Much of the current discussion around net zero carbon tends to focus on new buildings. It involves questions of how to lower embodied carbon, incorporate new materials, integrate on-site renewables and so on. These issues are certainly important and need answers, but they can also obscure the importance of existing buildings.
New buildings represent a tiny proportion of the overall built environment and so existing buildings represent the best opportunity for reducing emissions on a substantial scale. That is why the first net zero framework (developed by WorldGBC) focused solely on existing buildings in operation, to tackle the main source of carbon emissions within the built environment.
In this article, we look at market and regulatory drivers of change and highlight strategies current owners and occupiers can consider. We then review the pitfalls of focusing on net zero outcomes for existing buildings without concurrent improvements in energy efficiency. Finally, we offer some thoughts on new building vs existing buildings and achieving net zero carbon – one of the biggest debates currently consuming our industry.
For many companies, buildings are a primary source – maybe THE primary source – for their carbon profile. Occupiers, particularly those with net zero carbon commitments, want to know what can be done to reduce emissions (management, procurement of renewable energy, etc). The dramatic rise in the number of companies establishing net zero carbon commitments has reinforced the focus on existing buildings, primarily because the carbon that these companies must report is operational.
In the last few years, occupiers have become much more adept at understanding how buildings perform and what this means for their own businesses. The rise of ESG, carbon reporting and industry tools have all focused attention squarely on carbon emissions at the building level. 10 years ago, it was virtually impossible to know energy use and carbon emissions from a building in the UK. Today, for many companies, that data is becoming essential to decision-making and a critical part of due diligence.
What this means is that occupiers of existing buildings are the largest and possibly most influential stakeholder in pushing net zero carbon. Whether it is through best practice (like integrated reporting) or regulation (such as Streamlined Energy and Carbon Reporting), the push for net zero carbon is coming largely from occupiers in existing buildings.
In response to this, owners now face more risks as potential tenants have higher expectations and more information at hand. Regulation is reinforcing this trend, as we are witnessing a global trend of governments requiring owners to report whole building energy usage and carbon emissions. The best-known example of this is Local Law 97 in New York City, which some observers consider to be the template for future carbon regulation globally. The law requires owners to report emissions for the whole building and to pay a carbon penalty if certain thresholds are exceeded.
In the UK, the Government recently held a consultation on requiring owners and tenants to report energy usage, with building ratings to be potentially based on this information. This is in sharp contrast to the current EPC building rating system that is based on “as built” criteria (and not actual emissions or consumption).
It is important to remember – at least for the present moment – that ESG regulation is focusing primarily on operational energy and emissions from existing buildings. The stakeholders most impacted by net zero carbon regulation are the current owners and occupiers of existing buildings.
There are signs that this is changing, as more jurisdictions (such as France or, closer to home, London) enact regulation and policies around embodied carbon for new buildings. But in terms of both market expectations, regulation and simply the number of stakeholders involved, in the short- and medium-term the focus on net zero carbon will remain on existing buildings and their operations.
Net zero carbon strategies for existing buildings
To reduce operational emissions in an existing building, there are several strategies, not dissimilar from those for new construction:
- Reduce the consumption of energy
- Install renewable energy technologies onsite
- Procure offsite renewables
- Purchase offsets
Ideally, existing buildings would use a combination of these to lower energy and reduce carbon emissions. Net zero carbon frameworks encourage the order above, starting with real reductions in consumption and using offsets as a last resort. In practice, however, many occupiers have opted to simply procure renewables and offsets, as these can be the easiest and cheapest way to reach net zero carbon operationally.
There are some cautions to this approach. A reliance on simply purchasing net zero carbon (either through offsite renewables or offsets) without making meaningful changes to operation and consumption have led to charges of “greenwashing.”
When renewable energy is procured, it is important to ensure that it is REGO/RGGO backed. REGO (Renewable Energy Guarantee of Origin) and RGGO (Renewable Gas Guarantee of Origin), as the names imply, validate that the supply of electricity and gas come from renewable sources. With offsets, purchasing them from reputable schemes (such as the “Gold Standard”) and using them as a last option can also help companies avoid criticism.
Net zero carbon and energy
Perhaps the most important de-risking and future-proofing option for existing buildings is to reduce energy use across the whole building. This is certainly the intention of all net zero carbon frameworks and, perhaps more importantly, it is a first principle of emerging regulation and emerging industry tools.
The reason why reducing energy is important is because net zero carbon is only one component of ESG moving forward. As odd as it may appear, it is very possible to have a net zero carbon building that consumes a great deal of energy. Owners and occupiers who purchase renewable energy and offsets can theoretically use as much energy as they want and still be net zero carbon. This is a challenge that the industry must address and until the definition of net zero carbon for operational assets “tightens up,” this is likely to remain the situation.
To help guard against this, emerging regulation is looking for buildings to report whole building energy usage as well as carbon emissions. There are proposals to do so in the UK. Influential industry tools such as GRESB and CRREM also require the reporting of both whole building energy and whole building carbon, and assets under these tools can be classified as “stranded” even if they are lower carbon. By stranding, we mean they are above best practice for energy reduction curves, and therefore in need of improvements to be commercially attractive, even if the energy is from low/no carbon sources. In short, going forward, being net zero carbon is likely not going to be sufficient as a credential for existing buildings – such assets will be expected to be low energy as well.
How net zero carbon for new buildings will affect existing assets
One reason why existing buildings will need to be more energy efficient stems directly from requirements for new net zero carbon buildings. Under the prevailing dominant frameworks (UKGBC, LETI, etc) new buildings are expected to meet strict energy use intensity (EUI) limits for whole building energy. This makes it impossible for new buildings to meet net zero carbon definitions without substantially reducing whole building energy consumption.
This results in new buildings that must meet more restrictive limits on energy, creating a much larger divide between new net zero developments and existing assets. Without energy reductions from existing assets, there is the danger they will be viewed as less desirable, especially if energy reporting comes into effect at the building level, or if building energy ratings become based on performance. Continued high prices for energy will also make inefficient assets less attractive, regardless of net zero carbon status.
New vs. existing - the future of net zero carbon
One of the major reasons why existing buildings (and refurbishment) are currently attractive options is because the grid has decarbonised successfully. Secondly, there has been a large growth in the availability of offsite renewable energy. Even inefficient assets that are using renewable energy – and perhaps lots of it – can look better (from a NZC perspective) than new buildings that require a lot of embodied energy for new construction.
When it comes to net zero, new buildings are in a difficult position because of the amount of construction carbon they produce. This is borne out by the current debate about new build vs refurbishment playing out in many planning departments. But it is important to remember that we are at a point in time and that the pendulum swings. Today, existing buildings tend to be the favoured segment, but only because of grid decarbonisation. Only a few short years ago, when the grid was not so clean, new build was heralded as the better carbon solution. Should new buildings be able to decarbonise materials (in a way like the grid), it will again be difficult to make the case for keeping inefficient existing assets based on carbon alone, especially if EUIs of new buildings significantly drive down demand for consumption.
Going forward, buildings, whether new or existing, are going to need to be net zero carbon and energy efficient. That is why following the energy hierarchy of being “lean” (energy efficient), then green (renewables) makes sense, in that order and for all kinds of assets.
We would note in closing that the latest addition to the London Plan is “be seen.” In other words, buildings will need to report publicly their whole building energy consumption. That is the world we are moving towards – one in which performance is measured, known and compared carefully, for both carbon and energy.