accounted for, including water, sewerage and other service pipes; toilets, basins, baths and shower screens; tapeware; electrical, telecommunication and entertainment cabling; heating/cooling ducting; timber skirting and architraves; kitchen and laundry benchtops; electrical fittings, switches and points; doors and door hardware; glass, stainless steel and composite surface finishes; external paving finishes, retaining walls and landscaping.

White goods, such as built-in ovens, stove and dishwashers, hot water systems, mechanical ventilation and security systems, etc. should also be included in estimating embodied energy. Some argue further that carpet, window furnishings and driveways, side fences and even landscaping should be included. These inputs were not included in the HIA analysis. Yet the embodied energy for HIA’s standard house (at just over 200m2) is estimated to be more than 2,500GJ. A process-based analysis might suggest a number below 700GJ.

Estimating carbon emissions from the building materials is even more complicated.

The heating and pressing processes and other treatments used in the production and manufacture of different building materials, building products and finishes vary significantly, as do the fuels and energy sources. Natural gas, electricity and coal are the most commonly used fuel sources. Other sources include LPG, recycled waste (including used tyres).

In addition to material production, manufacture and fabrication process emissions, fuel and transport emissions, some extraction processes also emit CO2 (or equivalent) directly into the atmosphere.

Even basic electrical energy sources vary in CO2-e footprint.

Aggregate fuel estimates can be used to apportion emission conversions across all building inputs, based on most commonly used Australian manufacturing andprocessing operations. Alternatively, discrete processes can be tracked for fuel inputs and proportioned against building material outputs. Multiple production processes and material outputs make the analysis more difficult, and the task increases exponentially as the number of separate downstream production/fabrication phases increases.Subsequent analysis estimated the total CO2-e for an average new house is 157 tonnes.

Embodied energy in land development and infrastructure construction

Land development and infrastructure can be divided into four parts:

1. Infrastructure – roads, drainage, stormwater, sewerage, footpaths, lighting;
2. Earthworks – land clearing, excavation and trenching;
3. Utilities and services – water, gas, electricity and telecommunications; and
4. Physical and community infrastructure.

Including the land development and infrastructure construction, the CO2 contained in an average new house and land package was estimated to be 220.8 tonnes.

Impact on new housing costs

At a carbon price of a $20 per tonne CO2-e, the additional cost on a new home was estimated to be $4416.40 ($20 x 220.82). Including flow on cost increases relating to taxes and charges, holding costs and other factors, the additional cost is $6,026. Other costs relating to feasibility studies, procurement, material specifications, design documentation, statutory approvals, insurances, etc. were not included.

Again, following announcements that compensation measures relating emissions-intensive, tradeexposed (EITE) entities would be included in the Government’s final carbon pricing policy, the analysis was revised. Based on comparable measures to those in the 2008 CPRS proposals, the cost increase was reduced to $5,200 for an average house and land package. 

Details on the Government’s “Clean Energy Future” package were released on 10 July and we now know that the CO2-e fixed price will be $23 per tonne (not $20), the EITE compensation will be set at 94.5% and on-road transport fuel will receive compensation. We also know that the compensation measures will change over time, the fixed price will increase to $25.40 by 2014/15 before moving to a variable pricing scheme in July 2015. 

So how much will carbon pricing add to the cost of building a new home? That will depend on the style, size and design of the home, the material specifications and inclusions, the extent to which increased costs are passed on to builders and contracts and ultimately the consumer, and the degree of product substitution – including substituting locally made building materials and products with materials and products manufactured off shore. 

The cost of building material inputs and hence the cost of every new home will inevitably increase. Housing affordability will inevitably fall and as a consequence push housing further from the grasp of too many more Australians. 

Housing is a staple of life, providing both shelter and a base from which Australians can participate in education, the workforce, local community activities and society more broadly. It is where our young Australians are raised and it is a fundamental input to our future prosperity and wellbeing. 

Yet we have a housing crisis in Australia. House prices, home loan repayments, and rental payments have grown to such an extent that they pose major barriers. 

Excessive taxation on new housing is a major cause of both Australia’s undersupply of housing and the resultant affordability problems. The tax system has major impacts on housing supply, housing affordability, and hence the ability of the community to access shelter. The tax burden on new housing has grown substantially over the past decade and there exists an inequitable treatment of new housing compared to existing housing. 

A recently completed study for HIA on the taxation of housing highlights results that are concerning. Firstly, the total tax burden on a new home in our three largest capital cities ranges from 36 percent in Brisbane to 38 per cent in Melbourne to 44 percent in Sydney.

The types of taxes placed on housing are highly problematic:

• They fall largely on the homebuyer;
• The majority are highly inefficient; and
• They can impact labour mobility and hence productivity.

Carbon pricing will add to the tax burden and to the inequity between new and existing housing. How much taxation on new housing is too much?