This article considers the emerging legal framework for reducing emissions in Australia’s building and construction sector.

Introduction

The building and construction sector in Australia can, and must, play a leading role in meeting Australia’s emissions reduction target of net-zero by 2050.¹ Globally, buildings contribute over one-third of all emissions, and similar ratios are reported in Australia.² This is perhaps unsurprising, given the energy and emissions generated for essential building services such as heating and cooling (operating emissions). However, the sector also contributes significant emissions through heavy industrial processes used to make building materials like concrete, steel and glass (embodied emissions).

To tackle climate change, therefore, the sector must embrace not just energy efficiency measures, but also low carbon building materials and construction technologies. Many of these materials and technologies already exist. The challenge will be introducing them at speed and scale, while also responding to increased demand and inflationary pressures.³ In this article we consider the emerging legal framework for addressing these challenges.

Legal framework

National Construction Code

To date, the sector has effected policies for reducing operating emissions largely via amendments to the National Construction Code (NCC). The NCC sets out the minimum performance requirements for building and construction work in Australia and is enacted into law through each State and Territories’ planning laws.

Globally, the introduction of mandatory net-zero (or “net-zero ready”) buildings are seen as a critical step towards achieving net-zero.⁴

In 2018, the Council of Australian Governments agreed to commence staged reforms to the NCC in response to industry calls for greater energy efficiency rules, and to meet future sustainability, amenity and health policy aims.⁵ A first tranche of reforms were introduced in the NCC’s 2022 revision (NCC 2022), which was gradually rolled out under transitional arrangements in each State and Territory jurisdiction.⁶

A second tranche of reforms were planned for the NCC’s 2025 revision (NCC 2025), including measures for higher energy efficiency ratings, mandatory on-site energy generation for commercial buildings, and mandatory electrical vehicle (‘EV’) charging circuits in new homes and apartment complexes. However, these planned reforms are facing political headwinds due to housing affordability and supply concerns. In April 2025, the ABCB announced that its usual process of releasing a preview of the draft NCC 2025 would be deferred.⁷ In South Australia, in August 2024, the State Government announced a “10-year moratorium” on NCC provisions that may impede housing affordability.⁸ Given these concerns, it is anticipated that the second tranche of reforms initially planned for NCC 2025 may be modified by government or deferred, in order to balance housing affordability, inflationary and sustainability priorities.

Notwithstanding the delays to NCC 2025, some noteworthy progress has been made recently in New South Wales, where planning policy now requires embodied emissions measurement and reporting for all new building types as part of the planning approval processes.⁹ Similar planning policies may eventually be introduced in other jurisdictions. It remains to be seen, however, whether further reforms will be introduced to limit embodied emissions or to achieve net-zero buildings.

Contract terms and procurement strategies

In the absence of mandatory requirements for net-zero buildings, financiers, developers and principals will need to take the lead to reduce emissions, especially embodied emissions. This can be implemented through procurement, financing and contracting strategies.

Federal and state government procurement practices are making good progress in this regard. For example, from 1 July 2024 the Federal Government mandated that procurement of construction services at or above $7.5 million must comply with its Environmentally Sustainable Procurement Policy (ESPP). The ESPP requires agencies to:

1. set sustainability ratings for their building and construction projects;
2. require suppliers to prepare an Environmental Sustainability Plan for achieving those ratings; and
3. incorporate model contract clauses into the relevant contract.¹⁰

KPI regimes and other contract terms that require green ratings to be achieved, may also become common place, especially where financiers impose sustainability requirements as part of their lending criteria.

Collaborative contracting models may also be employed with sustainability goals in mind. For example, many of the building techniques and materials needed to reduce emissions are not yet approved in existing government agency standards or in Australian Standards.¹¹ Two stage “Early Contractor Involvement” contracts could be used to greater effect, where building contractors may demonstrate the use of such building techniques and materials in the planning phase, prior to proceeding to the construction phase.¹²

Rating systems

Measuring operational and embodied emissions under independent and verifiable rating systems is essential for achieving net-zero buildings. They set the foundations for measurable compliance under building codes, planning policy and contracting terms.

In Australia, there are several reputable rating systems, including:

4. the Nationwide Housing Energy Rating System (NatHERS);
5. Green Star;¹³
6. the National Australian Built Environment Rating System (NABERS); and
7. the Infrastructure Sustainability Council Rating Scheme.

The NatHERS star rating system sets the mandatory baseline energy efficiency levels required under the NCC 2022. The other systems are voluntary but can be used to set more stringent energy efficiency requirements where required by developers, principals or financiers.

In late 2024, NABERS introduced an embodied emissions rating tool which measures embodied carbon over the whole life cycle of the asset.¹⁴ The NABERS embodied carbon tool and rating system is a key milestone towards driving down embodied emissions in the building sector.¹⁵ Similar tools are being developed internationally.¹⁶

Standards

Reducing embodied carbon requires a raft of new building materials and technologies (from “green” cement or concrete mixes, recycled materials, bio-based products, prefabricated buildings, and cross laminated timber as an alternative to steel superstructures). A barrier to these innovations is a current lack of International and Australian Standards to demonstrate how their application complies with the NCC’s performance requirements.¹⁷ The introduction of standards for new building materials and technologies will therefore be an important part of the sector achieving its net-zero aspirations.

A good example of this is the recent 2024 revision of Australian Standard 4777 Grid connection of energy systems via inverters – Inverter requirements, which now provides guidance for installing “vehicle to grid” systems (which are a key enabler for emission reductions). This revision would likely become a reference document in NCC 2025.¹⁸

Urban planning laws

Urban planning laws and controls are vital to reducing emissions in the built environment. Carbon-offsetting may become a key feature of planning laws. Also, incorporating nature corridors, green spaces that act as “carbon sinks”, reducing the “urban heat island effect”, and requiring access to sustainable supplies of water, can all be a feature of planning controls in the future.¹⁹

Is a net-zero future possible?

The answer to this question is “yes”, but significant work lies ahead for the sector’s emerging legal framework. And the issues of affordability housing and supply shortages will need to be addressed in parallel. This article is aimed at generating greater awareness on the topic. In this way, it is hoped that greater progress can be made towards a net-zero future in the sector.

This article was written by Jonathan Davies, Special Counsel and Noel Williams, Associate, and reviewed by John Vozzo, Partner.

¹ See the Climate Change Act 2022 (Cth).

² A figure of at least one third is generally reported by various agencies: see, for example ‘Buildings’, International Energy Agency (Webpage) <https://www.iea.org/energy-system/buildings>.

³ The scale of the task is immense. If IEA estimates are correct, the globe will see the equivalent of nearly 1,400 new cities the size of Paris (in terms of square footage) by 2050: see Eric Alstrӧm ‘We’re building a new Paris every week — but can this be sustainable?’, Euronews (online, 22 August 2023) <https://www.euronews.com/2023/08/22/were-building-a-new-paris-every-week-but-can-this-be-sustainable>. In Australia, a footprint of 26 times the size of Melbourne’s CBD per year is required to meet the government’s housing target: see Alan Kohler, ‘Australia’s focus on housing supply isn’t enough to solve this crisis’, ABC News (online, 7 July 2025) <https://www.abc.net.au/news/2025-07-07/housing-supply-infill-construction-tax-reform-immigration/105499648>.

⁴ See IEA, Technology and Innovation Pathways for Zero-carbon-ready Buildings by 2030 (Report, September 2022) <https://www.iea.org/reports/technology-and-innovation-pathways-for-zero-carbon-ready-buildings-by-2030>. GlobalABC has also called on major emitters and G20 governments to include detailed building code reform plans in their Nationally Determined Contribution updates under the Paris Agreement: see United Nations Environment Programme, Global Status Report for Buildings and Construction 2024/2025: Not just another brick in the wall – The solutions exist. Scaling them will build on progress and cut emissions fast (Report, 2025 <https://globalabc.org/resources/publications/global-status-report-buildings-and-construction-20242025-not-just-another>.

⁵ COAG Energy Council, Trajectory for low energy buildings (Report, December 2018) <https://www.energy.gov.au/energy-and-climate-change-ministerial-council/energy-ministers-publications/trajectory-low-energy-buildings>. See also Peter Shergold and Bronwyn Weir, Building Confidence: Improving the effectiveness of compliance and enforcement systems for the building and construction industry across Australia (Report, February 2018) <https://www.industry.gov.au/sites/default/files/July%202018/document/pdf/building_ministers_forum_expert_assessment_-_building_confidence.pdf>.

⁶ For the transitionary arrangements in South Australia, see Ministerial Building Standard MBS 007: Modifications to the Building Code of Australia (Amendment 4).

⁷ ‘Update: Progress on the next edition of the NCC’, ABCB (Webpage, 4 June 2025) <https://www.abcb.gov.au/news/2025/update-progress-next-edition-ncc>.

⁸ ‘Building Code’, Plan SA (Website) <https://plan.sa.gov.au/resources/building/building_code>.

⁹ State Environmental Planning Policy (Sustainable Buildings SEPP) 2022. See also Department of Planning and Environment, Embodied Emissions Reporting (Technical Note) <https://www.planning.nsw.gov.au/sites/default/files/2023-09/embodied-emissions-technical-note.pdf>.

¹⁰ See ‘Model Clauses: Environmentally Sustainable Procurement Policy’ Department of Climate Change, Energy, the Environment and Water (Policy, July 2024) <https://www.dcceew.gov.au/sites/default/files/documents/esp-policy-model-clauses-july-2024.pdf>.

¹¹ ‘Australian Standards’ refers to the standards published by Standards Australia.

¹² See the recommendations in Infrastructure Australia, Embodied Carbon Projections for Australian Infrastructure and Buildings (Report, 2024) <https://www.infrastructureaustralia.gov.au/reports/embodied-carbon-projections-australian-infrastructure-and-buildings>.

¹³ Green Star ratings are awarded by the Green Building Council of Australia.

¹⁴ See ‘NABERS Embodied Carbon’, NABERS (Webpage) <https://www.nabers.gov.au/ratings/our-ratings/nabers-embodied-carbon>.

¹⁵ ‘NABERS Embodied Carbon rating tool released’, NABERS (Blog Post, 29 November 2024) <https://www.nabers.gov.au/news/nabers-embodied-carbon-rating-tool-released>.

¹⁶ In the UK, see Royal Institution of Chartered Surveyors, Whole Life Carbon Assessment for the Built Environment standard, 2^nd edition (Standard, 1 July 2024) <https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/construction-standards/whole-life-carbon-assessment>; see also World Business Council for Sustainable Development, The Building System Carbon Framework (Standard, 9 July 2020) <https://www.wbcsd.org/resources/the-building-system-carbon-framework/>.

¹⁷ The NCC contains two compliance pathways for building work. Typically, a building proponent will show compliance with the Code’s “Deemed-to-Satisfy” provisions, which are a combination of prescriptive rules and cross-references to prescribed Australian Standards. Where no Australian Standard or equivalent standard exists, a building proponent typically must demonstrate compliance on a case-by-case basis, often using expensive verification processes. This makes novel building materials and technologies less attractive to the market and slower to take up.

¹⁸ See ‘What’s new in AS/NZS 4777.1:2024? Key updates for inverter energy systems’, Standards Australia (Blog Post) <https://www.standards.org.au/blog/as-nzs-4777-updates>. The 2020 revision of AS/NZS 4777 currently applies in NCC2022.

¹⁹ See for example ‘Urban Heat’, NSW Department of Planning, Housing and Infrastructure (Web Page) <https://www.planning.nsw.gov.au/policy-and-legislation/resilience-and-natural-hazard-risk/urban-heat>.