Results - Buildings

Here we analyse the potential of global climate governance to promote the decarbonisation of this sector. Global governance and cooperation in the buildings sector is generally difficult given its mostly localised supply chains, lack of exposure to international trade, and highly differentiated needs in relation to geography and climate. Several existing institutions could in theory help to close the governance gaps identified but in practice all have limitations, such as the diverging interests among the parties to the UNFCCC and the Paris Agreement and the need to achieve consensus. The best way forward may therefore be a coalition of ambitious countries and other others, such as a “Breakthrough” on the buildings sector, that draws on the strengths of existing institutions. 

Our article “Global Climate Governance for the Decarbonisation of the Buildings Sector (Deliverable 6.1c)” is based on the perspective of seeing climate change mitigation as a transformation problem and aims to contribute to the understanding of how global climate governance can contribute to the transformation of the buildings sector. To this end, this article proceeds in four steps. First, it identifies key strategies and instruments for the decarbonisation of the buildings sector as well as challenges and barriers that impede the transformation of the sector. Second, it analyses how international institutions could in theory assist with overcoming these barriers and mobilising opportunities (“governance potential”). Third, it assesses to what extent existing intergovernmental and transnational institutions that have relevance for the decarbonisation of the buildings sector have so far in practice delivered on the identified governance potential. On this basis, it discusses how global governance could be enhanced.

Buildings are one of the main emitting sectors but political attention to the need to decarbonise this sector has been low. Nationally, most countries lack strong mitigation policies and/or enforcement. Internationally, the sector was not even mentioned in recent outcomes of key institutions such as the G7 or the MEF. Correspondingly, the potential of global governance has been exploited only to a limited extent, though with some variation.

Very many institutions are active on the provision of knowledge and learning. Regarding the buildings sector as a whole, however, there is no strong government-backed signal on the need to decarbonise; various calls for action were supported only by a handful of governments. There also is little rule-setting. There is no requirement for a sectoral breakdown of NDCs and LTSs. There has been some movement towards coordinating standards for air conditioners, but efforts to organise buyers’ or sellers’ clubs for cooling technology were not successful. Correspondingly, the potential to provide transparency and accountability of countries’ actions has been exploited only to a very low extent. While the UNFCCC and the PA have the potential to provide for transparency of parties’ actions in the buildings sector, this potential is not exploited as parties’ performance is not discussed at sector level. More generally, NDC achievement is not mandatory and the PA’s transparency mechanisms have several weaknesses. Regarding means of implementation, while substantial resources seem to be provided, there is a lack of data on actual needs. IPCC and IEA consider that investments need to grow by a factor of 3-4 by 2030 to get onto a Paris-compatible trajectory.

Several already existing institutions could in theory help to close the governance gaps identified. In practice, however, the near-term potential is probably limited. The UNFCCC has the authority to act across all five governance functions, but the diverging interests of its broad membership and the need to achieve consensus have made it difficult to agree on strong decisions. The IEA has done much work to promote energy efficiency as “first fuel” and has strong competence to contribute to transparency, but has no mandate to create rules and standards. The G20 will probably be blocked by the Ukraine war for the foreseeable future and the G7 did not feature buildings in its most recent leaders’ communiqué.

The best way forward may therefore be a coalition of ambitious countries and other others, such as a “Breakthrough” on the buildings sector, that draws on the strengths of existing institutions. France and Morocco are currently leading efforts to launch one. To add value to the existing institutional landscape, such a “Breakthrough” should include an ambitious global target or roadmap as well ambitious individual targets and pledges to increase means of implementation for developing countries. The GlobalABC and the IEA could track implementation, as the IEA is already doing case with the existing Glasgow Breakthroughs. Successive COP presidencies could use the annual COP sessions as platform and occasion to demand demonstration of clear progress. In addition, if country members included their Breakthrough pledges in their NDCs, they would thereby be subject to the transparency mechanisms of the Paris Agreement. However, the success of such as “Breakthrough” is far from assured given that so far all calls for building decarbonisation commitments by governments gained only a handful of signatories. A fallback option would be to strengthen the GlobalABC in terms of its membership and administrative capacity.

Read: Global Climate Governance for the Decarbonisation of the Buildings Sector

Buildings are responsible for around 55% of global electricity use, which is projected to rise further, given the increasing access to space cooling and heat pump application (UNEP, 2020). Beyond the operation of the buildings, their construction causes massive indirect emissions arising from construction and manufacture, which are responsible for 10% of global energy-related CO2 emissions (IEA, 2021). However, the sector decarbonisation has been slow to move.

Here we first synthesise existing literature to identify key barriers for three building mitigation strategies on a global scale: improving building envelope performance, transitioning to low-carbon heating, cooling, and cooking systems, and adopting energy-efficient appliances and lighting. We then examine how various policy instruments, including governance and planning measures, regulatory frameworks, economic incentives, market-based approaches, and capacity-building initiatives, address these barriers.

As a second step, the research analysed the same categories of key barriers in ten selected countries. The identified barriers align closely with the global findings, although certain barriers are specific to particular countries. The report maps and compares policy measures implemented by each country to address these barriers. Most countries employ a mix of policies, with the European Union (EU) demonstrating the most comprehensive approach, followed by China and the United States.

To achieve the Paris Agreement target, the building sector can be decarbonised through the following five interlinked strategies:

1. Improving building envelope performance (e.g., thermal insulation, optimising solar gains, solar shading).
2. Shifting from fossil-fuel-based and low-efficient to low carbon heating, cooling, and cooking.
3. Using energy efficient appliances and lighting.
4. Minimising embodied carbon of building materials.
5. Applying sufficiency measures (avoiding the demand of energy and materials).

Political factors represent a crucial barrier. There is often an absence of clear policy signals and incentives for different actors on the value chain to be engaged and invest in building energy efficiency and it is challenging for many governments to develop an ambitious and comprehensive long-term roadmap to outline the building sector decarbonisation pathway (Gaur et al., 2021).

Apart from political factors, there are economic and financial barriers. Energy efficient building envelops, heat pumps and super-efficient ACs, and clean cooking are often associated with higher upfront costs and longer payback time than conventional ones that has been a significant barrier to their adoption. The cost barrier is aggravated by split incentives, where the investors, who own the tenant-occupied buildings, do not financially benefit from their investment in, e.g. energy retrofits and energy systems such as heat pumps (Höfele & Thomas, 2011).

Another key barrier is due to the lack of capacity, i.e., the knowledge and skills required on the supplier chain, such as designing (in particular, identifying the best technology mix) and construction of high energy-performance buildings.

Building decarbonisation also faces technical barriers, ranging from infrastructure (network) and building characteristics (e.g., structure, orientation) to technical processes. For example, a critical barrier to market penetration of decentralised heat pumps is the incumbent heating infrastructure (e.g., the gas grid), which is associated with significant sunk costs invested by gas utility companies (Lowes et al., 2022).

Social and cultural factors also have a significant impact. In North America and Europe, in combination with information availability, consumers’ attitudes and values were identified as one of the most critical factors in improving the building envelope (Mata et al., 2021). Besides, building occupants’ behaviour can limit the GHG reduction potentials of building energy performance improvement, e.g., through increasing ownership and use of appliances (IEA, 2019) and demand for more living space (Bierwirth & Thomas, 2015).

It has been increasingly acknowledged that building mitigation measures have multiple benefits (co-benefits), which are aligned with SDGs. The analysis showed the above-mentioned mitigation strategies could direct be linked to 12 SDGs, which is primarily based on the review in Pathak et al. (2022): SDG1: No poverty, SDG2: Zero Hunger, SDG3: Good health and wellbeing, SDG4: Quality education, SDG 5: Gender equality, SDG 6: Clean water and sanitation, SDG 7: Affordable and clean energy, SDG 8: Decent work and economic growth, SDG 10: Reduce inequality within and among countries, SDG 11: Sustainable cities and communities, SDG12: Responsible consumption and production, SDG13: Climate action. The co-benefits could potentially enable mitigation in the building sector. On the other hand, building decarbonisation could also potentially create negative impacts on SDGs, e.g., distributional effects and inequality among different income groups, conflicting land use for food production.

Regulatory instruments are the most popular (see table below). All countries have building energy codes and MEPS for appliances and equipment. However, for building energy codes, except for China, the US, and the EU, the compliance rate is low in most countries. Besides, although all countries have MEPS, the numbers of appliances with MEPS vary significantly across the countries. Three countries (the EU, China, and Japan) out of six countries with significant heating demand have policies to ban fossil fuel boilers in buildings.

Apart from regulations, information instruments such as appliance labelling, which is often implemented with MEPS, are found in all countries, showing similar variations as the MEPS. Another common instrument is building information disclosure, except in Vietnam and Indonesia. Most countries have implemented at least some economic instruments, among which subsidies/grants are most common. Furthermore, most countries have implemented government lead-by-example through regulations, national strategies, or projects.

While the above-mentioned regulatory, information, economic, and lead-by-example instruments have been widely implemented, several policy instruments have only been applied in a few countries: policy roadmaps, phasing out fossil fuel subsidies, energy efficiency obligations (EEOs), ESCOs policy package, One-stop shops (OSS), RD&D policies, carbon pricing for heating fuel.

Based on the results of the study, recommendations include the following:

• develop policy roadmaps with PA-aligned targets and clear timelines, which provide a reliable planning framework for all market actors and reduce the risk for investors;
• phase out fossil fuel subsidies, which create structural barriers to decarbonising energy efficiency;
• develop a comprehensive policy package to promote ESCOs development, which could address upfront financing and technological barriers for building decarbonisation;
• explore innovative mechanisms such as One-stop shops, which, e.g., aggregate small-size building projects and support stakeholders to access finance;
• support targeted advice (e.g., subsidised), which could help the building owners to identify concrete energy saving opportunities and potentially trigger high and cost-effective investment in building decarbonisation.

Read full report: Barriers and Policy analysis: Building Decarbonisation