3.1 Investment needs The analysis in this chapter is predicated on climate change and GHG emissions
being an overriding
concern for the building sector. Related to this are key environmental challenges such as water scarcity, land use, waste and sanitation. Climate change both impacts and is impacted by these. The social and economic dimensions are addressed in terms of how a more efficient use of resources in the building sector and a reduction of its GHG emissions can contribute to energy savings, health and productivity gains, as well as job creation. Overall, green building investment needs are primarily driven by climate and resource scarcity or efficiency imperatives.
Buildings currently account for 40 per cent of energy use in most countries (IEA 2010b), with projections that demand in this sector will increase by 60 per cent by 2050 (IEA and OECD 2010). This is larger than either the transportation or industrial sector. The IEA and OECD (2010) estimate that building sector carbon emissions will need to be reduced from the 15.2 Gt per year currently projected for 2050 to approximately 2.6 Gt per year as part of a strategy to successfully address climate change.8
Country/region OECD N. America
OECD Europe OECD Pacific Japan
Transition Economies Developing Asia China India
Latin America Middle East Africa
WORLD *Relative to business-as-usual
Table 3: The economics of global building transformation Source: Adapted from Houser (2009)
Greening the global building stock will require considerable investment in new technologies and sustainable building materials as well as in design and engineering expertise. This will increase the upfront cost of building construction relative to continuing with business-as-usual. The IEA and OECD (2010) estimate that a 12.6 Gt reduction by 2050 could be achieved with an average investment of US$ 308 billion per year between 2010 and 2050.9
estimate of US$ 1 trillion per year on average between 2010 and 2050 was obtained in a separate study by the Peterson Institute for International Economics (Houser
Technology Perspectives 2010 (IEA and OECD 2010) revises earlier estimates that CO2
8. This reduction of 12.6 Gt CO2 emissions from buildings would need to be reduced by 8.2 Gt from
a projected 20.1 Gt in 2050 to 11.9 Gt (IEA 2008). The earlier estimates formed a reference point for other analysis, including by the Peterson Institute for International Economics (Houser 2009). The 2010 estimates also include reductions achieved by fuel-switching and electricity de-carbonisation, whereas the earlier estimates were limited to efficiency measures.
9. The IEA and OECD (2010) modelled a scenario that estimates a total investment of US$ 12.3 trillion required over this 40-year period, consisting of US$ 7.9 trillion in the residential sector, and US$ 4.4 trillion in the services sector. IEA’s estimates are all in US$ 2007.
10. Net present value is calculated by subtracting the additional up-front operation and maintenance cost required for the more-efficient investment from the expected energy cost saving over the lifetime of the more-efficient investment. Energy cost savings are discounted by 6 per cent annually. NPV is then divided by the cumulative change in emissions resulting from the investment over the course of its life-time. This is known as abatement cost and expressed in US dollars per tonne of CO2