04 Buildings
04 Buildings

Share of global emissions (IPCC)

Fresh ideas needed

Among the more vexing problems of the energy transition is the task of eliminating emissions from the world’s buildings. Because they burn fuel for heat and hot water, buildings are directly responsible for 6 percent of global emissions. But they also consume a substantial share of the world’s electricity, making them indirectly responsible for a much larger share of emissions.

Figure 16: Direct building emissions, plus emissions from power and heat used in buildings

Source: IPCC

The technological path to eliminating the direct emissions is clear: all the energy services in buildings need to be converted to electricity, with heating and (where necessary) cooling provided by devices called heat pumps. These are machines that heat or cool a building not by generating heat but by moving it around, in the same way a refrigerator does but at a larger scale. They can be 300 to 400 percent efficient, meaning they can inject an amount of heat energy into a building three to four times larger than the electricity they use to do so. To further minimise electricity usage and the cost of operating these units, buildings need to be tightly insulated, with air gaps sealed, and draughty windows may need to be replaced.

Heat pump sales are growing but are far below where the International Energy Agency calculates they need to be to be in line with a 1.5º pathway.

If the technological path is clear, the legal path is anything but. Ownership of buildings is fragmented, and any public policy designed to speed up the transition of buildings must grapple with this complexity. To cite a simple example, the owner of an apartment building has the right to decide what kind of appliances it will have and what efficiency standards they will meet, but it is the tenants who must pay the energy bills. This gives the owner no incentive to fix up the building or install efficient appliances, while the tenant with a direct financial stake in those decisions has little or no ability to influence them — a problem known as the “split incentive”. Similar problems apply in commercial buildings, but they are afflicted by another difficulty: serious expertise may be required to run the complex air-handling systems in larger buildings, and it is often lost as buildings age and change hands. Research has found that many commercial buildings operate far below their maximum potential efficiency.

Decades of work on these problems has led to limited progress. As a result, many experts have recently concluded that the only way to achieve society’s goals will be to impose legally enforceable mandates on building-energy use. In the past few years, such mandates have begun moving onto the statute books, but there is a long way to go to achieve universal coverage of the building stock.

An obvious and immediate task is stop constructing new buildings that are going to need fixing in a few years — that is, to adjust the building codes and related requirements now, so that newly constructed buildings are fit for purpose in 2050. Dozens of towns in California, and a handful elsewhere in the United States, have banned the installation of new gas hook-ups in buildings, requiring that they be all-electric when constructed. California also requires solar panels on all new homes, to offset as much of the electricity use as possible. In many jurisdictions around the world, however, building codes are woefully out of date, and need to be revised to incorporate the latest standards in energy efficiency.

A worker standing on top of a building manoeuvres into place a large panel containing thermal insulation and advanced windows and doors.

A worker manoeuvres into place a panel containing thermal insulation and advanced windows and doors, as old buildings in France are renovated to be more energy-efficient. Image: Fabrice Singevin/Energiesprong International

The International Energy Agency has recommended that no gas boilers or furnaces be installed in newly constructed homes after 2025, and several European governments have announced policies consistent with that ambition. But getting gas out of existing homes is an entirely different matter — one that governments have yet to tackle with any courage. The worldwide renovation rate for buildings is in the order of 1 percent a year; the International Energy Agency calculates that the rate needs to jump to 2.5 percent to meet climate goals.1 At the rate the United Kingdom, to cite one country, is installing heat pumps in old homes, the job will be done in 600 years.2 This sluggish renovation of existing buildings must be tackled with creative public policy.

Intervene at time of sale?

One option is to impose requirements that apply whenever a building is sold. The law may decree, for instance, that part of the sales proceeds be set aside for use by the new owner to bring a building up to standard. Direct subsidies for the installation of heat pumps and insulation are another intervention, though these would need to be sizeable to motivate building owners to action. We are likely to get a test of how well such a policy works in the United States, under the new climate law adopted this summer in that country. Homeowners who undertake an extensive package of efficiency improvements, including installation of a heat pump, may be able to claim tax credits approaching $5,000. That is 25 times the money that was available to homeowners under previous legislation.

A worker installs thick insulation sections on the inside walls of a building.

A new home gets high-quality insulation to save energy. Image: Adobe

A new type of law is being adopted by forward-looking jurisdictions in the United States. Several cities — including Washington, D.C. and New York City — have established “building energy performance standards”, essentially requiring year-by-year reductions in the energy use of buildings. For now, the laws apply to large offices and other commercial buildings, and should create an expanded market for renovating buildings and running them properly. The European Union has adopted a scheme in which larger buildings are assigned a letter grade according to how much energy they use, but these ratings are widely perceived as inaccurate, and it is not clear whether this name-and-shame policy has stirred any increase in renovations. The EU is beginning to consider mandates, but only for the worst-performing buildings.

The building-energy problem has become exceedingly urgent, for the simple reason that so little progress has been made in solving it. We hope that governments around the world are closely watching the policy experiments being undertaken in the leading jurisdictions, and stand ready to copy the ones that work. It can be done: a decade ago, governments made a strong push to get building owners and consumers to adopt new light bulbs based on light-emitting diodes, or LEDs. The result was a dramatic scale-up in the market and an equally dramatic march down the price curve for LED technology. That success shows what can be done with creative public policy when governments really try.

Price shown is for cool white LEDs.

One additional problem relating to buildings needs to be tackled with haste. A rising proportion of their energy use comes from “plug loads” — the devices that tenants bring with them into buildings. The advent of always-on, internet-connected devices has created a huge vampire load on the electrical grid. Some progress has been made in requiring these devices to be as efficient as possible, and governments around the world need to join forces to keep toughening up those rules. In addition, far more effort needs to be made to give buildings and the devices in them the ability to respond to conditions on the electrical grid. When the grid is short of power, smart devices could power themselves down, or could be set to turn off lights, turn thermostats up or down, or tell electric cars the best time to charge. Some research has found that electrical demand at peak times could be suppressed by as much as 20 percent through such methods, giving the grid a far greater ability to balance out fluctuations from wind or solar power.3 But the necessary rules and technologies to make this happen at scale are still in the early stages; accelerating them is among the most imperative tasks for the years ahead.

2026–2030 figures represent the annual investment required under IEA’s Net Zero Scenario.