Towards a green economy


of the building envelope (insulation and windows), together with the replacement of heating and air- conditioning systems. The benefits of such an approach are clear, with efficiency improvements of 50-75 per cent documented, and savings of 30 per cent routinely achieved.


Institutional investor offering: For financial institutions, energy-efficiency


projects in buildings are often


associated with the following major hurdles: low financial returns, credit risks, uncertainty, and difficulty in evaluating the added financial value of green buildings. If the projects are small-scale, they do not fit into the traditional financial toolbox. But this situation is also changing. After the recent financial crisis, some long-term institutional investors such as pension funds have started searching for new asset classes to rebalance their portfolios. Green buildings – retrofitted or newly constructed, as well as the manufacturing of related materials and equipment – may become an asset class that can help diversify portfolios and generate steady growth of earnings. Additional discussion on this can be found in the Finance chapter of this report, which includes the case study: “The emergence of responsible property as an asset class”.


Market and industry structure The building market is highly fragmented with many small landlords, corporate property owners managing multiple buildings, usually in local or regional markets, and public housing authorities, which are also mostly local. Coordination between all these stakeholders in the building and construction value chain is uncommon. By example,


decisions taken during the feasibility


assessment and design phases will have a major impact on the level of emissions during the building use or operational phase, but feasibility assessments tend not to account for the life-time running costs of the building since these are not paid for by the property developer (UNEP SBCI 2009b).


Owing to the fragmentation of the building market, it is difficult to make use of the Clean Development Mechanism (CDM) as building projects often do not provide sufficient carbon emission reduction pay-off and stakeholder commitment. In addition, the fragmentation also makes it difficult to comply with baselines and additionality requirements. Other obstacles include the CDM methodologies and procedures (see below).


Another aspect of the fragmentation is reflected in the differing interests of individual households and utilities. While householders may be intrigued by the prospect of greening their homes and reaping energy savings and health benefits, utilities face a potential reduction in their sales revenue and therefore may have little interest in supporting investment in green buildings.


362 4.2 Policy instruments and tools


Following the analysis of UNEP SBCI (2007b), policy instruments and tools for greening buildings can be classified as follows:


■ Regulatory and control mechanisms, which cover


• Regulatory-normative mechanisms such as standards and


• Regulatory-informative mechanisms when the end-user is informed but not obliged to follow the advice (e.g. labelling);


■ Economic or market-based instruments; ■ Fiscal instruments and incentives; and ■ Information and voluntary action.


These categories of instruments and tools are analysed below in terms of their use, efficiency and likely effectiveness in different contexts.


Regulatory and control mechanisms Regulatory and control mechanisms have to be monitored, evaluated and updated regularly to remain in touch with technological developments and market trends. They are easier to enforce with respect to new rather than existing buildings. Examples of such measures


are appliance standards, building


procurement regulations, energy-efficiency obligations or quotas, mandatory audit programmes and utility demand-side management programmes. Examples of their cost-effectiveness expressed in US$/tCO2


of the cases are the following (UNEP SBCI 2007b): ■ Appliance standards: – US$ 65/tCO2


US$ 194/tCO2 in 2020 (EU);


■ Building codes: from – US$ 189/tCO2 for end-users (Netherlands);


to – US$ 5/tCO2


■ Procurement regulations: US$ 1 million in purchases saves US$ 726,000 per year (Mexico); ■ Energy Efficiency Obligations: – US$ 139/tCO2


(UK);


■ Mandatory certification and labelling: – US$ 30/tCO2 (Australia); and


■ Utility Demand-side Management Programmes: – US$ 35/tCO2


(USA), – US$ 255/tCO2 (EU).


Complications in the use of these regulatory instruments relate mainly to lack of enforcement and the rebound effect, where the end-user buys more of or uses the more efficient technology more extensively than before and


codes,


for most in 2020 (USA), –


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