Understanding the target for zero carbon emissions by 2050 and taking action in the future
These days, we do not have to prove the importance of including ESG (environmental, social, and governance) criteria in Real Estate Companies’ overall business strategy, whether that is to send a positive message to investors or to properly satisfy the expectations of stakeholders, like employees or clients. Furthermore, the real estate sector is responsible for 38% of energy consumption and 29% of greenhouse gas emissions in Europe, so to reach the zero carbon emissions by 2050 target, it is crucial to get ready for action now! But what does that mean in real terms? And what does that mean for Real Estate players?
Evaluating assets’ energy performance: feedback on successive evolutions
We are currently facing an important change in how the industry evaluates assets’ ESG performance. In the past, thresholds for considering a building to be green were fixed and in absolute values, such as schemes like France’s Régulations Thermiques (thermal controls), Belgium’s Energie Prestatie en Binnenklimaat (energy and indoor climate service), and Britain’s Energy Performance Certificates. However, these thresholds pose two significant problems. First, it only allows you to establish a building’s performance at the time of construction or renovation, and, second, it does not take the building type and usage into account.
Yet, a building’s energy consumption, for instance, is directly linked to its type and usage. As a result, it makes no sense to employ the same thresholds for catering venues, retirement homes, or offices. The idea of meeting a threshold had then gradually given way to benchmarking assets, everything considered. Essentially, benchmarking is saying: “Describe me a given building and I will tell you how much similar buildings consume.” While this approach is particularly useful for understanding where to place a building in terms of energy efficiency compared to its peers, it doesn’t tell what is the intrinsic performance of each building.
Faced with this disadvantage, first-of-class Real Estate players are now thinking in terms of our onward trajectories. It is no longer an issue of defining consumption according to type but rather a global objective of encouraging everyone to improve their performance. Consequently, many regulations have been announced and many initiatives are created to lower the environmental footprint of the real estate sector. As an example, in France energy trajectory emerges the “Décret Tertiaire” regulation for tertiary portfolios.
The French “Décret Tertiaire” is French law, which demands that tertiary buildings over 1,000 sqm reduce their energy consumption by 40% by 2030, 50% by 2040, and 60% by 2050 compared with a year that can not be before 2010.
In the UK, another example is Better Buildings Partnership’s initiative that launches a Climate Change Commitment initiative to help Real Estate actors towards a Net Zero Carbon Trajectory within a 2-degree climate change scenario.
Ultimately, for its part, the Net Zero Asset Owner Alliance came into being in response to scientists’ demands to limit global warming by reducing our greenhouse gas emissions as soon as possible and aims to reach zero carbon emissions by 2050. Zero emissions are often confused with carbon offsetting which is making carbon sinks to limit its spread in the atmosphere. This technique alone, however, is far from enough as in reality, the greenest energy is the energy that is not consumed.
Defining strategy at the asset vs at the global level
Fortunately, to reach zero carbon emissions, thinking in terms of the overall portfolio rather than individual assets is recommended. No building can immediately meet zero carbon emissions for two main reasons: existing technical leverages and users acceptability.
From a technical point of view, old buildings, or those with energy-intensive equipment such as data centers will struggle at reducing so significantly their usage to reach zero carbon emission. A data center, for example, cannot easily reach energy neutrality on its own, but it would be possible for another tertiary building to compensate for the overconsumption by being energy positive. The two buildings could form a neutral pair.
Equally, it is particularly important to take into account the acceptability to the occupants. Although possible to decrease air conditioning in many buildings during summer (for example, with a temperature of 25°C instead of the too-common 19°C), it is not feasible to cut this completely during times of high temperatures or at least not immediately without raising significant concerns from occupants.
Therefore, we have to think globally. As a first start and to make it practical, Net Zero Carbon should be met across the whole portfolio. Some buildings, such as old ones or data centers, can continue having a negative footprint while the others will have a positive one through the energy from solar panels or CO2-absorbing living walls.
Defining the scopes of Net Zero Trajectories
There is one further question to consider: how far do these targets go? If French “Décret Tertiaire” requires a 60% decrease in energy consumption by 2050, why not a 70% decrease? Or even 100%? Or even better, demand energy-positive buildings?
Considering what are the technical means available and forecasting what could be the innovative technologies in the future will help trajectories and make choices that allow actors to revise these (already ambitious) targets upwards.
Regarding Net Zero Carbon trajectories, the last but not the least point to consider is the scope of action and performance. Indeed, do we consider scope-1 emissions (direct emissions) and scope-2 (indirect emissions linked to energy consumption) only? Or do we want to take scope-3 emissions (indirect emissions from services linked to the buildings) into account?
In terms of data collection and KPI follow-up, scope-3 emissions can easily make in-charge people head funny. However, gradually widening the scope of actions and performance will tomorrow become a must for the market and a requirement coming from investors. So, the earlier Real Estate companies structure governance to make it happen, the better they will value their portfolios.
As an example of a coherent Net Zero Carbon trajectory framework, the EU has developed the CRREM (Carbon Risk Real Estate Monitor). This research and innovation project defines science-based decarbonizing methods for the commercial and residential real estate sectors to limit global warming to 2°C, or even 1.5°C.
The zero carbon emissions target by 2050 is set and everything is coming together accordingly. Awareness around it becomes now universal and real estate’s key players must get started to reach carbon neutrality by 2050. Ready! Steady! Go!
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