Setting carbon emissions reduction targets is nothing new. Many companies, including the real estate sector, have already developed many targets and goals in contribution to limit global warming. Also, the conventional target of limiting warming to 2oC is not enough. As the scientific community always emphasizes, to limit global warming to 1.5oC, achieving net-zero global emissions by mid-century is necessary. Recently, some global corporations including Microsoft, Mercedes-Benz, and Nike have committed to net-zero emissions by 2030. Although there is an increasing trend in setting a net-zero target, it is not a popular option among the corporates, due to the difficulties in achieving it. As a result, the Science-Based Target initiative (SBTi) has published a working paper on the foundations for setting science-based targets for corporates, providing insights and guidance on how to achieve a net-zero goal1. It shall be a good opportunity for the real estate industry to learn more about net-zero targets. Sooner or later, this is inevitable.
Scenario Matters
To understand net-zero targets, first of all, it is important to understand what target setting is. There are two types of targets: directional statements and numerical targets2. A science-based target is a numerical target. Depending on the business nature and the ambition of the target setting, a target can either be in absolute value or intensity-based. After deciding the target type, scenario-analysis would be conducted to study the projection of the targets and their feasibility under different scenarios of climate change. In the SBTi methodology1, two scenarios are used: (1) limiting warming to 1.5oC and (2) staying well below 2oC. Because of different scenario assumptions, the scenario choice that is wished to achieve would largely determine the target to be set.
Net-zero Target
Here comes the net-zero target. To achieve the 1.5oC scenario, the world needs to halve the carbon emissions by 2030 and reach net-zero emissions by mid-century, according to the Intergovernmental Panel on Climate Change (IPCC)3. Net-zero is defined as a point when “anthropogenic emissions of greenhouse gases (GHG) to the atmosphere are balanced by anthropogenic removals over a specified period”. According to the findings from SBTi, two conditions are required to reach net-zero emissions1:
- To achieve a scale of value-chain emissions reduction consistent with the depth of abatement achieved in pathways that limit warming to 1.5oC with no or limited overshoot; and
- To neutralise the impact of any source of residual emissions that remains unfeasible to be eliminated by permanently removing an equivalent amount of atmospheric CO2.
This implies that setting a net-zero target is way beyond the conventional GHG emissions reduction target. Companies are responsible for the emissions that are yet to be reduced, or that are impossible to be eliminated as well.
Target: Net-zero Buildings
In the context of the real estate industry, since buildings cause huge carbon footprints to the global GHG emissions, setting a net-zero target is a stepping stone for a net-zero future. According to the World Green Building Council (WGBC), a net-zero building is defined as a building that is highly energy-efficient and fully powered from on-site or off-site renewable energy sources4. Operating in net-zero can reduce the overall carbon emissions gradually from the buildings. Thus, to push the industry forward in contribution to limiting global warming in 1.5oC, a net-zero target is inevitable. In fact, WGBC has targeted that all new buildings must operate at net-zero carbon by 2030, and 100% of the buildings must be net-zero by 2050, with the strategies of reducing energy demand and generating balance from renewable energy. The WGBC targets to align with SBTi’s first condition to reach net-zero emissions, which provides a good foundation and reference for the real estate industry to set a net-zero target accordingly. For example, Landsec in the UK has already targeted to become the first net-zero carbon commercial building by 2030, which is in line with the UK Green Building Council’s net-zero carbon buildings framework.
Target: Net-zero Hong Kong
The case of Hong Kong illustrates how net-zero targets are important in the real estate sector. Since 60% of the city’s GHG emissions came from the buildings5, if net-zero could be achieved in Hong Kong, this would contribute tremendously to the carbon reduction of the city. Despite this, there are still not many companies that have committed to the SBTi or setting a reduction target. Even for the industry-leading companies in Hong Kong, their targets are set only to keep the warming to 2oC, where none of them has a net-zero target. For a city where buildings are big contributors to the overall GHG emissions, it seems there is room for improvement. Target setting would be a good starting point, especially a net-zero one. Followed by target setting, buildings in Hong Kong could take further actions to reduce emissions, such as retro-commissioning, and incorporating smart and renewable technologies. All these further actions and solutions are built on the premises of setting an ambitious, viable, and meaningful target.
The Second Condition
Recalling the two required conditions to reach net-zero emissions, the above actions could only satisfy the first condition. Companies still need to fulfill the second condition to neutralize the residual emissions, which are the remaining unabated emissions by the time net-zero is reached. For the building sector, this implies that offsetting and reaching negative emissions play a critical role to meet the target. In addition to compensating these residual emissions through offsetting, buildings shall look for innovations to incorporate negative-emission technologies as a neutralization tactic. It is important to note that offsetting and reaching negative emissions shall be complementary to value-chain emissions reduction, but not replacing them.
Challenges Ahead
Achieving net-zero emissions is not easy. However, companies would risk losing billions of dollars in investor capital if they do not adopt. Amid concerns that recent investment could result in stranded assets, some companies are setting emissions targets. For the real estate sector, this would require more than achieving a conventional 2oC target, with more hard work and ambition to reduce emissions. Setting a net-zero target is a crucial step. This would lead to further emissions reduction and neutralization actions, and ultimately, a net-zero future.
References:
1. Science Based Target initiative. (2020). Foundations For Science-Based Net-Zero Target Setting In The Corporate Sector.
2. HKEX. (2020). How To Prepare an ESG Report: A Step-by-Step Guide to ESG Reporting
3. Intergovernmental Panel on Climate Change. (2018). Special Report: Global Warming Of 1.5ºC.
4. World Green Building Council. (2020). What is Net-Zero? Retrieved from https://www.worldgbc.org/advancing-net-zero/what-net-zero
5. World resources Institute. (2020). Towards a better Hong Kong: Pathways to Net Zero Carbon Emissions By 2050.