The critical role of buildings in energy transition

Buildings account for about a third of total final energy consumption and energy-related emissions globally. They also have very long lifetimes that can impact energy and emissions for decades. But while they are often overlooked, they must play a critical role in the energy transitions. A recent report from the IEA, “Perspectives for the Clean Energy Transitions: The critical role of buildings“, finds there is a risk of a serious lock-in of inefficient buildings as countries without mandatory codes are expected to see an explosion of building construction, half of which by the early 2030s.

The pace and scale of the global clean energy transition is not in line with climate targets. Energy-related CO2 emissions rose again in 2018 by 1.7%. The buildings sector represented 28% of those emissions, two-thirds from rapidly growing electricity use. In fact, since 2000, the rate of electricity demand in buildings increased five-times faster than improvements in the carbon intensity of the power sector.

CO2 emissions need to peak around 2020 and enter a steep decline thereafter. In the Faster Transition Scenario, energy-related emissions drop 75% by 2050. The carbon intensity of the power sector falls by more than 90% and the end-use sectors see a 65% drop, thanks to energy efficiency, renewable energy technologies and shifts to low-carbon electricity. The buildings sector sees the fastest CO2 reduction, falling by an average of 6% per year to one-eighth of current levels by 2050.

Technology can reduce CO2 emissions from buildings while improving comfort and services. In the Faster Transition Scenario, near-zero energy construction and deep energy renovations reduce the sector’s energy needs by nearly 30% to 2050, despite a doubling of global floor area. Energy use is cut further by a doubling in air conditioner efficiency, even as 1.5 billion households gain access to cooling comfort. Heat pumps cut typical energy use for heating by a factor of four or more, while solar thermal delivers carbon-free heat to nearly 3 billion people.

A surge in clean energy investment will ultimately bring savings across the global economy and cut in half the proportion of household income spent on energy. Realising sustainable buildings requires annual capital flows to increase by an average of USD 27 billion over the next decade – a relatively small addition to the USD 4.9 trillion dollars already invested each year in buildings globally. Yet, cumulative household energy spending to 2050 is around USD 5 trillion lower in the Faster Transition Scenario, leading to net savings for consumers, with the average share of household income spent on energy falling from 5% today to around 2.5% by 2050.

Government effort is critical to make sustainable buildings a reality. Immediate action is needed to expand and strengthen mandatory energy policies everywhere, and governments can work together to transfer knowledge and share best practices. Clear policy support for innovation will enable economies of scale and learning rates for industry to deliver solutions with little increase in cost. Policy intervention can also improve access to finance, de-risk clean energy investment and enable market-based instruments that lower the cost of the clean energy transition.

Delaying assertive policy action has major economic implications. Globally, the scale of new buildings likely to be built by 2050 under inadequate energy policies is equivalent to 2.5-times the current building stock in the People’s Republic of China (“China”). Waiting another ten years to act on high-performance buildings construction and renovations would result in more than 2 gigatonnes of additional CO2 emissions from 3.500 million tonnes of oil equivalent of unnecessary energy demand to 2050, increasing global spending on heating and cooling by USD 2.5 trillion.

Source: International Energy Agency (IEA)