Climate change clauses - NEC Option X29 and the Chancery Lane Project

The recent COP27 summit has served as a stark reminder of the need to reduce greenhouse gas emissions and work towards net zero. With the built environment and the construction industry contributing significantly towards greenhouse gas emissions, it is critical that carbon emissions are considered from the outset of any project, particularly at contract stage when setting and agreeing requirements.

There are an increasing number of useful resources to assist in this process, including the new NEC Option X29 clause and the Chancery Lane Project:

NEC Option X29

NEC Option X29 is a climate change clause with versions for use in the NEC4 main contract or any NEC4 subcontracts. The key points are:

• X29 enables “Climate Change Requirements” for the project to be included in the scope of the works, making it mandatory for the contractor to comply with these requirements. There are no specific climate change requirements that must be included, but the NEC guidance states that they should be “achievable” and “not place undue risk” on the contractor. Examples from NEC include recycling, waste reduction and renewable energy.
• contractors are required to provide a climate change plan detailing how they will achieve the Climate Requirements in the scope.
• X29 introduces an optional performance table setting targets for climate change that the contractor is required to report against throughout the project. It is also possible to create financial incentives: the contractor may be paid for achieving or exceeding a target or required to pay a specified amount if it fails to meet a target.
• contractors can also propose changes to the scope “to reduce the impact of the creation, operation, maintenance or demolition of the works on climate change”.

The Chancery Lane Project

The Chancery Lane Project has produced over 100 precedent climate-related clauses for use in contracts, covering topics including:

• net zero
• energy
• waste reduction
• green leases
• greener transport

As well as construction contracts, the clauses can be incorporated into a wide variety of contracts, including commercial, real estate and financing agreements. This is extremely useful given the range of contracts that will be put in place on any construction contract and will assist in passing climate related obligations down supply chains.

Both the Chancery Lane Project and NEC X29 are very welcome resources at a time when there is increased focus on reduction of emissions. However, these clauses are only one of many necessary considerations for the construction industry in the journey towards net zero and on any project. Furthermore, these are optional resources, so the parties involved in a project will have to make the decision to use these resources, with no sanction of failure to do so.

It is also important to note that the clauses must also be adapted to the needs of the specific project and contract and legal advice should be taken on how best to do this.