Constructing and retrofitting energy efficient buildings is one of the best bets for job creation as the economy recovers from the Covid pandemic.
The International Energy Authority identified the potential of energy efficient building in its Special Report on Sustainable Recovery. The report uses analysis the IEA completed together with the International Monetary Fund. It published the report as a blueprint for action.
It lists a detailed series of policies, actions and investment targets governments can follow as their plot a path away from the economic damage caused by the pandemic. Six sectors are covered in the plan, electricity, transport, industry, fuels, emerging low-carbon technologies and buildings. The last has the most immediate potential.
Taken as a whole, the IEA says its plan could boost worldwide economic growth by an average of 1.1 per cent a year. It could create 9 million jobs and reduce annual global energy-related greenhouse gas emissions by a total of 4.5 billion metric tons by the end of 2023. There will also be health and welfare benefits.
It won't be cheap. The IEA costs the needed investment at a trillion US dollars a year for the next three years. Ideally the funds will come from public and private sources.
The IEA estimates up to 30 jobs in manufacturing and construction would be created for every million dollars invested in retrofits or in adding energy efficiency to new buildings. No other sector has the same potential to create employment at a time millions of workers around the world have lost their jobs.
Close to 10 per cent of the world's workforce is employed in construction, manufacturing related to building on in one of the industries directly connected to the sector. That's around 250 million workers.
The IEA says there has been a drastic decline in the construction and building sector in the past year or so. There are disruptions because of on-site working conditions with Covid precautions.
Construction firms face labour shortages, in part thanks to travel restrictions and there has been considerable disruption to the building material supply chain. As many as 25 million jobs were either lost or are still at risk.
Worldwide investment in energy efficient building is expected to fall by around 15 per cent.
Yet the need for Green buildings has never been greater. If the world is to meet its carbon reduction goals, the sector needs to expand.
The IEA says there are short lead times in the construction sector. Existing efficiency programmes can be expanded almost immediately, while new projects can often be shovel ready within weeks.
It says: "Targeting support to social housing and government buildings in the first instance could help kick-start efficiency improvement works, creating a pipeline of projects for the industry. Government investment in accelerating energy efficiency in buildings would bring long-lasting benefits: it would reduce energy bills for consumers, reduce energy poverty, improve health and comfort, and improve resilience in the face of climate events and price shocks."
Retrofitting is important, the potential gains are huge. At the moment less than one per cent of existing buildings have energy retrofits each year. In the more advanced economies, and these are usually where the heating demand is greatest, the majority of buildings were constructed before any building codes dealing with energy efficiency.
The IEA says that for existing buildings there is scope for adding insulation and improving glazing. At the same time improvements can be made moving to more efficient heating technologies such as heat pumps or heating systems based on renewable resources.
Adding digital energy management can also pay dividends.
Governments can get the best return on investment in retrofitting when they focus first on the oldest, least efficient buildings. Deep energy refits have the potential to reduce energy demand from heating by as much as two-thirds.
Among the suggestions for governments, the IEA recommends increasing the incentives for energy efficiency improvements, smart energy management and on-site use of renewable energy. The process can be speeded up by reducing the administration and processing time for any approvals and moving to reduce any shortages in skilled installers and service providers.
There is scope for governments to provide guarantees that would encourage energy service companies to invest more in retrofits.
Public procurement can take a leading role. This would be the time to retrofit social housing, schools, offices, health facilities and local or central government properties. Beyond that, the IEA recommends addressing the households and businesses most affected by the pandemic: low-income families, small businesses and hotels. There's a secondary pay-off here.
More efficient buildings mean smaller power bills, that puts money back in people's pocket which they can spend elsewhere and stimulate the local economy. Another benefit is that reduced energy use leads to increased resilience, this is especially the case if solar power or other renewable energy sources and back-up batteries are part of the mix.
Sustainable buildings, not stranded assets
Industrial buildings that can't show they are low- or zero-carbon run the risk of becoming stranded assets. That's the conclusion of a report from the Australian and New Zealand Green Building Councils.
There are forecasts that the expansion of online retail will drive growth in the industrial building sector over the next decade. The report says New Zealand has an industrial building pipeline worth around NZ$13 billion.
Investors are increasingly unwilling to be stuck with properties that are polluting. This makes them undesirable and could inflict financial or reputational damage on owners.
At the same time, investors are becoming more aware that zero carbon buildings can open doors to the growing multitrillion-dollar green bond market, such as the $600 million Green Bond issued by ANZ in 2015.
Davina Rooney, who heads the Australian Green Building Council, says this gives the sector a valuable opportunity to build better assets. They could be designed to minimise embedded carbon and, when finished, cut operational carbon emissions.
The report says industrial buildings with Green Star certification produce 66 per cent fewer greenhouse gas emissions than standard buildings. The upfront cost of green design might only be 2 per cent, over the life of the building that can result in savings of 20 per cent of the total construction cost.
Decarbonising the construction sector
A report commissioned by the New Zealand Green Building Council estimates construction accounts for around 20 per cent of the nation's carbon emissions.
In Under Construction: Hidden emissions and untapped potential of buildings for New Zealand's 2050 zero carbon goal researchers say the sector pumps out close to three million tonnes of carbon each year. That's the same as having a million extra cars on the roads.
The report was written by sustainability consultant Thinkstep. It goes on to say the industry could cut emissions by 1.2 million tonnes, which would have the effect of removing almost half a million cars.
This figure is what is known as "embedded carbon". It counts the pollution caused by building and building materials. It is separate from the carbon emitted from activities like heating and lighting when the building is in use. Steel and concrete make up more than half the carbon footprint of residential and non-residential construction.
Thinkstep says there is untapped potential to reduce carbon. It could fall as much as 40 per cent by 2050 — the year government has set for New Zealand to be carbon neutral.
Rather than look for a magic bullet, the consulting firm says the goal is achievable through lots of smaller changes throughout the construction supply chain. The key is for everyone in the sector to co-operate.
Construction material suppliers need to move to low carbon manufacturing technologies. While customers must consciously choose less polluting materials. It would help if public and private procurement policies reflected these priorities. And the New Zealand Emissions Trading scheme has to account for the emissions in imported materials. Thinkstep also recommends improving the availability of data so that everyone can make better informed decisions.