Green building boost could trigger $1.5b of investment – Marty Verry

A Red Stag TimberLab employee in Rotorua prepares glulam beams and CLT panels for the Fisher & Paykel project.

THREE KEY FACTS

• New Zealand has joined 70 countries in signing the Declaration de Chaillot to reduce building emissions.
• The accord aims to align construction emissions with the 1.5-degree global warming target.
• Modelling suggests the initiative could trigger $1.5 billion investment in sustainable materials and create 7000 jobs.

There are green shoots emerging in the green building space with New Zealand joining 70 countries signing up to the Declaration de Chaillot international accord.

The accord seeks to align building and construction emissions with the target to limit global warming to 1.5 degrees. The sector is responsible for approximately 20% of global emissions, so this is a major step in the right direction.

At a time when the Government has been rolling back all the previous Government’s policies in this area, it is heartening to see that construction emissions are in fact being taken seriously. The world and our trading partners are feeling the effects of climate change more than New Zealand, so the move to match their concern and act is a decisive step.

Commitments

According to the UN, signatories denounce the continued investment in systems and buildings with excessive carbon intensity. Areas of regulatory and policy response include “regulatory frameworks and mandatory building codes to move towards carbon-neutral buildings”.

This includes regulatory tools to increase the share of resilient, near-zero-emission and affordable buildings. Countries are expected to lead “by example, by adopting ambitious policies regarding public procurement”.

Signing ministers also commit to “promoting the production, development and use of low-carbon, durable and cost-effective construction materials”.

Many countries and states around the world have been adopting these policies individually, including many countries in Europe and states through the USA, Canada and Australia, with New South Wales being the latest. The Declaration de Chaillot broadens that climate change response out to over 70 countries.

Regulatory and policy options

When it comes to building emissions, there are “operational emissions” and “embodied emissions”.

Operational emissions are caused using energy in operating the building over its lifetime. In New Zealand, where the power grid runs on around 85% renewable electricity now and is expected to cap out at around 97% in a few years, action on operational emissions is not so important.

Where the big impact can be made is in “embodied emissions”. These are the emissions that went into making the materials and constructing the building. They can be avoided at the outset of the project and so get results immediately.

Causes include the fuel to extract iron ore or cement in Asia, truck it to ports and ship it to New Zealand as steel or cement. Bigger causes are the industrial processes themselves to make steel and concrete here. Both are high-energy consumers and release emissions as part of their chemical process. Solutions to eradicate these emissions are limited with current technology, or excessively expensive, despite years of research.

On the other hand, cost-effective substitutes for steel and concrete are now readily available for most above-ground building structures. Foremost among them is “mass timber”, which is a term to describe large-format engineered wood products such as Cross Laminated Timber (CLT) and glulam.

New Zealand is the 71st country to sign a global declaration on buildings and climate change.

If designed right, these are proving cost-effective. Therein lays the opportunity for government regulatory and procurement policy. With initiatives to focus government procurement and regulation on finding the lowest-emission option, designers will need to adopt the strategies that are now proven to be working.

Those designers can then take that knowledge to private sector projects. The combined additional demand will spur further investment, lowering the cost of materials further. A virtuous circle – economies of scale, investment, lower material costs, leading to greater demand, more economies of scale, investment ...

There is now a large ecosystem of experienced mass timber architects, engineers, builders and suppliers in New Zealand, supporting dozens of projects around the country at any given time. Current high profile projects include the huge footprint three-level Fisher & Paykel global headquarters in Auckland and the new six-level Parliamentary Service project starting in Wellington.

Potential $1.5b industry response

Modelling based on initial research by Deloitte established that the policies required to enact the Declaration de Chaillot commitment – procurement leadership and regulated caps on embodied carbon – could increase the market share of sustainable materials to 50%. If that occurred, the modelling found it could trigger $1.5 billion of investment in wood processing.

Spin-off benefits include 3.5 million tonnes of extra logs processed domestically each year, over 7,000 new regional jobs and 1.5 million cubic metres of additional export timber annually.

Scion modelling shows this would mean over 10 million tonnes of additional CO2 stored over the next 50 years. The latter does not count the avoided emissions from the substituted steel and concrete.

This is all good news for NZ Inc and the planet. Wood products have long supply chains reaching deep into our provinces, often involving Māori-owned assets and staff. The high-emission legacy products have limited processing domestically but will still be in high demand for the many infrastructure projects on the books. They will also still be used in buildings where required.

By signing this accord, designers will be incentivised through policy and good regulation to work out where negative emission products like mass timber can be used. Without it, they won’t. Ministers Penk and Watts are to be applauded.

Marty Verry is CEO of the Red Stag group and advises Governments on sector responses to policy and regulatory changes.