29-04-2021

Reaching carbon reduction goals in the real estate sector: are we on track?

Last week was a big week for climate change action. Starting on Earth Day, 40 world leaders (virtually) met at the Leaders Summit on Climate where they pledged their increasingly ambitious emission reduction targets. The most prominent new contribution comes from the U.S., which has announced their most aggressive climate plans in history and will now take a leading role in climate action, again. Other notable contributions come from the EU, China, and Japan.

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Source: Climate Action Tracker

Although the newly declared targets of last weeks’ summit contribute to a narrowed emissions gap in 2030, it is clearly visible from the projections of the Climate Action Tracker that these targets are far from enough to keep temperature rise below 1.5 degrees Celsius by 2030 (the target as set in the Paris Climate Agreement).

How are developments in the built environment regarding emission reductions? As the building stock accounts for 40% of total GHG emissions, decreasing energy consumption in this sector is crucial in reaching carbon emission reduction goals.

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Buildings sector (direct and indirect) energy-related CO2 emissions in the Sustainable Development Scenario, 2000-2030 Source: IEA

So far, CO2 emissions in the building sector are still on the rise, as observed in the above graph by the International Energy Agency. This moves the sector further away from positively contributing to the emission reduction goals set in Paris. Although emission growth from the sector stagnated between 2013 and 2016, it started to rise again after. What drives emissions from the building sector to keep on rising? One reason is that more extreme and warmer weather is observed in recent years, which increased the demand for electricity for cooling appliances.

Also, decarbonization efforts cannot keep up with new constructions in developing countries. Globally, we are experiencing the largest growth in urbanization ever. 55% of the world population currently lives in urban areas, and this is expected to grow even more to 68% in 2050. While energy use per m2 is decreasing from 0.5% to 1% per year since 2010, growth in floor area is around 2.5% yearly since 2010. The same mechanism applies to renewable energy technologies. New and more sustainable energy sources are becoming prevalent, but they are introduced at a slower pace than the increase in fossil fuel-using appliances that stem from increased energy demand for buildings globally.

Thus, while energy efficiency efforts are increasingly present, it is currently not enough to combat rising energy demand of the growing building stock worldwide. In 2020, the IEA estimated that per m2, annual energy use would have to decrease by 2.5% globally (starting from 2019) to meet the 2030 goals of the Paris Agreement. The above trends highlight the case for urgent action on emission reductions in general, and the important role that the real estate sector has in the overall emission mitigation goals.

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