Guide

Brick by brick: a guide to decarbonizing the built environment

Global share of buildings' and construction's energy use and emissions, 2019
Written by Publishing Team

  • Reducing emissions from the built environment is urgently needed if we are to achieve our climate goals.
  • Buildings account for about 40% of all global energy use and emissions.
  • From relocation to new construction and retrofit – here are 10 priority areas that public and private sector decision makers should focus on.

Having spent my entire career working in real estate, it is both humbling and intimidating to admit that buildings account for about 40% of total global energy use and emissions.

I suspect decarbonization will greatly affect almost every aspect of my personal and professional life – but with creativity, innovation and the use of technology I believe we can achieve the needed transformation. Below, I prioritize issues in our built environment where cooperation between businesses and governments is sorely needed to accelerate progress toward our shared goals.

Global Share of Energy Uses and Emissions in Buildings and Construction, 2019

Global share of energy use and emissions in buildings and construction, 2019.

Photo: Global Alliance for Buildings and Construction

Cities account for 75% of global emissions and are often the most exposed to the consequences of climate change. Of the 17 largest cities in the world, 14 are coastal cities, which makes them particularly vulnerable to climate-related extremes of weather. “Necessity is the mother of invention” takes on new meaning as cities are pushed to the front line in the battle to limit and mitigate the effects of climate. Regulations regarding building construction and operation, and planning policies that promote sustainable transportation, are among the key areas in which it leads forward-thinking cities like New York.

The pandemic-induced lockdowns have shown us the benefits of reducing vehicle movements. Emissions fell by 88% across Europe during the quarantine. Restrictions – and eventual bans – are being imposed on combustion-engine vehicles in cities to accelerate the adoption of electric vehicles, often beginning with public transportation infrastructure. The Birmingham Clean Air District, UK, has introduced fundamental changes in travel patterns (see figure below). The bike lanes introduced in Paris in response to COVID have been permanently maintained. Carbon accounting must increasingly be at the center of policymaking around urban transport.

The pandemic has also affected the labor market, marked by job vacancies and record levels of resignations. The corporate ESG credentials are set to play an increasing role in attracting and retaining top talent, who increasingly believe that an employer must have a social and environmental conscience. The buildings they occupy, the sites they choose, and the ways they allow their employees to work will have a profound impact on companies’ carbon footprint. This, in turn, will affect whether they are seen as a ‘preferred employer’.

Over the next 40 years, it is expected that the equivalent of a city the size of Paris will be built every week. Given that concrete production alone accounts for 8% of total global emissions, the way we design and build new buildings needs to fundamentally change to meet our climate goals. Improvements in design, innovative materials, new construction techniques and the increased use of technology are helping to reduce the “lifetime carbon” impact of new developments. The use of digital twins to regulate energy use in buildings is showing very promising results. Given that typical buildings exceed their designed energy use by 3.8 times, the power of digital twins to diagnose and correct inefficiencies makes a material contribution to reducing emissions.

Retrofit vs New Construction

Perhaps the biggest challenge is the vast inventory of existing buildings that need to continue to be used – but which must be operated more efficiently. The retrofit of occupied buildings presents practical challenges to developing facilities without disrupting business operations, as well as the more ambiguous issue of cost allocation and financial viability. Early adopters in both the public and private sectors provide models for others to follow. However, in the UK and EU, government regulations regarding building standards are already accelerating obsolescence in order to shift the cost-benefit balance. Other jurisdictions are likely to follow suit. Funding and making the necessary adjustments is a huge challenge but also offers huge business opportunities for those with the right skills and vision.

Legislation may be slow to affect the real estate sector directly, but successive waves of regulatory and market forces are already affecting the banking and financial industries on which the real estate market is built. Whether it’s in the form of construction loans or mortgage financing, banks’ exposure to climate risk is increasingly being measured, monitored, and costed. Funds that explicitly target “green” investments are becoming popular; Those who avoid “brown” brown more. Sustainable financing is already growing exponentially and will soon impact the cost and availability of debt and equity for every real estate project.

Real estate is geographically fixed in nature, yet every location on the planet is exposed to its own unique mix of regulatory and physical climate risks. Both occupiers and investors are reassessing their exposure to the venue in light of these new risks, which are now being recognized and appropriately priced. Rent and capital values ​​are already adjusted at the building level, but the effects of climate on value at the urban and regional levels are – so far – hard to discern. Property insurance costs have risen in response to recent severe weather events – and this is certainly a key indicator of how the property value landscape is being reshaped by climate change and our response to it.

Annual property insurance rates increase

Annual property insurance rates rise.

Photo: Marsh Global Insurance Market Index

The effects of climate change fall disproportionately on the parts of the world and sectors of society that are least able to protect themselves or recover from climate events. From losing a home or livelihood to losing lives, millions of people are facing a rising tide of social and economic impacts as a result of climate change. As the World Bank has meticulously said: “Climate change is more than just an environmental crisis – it’s a social crisis.”

I believe we are all part of a human ecosystem, at the heart of which lie the towns and cities that form the backdrop to our lives. The real estate industry has been responsible for creating the buildings in which we live, work and play; But we cannot solve the current crisis alone. Now we must urgently reach out to our partners elsewhere in the public and private sectors to meet the challenge of decarbonizing the built environment for the benefit of society as a whole.

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