The carbdown is on! Which net zero scheme is the right one for you?

Wake-up call

The carbon clock is ticking…faster than most people think. The Mercator Research Institute on Global Commons and Climate Change (MCC) has determined that the climate goal should not be 2050, as defined in the Paris Agreement, but now 2043 because the CO2 budget for staying below the crucial 1.5°C threshold will be exhausted in around seven years. Does this make you feel uneasy? It should! 

In response to the Paris Agreement, the EU presented the Green Deal on December 11, 2019, with the goal of becoming the first climate-neutral continent by 2050.  Among other things, this roadmap envisages promoting decarbonisation of the energy sector and increasing the energy efficiency of buildings.

Why is decarbonisation important and how does it work? 

In its EU taxonomy report, the Technical Expert Group (TEG) on Sustainable Finance has shown that buildings account for around 40% of energy consumption and around 36% of CO2 emissions in the EU. 

At the same time, CO2 emissions from building material production and processing in building construction are increasing. 

This is a development in the wrong direction!

This is specifically outlined in the EU taxonomy’s technical appendix, which states that, taking into account the goal of operating climate-neutral buildings in Europe by 2050, new buildings have to be planned and built climate-neutrally between 2021 and 2050. The earlier this is implemented, the sooner the 2050 target can realistically be met. On the one hand, this means that efficiency-enhancing reconstructions must be carried out for a large part of the building stock and on the other, a paradigm shift in planning needs to be accelerated. The process should begin with the investors, who should focus on lower-risk project developments to get the ball rolling.     

The EU taxonomy was developed to better manage this process; it presents four basic principles relevant for CO2 reduction:

1. Construction of new buildings: to lower primary energy demand by 20% of that specified in national building regulations

2. Reconstruction and renovation of existing buildings: In accordance with the Energy Performance of Buildings Directive (EPBD) or 30% less primary energy demand than in the baseline state

3. Individual measures and services

4. Purchase and ownership: Buildings constructed after 2021 must meet the standard stated under “1. Construction of new buildings”. Buildings constructed before 2021 must be in the top 15% of the national building stock in terms of their primary energy demand.

Today, only 1% of buildings meet the requirements of a net zero carbon building”.   

The World Resources Institute (WRI) points out that the political framework conditions set by cities and municipalities play an important role in achieving the goals of the Paris Agreement. Clear regulations lead to a common path towards climate neutrality and to greater acceptance among investors, owners and users.

The resulting development concept for districts and communities leads to a better cost-benefit ratio: Nearby renewable energies can be better planned and used to generate electricity where it is needed without having to travel long distances. Likewise, building networks for better load distribution are an important contribution that must be regulated by law to make it attractive for investors and project developers alike.

Differences to consider at building level according to WRI

Best of five – Finding the best scheme to achieve your net zero goal

Since building construction and operation account for around 40% of global CO2 emissions, various initiatives have been launched in recent years to advance the climate goals set at the Paris Climate Change Conference in 2015. We would like to give an overview and present our opinion on the most important schemes. After all, the earlier a suitable strategy is selected, the sooner the goal of climate neutrality of buildings can be achieved.

General consensus exists around the following steps that make up a successful climate protection roadmap:

1. Define CO2 footprint

2. Increase energy efficiency

3. Renewable energy supply

4. Generation of renewable energies on-site

5. Generation of renewable energies off-site

6. Use of offsetting programmes as a last resort

Below, we present and compare selected schemes to support the carbdown of your portfolio:  

Net Zero Commitment (World Green Building Council)

Source: World Green Building Council.

In 2017, the World Green Building Council (WorldGBC) launched the “Advancing Net Zero” initiative to help advance CO2 emissions reduction in the building sector. The aim is to ensure that all new construction projects are CO2-neutral by 2030, while advocating for all existing buildings to be CO2-neutral in operation by 2050. 

All project signatories commit to publishing their performance data no later than two years after joining the commitment. To this end, the WorldGBC provides a template to help with consistent data collection for each building. In addition, a decarbonisation plan with specific goals and information on the fund’s progress is requested, which can be derived from the building-related data, among other things.

Climate Positive (DGNB e.V.)

Source: DGNB e.V.

The German Sustainable Building Council (DGNB) has launched “Climate Positive”, an award in recognition of buildings that play an important role in CO2 emissions reduction. Specifically, the award honours buildings in operation that demonstrate a balanced, or ideally, negative annual carbon footprint. Building performance data is collected and evaluated for a period of one year, on the basis of which absolute greenhouse gas emissions are calculated.

LEED® Zero (U.S. Green Building Council)

Source: U.S. Green Building Council.

In addition to its LEED® certification system, the U.S. Green Building Council (USGBC) has introduced the LEED® Zero certification scheme for new and existing buildings. Buildings that have already been certified in accordance with LEED® can qualify for verification of achieving net zero performance.  

Similar to existing certifications, the issued LEED® Zero certification is valid for three years and requires the provision of 12 months of performance data. Data is collected for the categories LEED® Zero Carbon Emissions, LEED® Zero Energy Use, LEED® Zero Water Use and LEED® Zero Waste. LEED® Zero Carbon Emissions focuses on the building’s carbon footprint, which is calculated on the basis of carbon emissions produced and carbon emissions avoided or offset. 

Zero Carbon Certification (International Living Future Institute)

Source: International Living Future Institute.

The International Living Future Institute‘s (ILFI) Zero Carbon Certification claims to be the first worldwide Zero Carbon third-party certified standard requiring projects to fully decarbonise. Buildings must demonstrate net zero carbon operations based on a one-year performance period. 

Net Zero Operational Carbon (London Energy Transformation Initiative)

Source: London Energy Transformation Initiative

In collaboration with the UK Green Building Council and the Better Buildings Partnership, the London Energy Transformation Initiative (LETI) provides Ten Key Requirements for New Buildings to showcase how new buildings can operate at net zero by 2030.  

To date, no certified Net Zero Operational Carbon projects exist. 

The minimum requirement is for buildings to achieve net zero carbon balance; however, should this not be attainable through required measures such as on-site renewable energy generation or investments into additional off-site renewable energy capacity, then a 15 year renewable energy power purchase agreement (PPA) should be made.  

So far, so good – which certified net zero projects are leading the way?  

Below, we introduce you to a few exemplary projects that have been certified for their net zero carbon performance and innovative efficiency solutions: 

1: Freiburg City Hall is the largest plus-energy-building in Europe, certified in accordance with the DGNB Climate Positive certification. 

2: The first building project certified in accordance with the LEED Zero (LEED Zero Energy) scheme are the “Entegrity Headquarters” in the U.S. 

Source: USGBC

3: The first net zero carbon building certified under the ILFI Zero Carbon Standard is the Google office building located at Pancras Square in London.

Source: Google

4: The 21,000m² net zero district project Brucklyn with residential, office and leisure facilities is currently under completion in the south of Erlangen, Germany, and will come into operation in 2020.

Interconnected energy system with closely integrated sub-systems of heating, cooling, and electricity. Source: Jost Unternehmensgruppe via Union Investment Real Estate.

Can we achieve our net zero goals? 

First and foremost, every investor, fund manager and asset manager must recognise and understand the urgency of the situation and the risk that arises from not taking immediate action. The European Union-funded project Carbon Risk Real Estate Monitor (CRREM) has illustrated this risk and viable approaches stakeholders can take in its Stranded Asset analysis.

To support our clients in their decision-making, EnviroSustain offers individual decarbonisation assessments for individual funds as well as assets. These assessments address and discuss necessary steps and measures for increasing energy efficiency, the use of on-site and off-site renewable energies and, if necessary, CO2 compensation measures. The resulting climate protection roadmap can be used as basis for setting priorities and budget planning.

If we are to reach our net zero goals, existing buildings should immediately undergo such an assessment. Further, it is recommended to consider certifying the project in accordance with an established net zero certification system or under a climate protection initiative (as introduced earlier). 

Regarding new building projects, the goals of climate-neutral construction and operation must be taken into account with immediate effect. When purchasing project developments, an ESG due diligence is advisable in order to better assess the risks and potentials with regard to the ESG strategy of the fund prior to the purchase.

All in all, a feasible task, but its success depends largely on those who have to make the right decisions now.

Oliver Bach

Project Director at ES Envirosustain

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