Last Friday, Finland and the European Union hosted a side event at the United Nations climate talks on the building sector. Finnish Minister of Housing, Jan Vapaavuori was a featured speaker and he made the point that globally, 40% of all energy is used by buildings and that their greenhouse gas emissions account for 30% of total GHGs. He made the important point that–for developed countries, at least–the crucial issue is dealing with old buildings.
Vapaavuori’s fellow panelist, Sylvie Lemmet of the United Nations Environment Programme, pointed out that 95% of the 2050 building stock is already built in developed countries.
This is significant for cities that are trying to reduce their emissions since developed countries are the ones that need to make the greatest emissions cuts by 2050. While it is relatively simple to regulate building efficiency prior to construction through the deployment of strong building ordinances, reaching already-constructed structures is a bit more challenging.
The other important point made by Vapaavuori is that building operation is more important than building construction in terms of emissions. This is essential to think about from the policy perspective as most urban policies–in the form of building codes or development credit–once again target new construction instead of renovation.
Much of the discussion focused on trying to figure out ways to create incentives for low-emission building renovation. The problem now is that there is a significant up-front cost for high-efficiency upgrades. While the upgrades pay for themselves in the long-run, consumers may not have access to the initial capital to invest in the upgraded equipment. Furthermore, in highly mobile countries like the United States, homeowners may only be thinking of living in a house for a short time, making investment unwise.
It would be relatively easy to leverage the savings generated over the life of a high-efficiency building enhancement to finance the requisite up-front investment. Some municipalities in California do this sort of thing where they establish a bond district that residents can tap into if they want to make an upgrade. The municipality fronts the money and then property owners pay back the city at a realtively low interest rate and monthly cost over several decades. If they sell the house, the new owner assumes the outstanding debt obligation. Cities are already using these sorts of financing schemes to raise money for things like alley pavement and sidewalk construction.
A federal program providing the capital in this way would be a perfect clean energy stimulus scheme.