The connection between climate change and extreme weather is increasingly evident with the expansive wildfires in the Western United States, serving as a grim preview of what a 2°C+ warmer world could look like. Climate data shows that the world has already warmed on average by just over 1°C since preindustrial times and our current emissions trajectory shows that we are rapidly outpacing our global carbon budget that would help to limit global temperature rise to 2°C.
Limiting warming to well below 2°C or 1.5°C, as set forth by the Paris Agreement, will require that global emissions reach net zero to achieve a balance between emissions produced and removed from the atmosphere to stabilize Earth’s climate. The importance of the net zero concept is that it allows for a give-and-take approach that incorporates offsetting to draw down emissions while helping to plan for a more stable future through reductions.
The building industry is uniquely poised to make a substantial impact through pursuing Net Zero Energy Building (NZEB) targets given that 40% of U.S. carbon dioxide emissions come from buildings. In this article, we have identified six primary strategies that real estate organizations can capitalize upon to draw down their carbon emissions and advance the sustainability and resilience of their portfolios.
COVID-19 Emissions Reductions
Global coronavirus shutdowns have created unique conditions in which GHG emissions have drastically reduced (around an 8% decline according to the IEA). A recent article by GRIST reported that emissions during the pandemic fell by an impressive 5.5%. While the temporary drop in carbon emissions from global shutdowns provides hopeful progress, it should not distract us from the systematic changes that are needed to slow the Earth’s warming trend that is resulting in changing climates. The sobering reality is that we need to achieve a larger annual reduction of 7.6% to prevent global warming from exceeding 1.5 – 2°C. The coronavirus crisis may in fact prove to be a catalyst for rapid advancement towards NZEB globally as countries consider green economic recovery plans and build upon momentum for cleaner, greener buildings.
Industry Leaders are Making Net Zero Commitments
The convergence of crises in 2020 should serve as a strong signal to companies to take a proactive approach to the climate dilemma. Small, incremental changes will not result in the shifts required to avoid the catastrophic changes a 3-4°C warmer world would bring. Rather, companies around the globe should actively focus on aggressive actions such as decarbonizing and reviewing the impacts of climate-related issues in their risk management strategies and consider net zero strategies that push for highly energy efficient buildings that are fully powered by renewable energy sources.
This path to net zero is already being paved by international CRE leaders who are making bold commitments. For example, organizations like the Better Buildings Partnership and ULI Greenprint have climate change commitments with the goal of reaching net zero carbon emissions by 2050. Verdani clients, including Jamestown, L.P. and CommonWealth Partners, have also made commitments to achieve net zero carbon emissions by 2050, signaling a promising shift in the industry that must continue if we are to make the critical emission reductions needed during the next 10 years.
Top Strategies to Achieve Net Zero Targets
As our technologies advance, the CRE industry needs to work together to decarbonize the building sector. Below are 6 important steps that we can take to work toward this goal:
Building operations can support the transition to a low-carbon economy in many ways, starting with passive design measures, and efficient design, construction and operations. Once design is formalized, energy efficient equipment should be installed throughout the building wherever possible. When working towards net zero, implementing an Efficient Operating Plan is also critical. Building occupants are typically responsible for most of the energy consumed in buildings and therefore, occupant engagement, education, and sustainable behavior are key to increasing performance. Ongoing commissioning of building systems and tracking building performance data are also important strategies to maximize building efficiency. Not only does this step evaluates a building’s energy performance by continually monitoring data, but it is also an important tool improving efficiency, reducing operating expenses and creating value.
Further reductions in building emissions can be achieved by using carbon-free renewable energy sources. The cost of renewable energy technologies for generation and storage has fallen considerably in recent years, and renewables are increasingly able to compete economically with conventional grid energy, making renewable energy a more attractive option. To utilize renewable energy, it must first be determined whether onsite generation is feasible or if offsite strategies will be needed. If onsite generation is a possibility, different ownership structures can be explored to support on site power including ownership, power purchase agreements and roof leases. The combination of solar and battery storage is also promising and helps to maintain electricity supply at night and reduce peak loads and eliminate peak demand charges.
If onsite energy generation is not feasible, offsite strategies where the power supplied to the building is done so indirectly, can be employed to meet renewable energy goals. Common examples include the execution of virtual power purchase agreements (VPPAs) and the purchase of carbon offsets. With a VPPA, the energy does not flow physically from the project to the buyer but is sold on the wholesale electricity market at a defined location. This financial contract is ideal because it allows the buyer to continue to obtain electricity from their utility company while also making strides towards meeting internal renewable energy goals. In comparison, companies can also purchase carbon credits to help compensate for the balance of emissions. Put simply, one carbon credit is equal to one ton of CO2 being removed from the atmosphere. Carbon offsets can also be used to invest in carbon-free renewable energy projects elsewhere.
Particularly in the context of new building construction, embodied carbon in buildings must be considered if we are going to achieve net zero targets. By definition, embodied carbon encapsulates the sum of all GHG emissions resulting from the mining, harvesting, processing, manufacturing, transportation and installation of building materials. Astonishingly, it is responsible for 11% of global GHG emissions and 28% of global building sector emissions. If the goal is to ultimately phase out fossil fuel emissions, carefully managing embodied carbon is an important part of the puzzle. Industry leaders are working on solutions such as The Embodied Carbon in Construction Calculator (EC3) is an open-access tool that allows benchmarking, assessment, and reductions in embodied carbon, focused on the upfront supply chain emissions of construction materials.
- Power Grid Electrification
The low-carbon economy is inextricably linked with the global transition away from fossil fuels. This energy transition means a significant push for the electrification of both the building and transportation sectors, which will in turn promote grid electrification. Combined with renewable energy generation, electrification provides a much more sustainable option for powering our buildings and communities with the positive outcomes of reduced reliance on fossil fuels and minimized climate risks. Berkeley is the first city in California and in the United States to prohibit natural gas infrastructure in new buildings and requires new construction to have electric infrastructure and we see this as a growing trend. To support a transition towards clean transportation, buildings should also plan to ramp up their EV charging station infrastructure.
A circular economic model is a regenerative structure that resembles natural ecosystems and aims to gradually decouple growth from the consumption of finite resources on the planet. Particularly when considering net zero targets, we must be attentive to our power generation sources and find methods to transition to a closed system. In contrast to our current unsustainable model of using fossil fuels that result in significant atmospheric pollution, a circular economy advocates generating power from renewable energy sources such as solar and wind will create a more sustainable system. Renewable energy sources minimize the negative outputs and wastes from linear and unsustainable fossil fuel power generation sources.
Net zero is both a path to a more sustainable, resilient, and thriving future as well as an important climate risk mitigation tool. As demonstrated by visible shifts in the finance sector, the low-carbon economy is growing with sustainability-linked loans on the rise, significant investment commitments for climate transition projects, and divestment from fossil fuels. Global pressure is increasing for buildings to transition to cleaner energy sources and those buildings that are fully dependent on fossil fuels such as natural gas will face greater transition risks. To meet these challenges, CRE firms should swiftly position themselves for success amidst changing circumstances in order to demonstrate the long-term resilience of their business models to investors. By walking the net zero path, real asset owners and managers will expertly position themselves to meet the demands of a rapidly evolving world and thrive in the face of the challenges we collectively face.
Verdani Partners is an award-winning full-service sustainability and ESG consulting firm with over 800 million SF across 4,300 properties in 11 national and international real estate portfolios with over $650 billion in assets under management. Contact us about net zero strategies, our COVID-19 building re-entry toolkit, your ESG program management, green and healthy building certifications, and GRESB reporting needs. www.verdani.com