Massive wildfires in California, the worst flooding in China since the beginning of this new millennium, and the second most active Atlantic hurricane season on record – this is a snapshot of what a 1 °C warmer world looks like. Such extreme weather events have become more unpredictable in intensity and frequency year after year, and they are expected to become more devastating as the world gets warmer if we do not take immediate actions to drastically reduce greenhouse gas (GHG) emissions.
IPCC’s Special Report on Global Warming of 1.5 °C (SR15) makes it clear that it’s not too late to prevent the worst impacts of climate change, but there is no time to waste. To have a fair chance of limiting global warming to 1.5 °C, we need to halve global CO2 emissions by 2030, achieve net-zero CO2 emission by 2050, and achieve net-zero on all GHG emissions by mid-2060s.
In addition to rapid and deep reductions in gross CO2 emissions (i.e. decarbonization), pathways outlined in the IPCC Special Report also require ramping up of CO2 removals from the atmosphere. Some GHG emissions are difficult or impossible to be eliminated. In order to achieve net-zero emissions of all GHGs, the rate of CO2 removals has to exceed the rate of CO2 emissions past 2050 to offset residual non-CO2 emissions.
From a real estate industry perspective, achieving a net-zero global target requires drastic transformations in how we design, construct, and operate buildings. Currently, buildings consume 32% of the global energy supply. With relatively longer life cycles measured in decades, developing zero energy and zero emission new buildings is especially important. Studies show that in order to achieve an 80-90% reduction in building energy consumption by 2050, new constructions need to be near-zero energy by 2020. Further investments are also needed to retrofit existing buildings to the same level of energy efficiency.
Since the publication of the Special Report, more than 20 countries have adopted net-zero targets. Some of these targets are published in policy documents, while others have been written into laws. With Europe leading the charge towards net-zero targets, three Asian countries have made it to the list. Bhutan, which has been carbon neutral since the early 1990s, pledged to maintain net-zero emissions. Perhaps more meaningful examples come from Singapore and Japan. With much larger economies than Bhutan, both countries aim to reach net-zero GHG emissions in the second half of this century. Collectively, however, these net-zero targets only cover about 10% of current global GHG emissions. Corporate commitments to net-zero emissions to support and supplement governmental actions are critically important.
Initiatives launched by industry associations, such as the World Green Building Council’s Net-zero Carbon Buildings Commitments, have garnered meaningful support among developers and real estate investors. Adoption in Asia, however, has been relatively slow, especially in the rapidly growing markets of China, India, and Indonesia. To date, there is only one Asian developer signatory from the Philippines.
In Singapore, efforts towards decarbonizing the real estate industry are mostly led by the public sector. As the national regulator, the Building and Construction Authority (BCA) piloted Southeast Asia’s first Zero Energy Building (ZEB) in 2009, and subsequently introduced Super Low Energy (SLE) and Zero Energy categories for the national Green Mark building certification scheme. Since then, the number of net-zero energy buildings in Singapore has grown to include the newly constructed SDE4 at the National University of Singapore and seven retrofitted buildings on Nanyang Technological University’s (NTU) campus. In October 2019, Singaporean utility provider SP Group launched the first net-zero emission building in Southeast Asia. Powered entirely by a solar and hydrogen energy system, the zero emission building is disconnected from the national electricity grid and generates zero GHG emissions during its operations.
So far, most net-zero energy and carbon building programs, including World Green Building Council’s Net-zero Carbon Buildings Commitments, focus on eliminating Scope 1 and 2 GHG emissions from the operations. In the construction industry, GHG emissions embodied in the construction materials are important emission sources as well, especially in fast-growing Asia markets. The production of many construction materials, such as cement, steel, and glass, has traditionally been a carbon-intensive process. However, some manufacturers are committed to change this.
Cement producer Heidelberg Cement and steel producer ThyssenKrupp have both committed to achieve net-zero emission in their production by 2050, partially through carbon capture, utilization and storage (CCUS). Beyond the production of building materials, the world’s fifth-largest construction company Skanska also committed to a net-zero emission target throughout its value chain by 2045. Other alternative solutions, such as the use of bio-materials, have been piloted in Singapore. In 2017, NTU launched the first large-scale building in Southeast Asia constructed primarily with mass engineered timber.
As a natural extension of setting science-based emission reduction targets, the Science-Based Targets Initiative (SBTi) published a set of recommendations earlier this year to guide corporates in setting meaningful and effective net-zero targets. Among other things, SBTi emphasizes that corporate net-zero targets should include all value chain emissions (Scope 1, 2, and 3). Reductions and eliminations of GHG emission sources within the corporate value chain (abatements) should be prioritized over offset measures that either reduce emissions outside the corporate value chain (compensation measures) or remove CO2 from the atmosphere through bio-sequestration and carbon capture, utilization, and storage technologies (neutralization measures). Corporate net-zero targets should also include separate strategies and targets for abatements, compensations, and neutralizations.
With pilot projects proving feasibility of new technologies and clearer guidance from SBTi on corporate net-zero target setting, we can expect growing interest in net-zero targets among real estate developers and investors. These efforts could be further supported by the growing market of green financing. In Singapore market, green financing in the real estate sector has grown more than seven-fold in the past 3 years. Combined with effective net-zero targets, targeted green financing schemes could catalyze a transformation in Asia’s real estate and building markets.
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