Johnson Controls issues USD 500 mn sustainability-linked bond
CORK, Ireland, 16 September 2021: Johnson Controls (JCI) said it has issued its first Sustainability-Linked Bond offering of USD 500 million in 10-year senior notes. The offering of the bond, the company said through a Press release, is in conformity with the company’s recently published integrated green, social and sustainability-linked finance framework. The publication of the framework and issuance of a bond mark two new sustainability milestones for Johnson Controls, which has become the first S&P500 industrial company to complete both accomplishments, it said.
Earlier, in January 2021, Johnson Controls adopted a new set of ambitious environmental goals, which it said, were approved by the Science Based Targets Initiative. The company said it has committed to cut operational emissions by 55% and reduce customers’ emissions by 16% before 2030. Based on the commitments, the company said, it issued the bond, which ties the interest rate on the bond to the achievement of the environmental goals. This means that Johnson Controls will pay a higher interest rate to bond investors if it fails to meet its interim targets for reducing Scope 1 + 2 and Scope 3 carbon emissions by September 16, 2025.
“Experts say that an additional USD 1-2 trillion/year must be invested in sustainability and cutting greenhouse gases if we are going to have any chance of meeting the steep carbon reductions science tells us is urgently required,” said George Oliver, Chairman and CEO, Johnson Controls. “Governments alone will not be able to mobilize this sum of money, so private sector capital needs to get sustainable, and fast. Building the market for sustainable finance is, therefore, an imperative; and ensuring that the highest standards are met so that dollars flow to projects that truly accelerate decarbonization, is also critical. With our continued commitment to sustainable finance and aggressive sustainability targets, we are showing our leadership in the field.”
Supreme Court in Canada endorses climate action to protect future generations
VANCOUVER, British Columbia, Canada, 25 March 2021: Not-for-profit legal firm, West Coast Environmental Law applauded the March 25 decision by the Supreme Court, upholding Canada’s price on carbon pollution, which confirmed the ability of all levels of government to take action to address the climate crisis, consistent with the overarching responsibility of the Canadian government to ensure that youth and future generations inherit a healthy atmosphere.
In light of the decision, the legal organization urged the Canadian government to ramp up its climate ambition and to strengthen and enact Bill C-12 without delay to ensure that Canada meets its future climate goals.
“Canada has missed every climate goal it has set for itself, in large part because of inconsistent and half-hearted efforts by both federal and provincial governments,” said Andrew Gage, Staff Lawyer at the firm. “This decision makes it clear – the buck stops with the federal government. The Canadian government must work cooperatively to encourage provincial action, but it can also step in when provinces fail and take the steps required to protect Canadians from climate change.”
Lawyers at the firm said the legal victory has the potential to result in environmental benefits well beyond climate action. “It is a landmark decision for the environment,” said Anna Johnston, Staff Lawyer. “By rejecting the provinces’ attempts to minimize federal authority over climate, the Supreme Court has made it abundantly clear that when it comes to environmental protection, we need all hands on deck.”
Warned Dr Silvie Harder, Climate Scientist: “Canada is warming at twice the global average – leading to increased floods, wildfires and other climate disasters. With today’s decision, the Canadian government is well placed to increase its climate ambition, bring our fossil fuel addiction under control and align with what the global scientific community says is needed to keep Canadians safe.”
Lawyers at the firm urged the Canadian government to press forward with its Net Zero Emissions Accountability Act, Bill C-12, which it said, has been languishing in Parliament. “Carbon pricing is good,” Gage said, “but a strengthened Bill C-12 will ensure that current and future governments keep working to achieve our climate targets.”
Building for the “new normal”
As the world continues to grapple with an ever-shifting economic landscape, owing to the COVID-19 pandemic, stakeholders in the building sector across the GCC region have observed how the pandemic has triggered an evaluation and reassessment of priorities. Ashok Jha, Head FM and Retrofit Projects, Universal Voltas, points out that the unprecedented disruption caused by COVID-19 has prompted many organisations to take actions they have been putting off for some time, including launching new digital services and evolving their business models, enabling greater flexibility in their working and implementing cost optimisation measures.
However, Jha says, perhaps the most notable trend would be the move towards a greater number of retrofit projects in the region. “Because of the COVID-19 pandemic, the oil prices plummeted to one of the lowest levels and government revenues went down in the GCC region,” he says. “This has led to reduced spending across all sectors, including new construction, with the current market seeing greater push towards shallow retrofitting, deep retrofitting, energy conservation and reducing the building carbon footprint in the existing buildings to make them more sustainable.” Jha says that since the number of existing buildings in Oman, Kuwait and the UAE is very high compared to new buildings, there was also a need to address the physical deterioration of the buildings, due to functional and economic obsolescence, and to make them more sustainable. “Because of this, there is a surge in demand for the retrofitting of the existing buildings across the GCC region,” he says (see sidebar).
Andrea Di Gregorio, Executive Director, Reem, Ras Al Khaimah Municipality, also believes the region is poised to see a strong pipeline of retrofit projects. “More focus is being put in refurbishing existing buildings, to bring them up-to-speed with the latest best practices in sustainability,” he says. “We see an increase in interest from building owners in retrofit activities, and we expect this interest to further increase throughout 2021 and in the coming years.”
Energy efficiency and sustainability
Another major driver for retrofits is the move towards energy efficient and sustainable practices, which has long been heralded by experts in the sector. Jha points out that because of the detrimental impact of buildings on the environment, with occupied buildings and the construction sector accounting for 36% of the global energy consumption and nearly 40% of total direct and indirect CO2 emissions according to International Energy Agency (IEA), the UAE has begun to actively transition into smart and sustainable cities, which has turned the focus on the energy efficiency of the buildings, specifically existing ones.
In addition to its impact on overall sustainability efforts, much of the move can be attributed to growing awareness on return of investment in terms of reduced operational cost. As Jha points out, retrofitting primarily refers to the measures being taken to replace legacy energy and utility systems with new and energy-efficient technologies. “These technologies not only reduce energy consumption and decrease carbon emissions but also lower maintenance costs, improve safety, enhance productivity, boost property valuations and also prolong the useful life of the assets and the building as a whole,” he says. “In a nutshell, we can say that OPEX of the building reduces and the asset value increases. Hence, it is becoming important day by day to retrofit buildings to not only make them more sustainable for the future but also to derive economical value by reducing the operational cost and, in turn, optimise the rentals and make them more lucrative for the tenants.”
Weighing in, Di Gregorio says that sustainable buildings often result in lower life cycle cost of the building itself. “If sustainability features are carefully selected, operational savings – in terms of energy and water usage and equipment maintenance – typically exceed any incremental investments that those features require,” he says. “For this reason, in a perfect market, where developers are able to fairly monetise their investments in higher quality buildings, we would expect for tenants any rent premiums for more sustainable buildings to be exceeded by the value of operational savings.”
Jha adds that as energy prices continue to rise, the relative benefits of energy efficiency will become increasingly important, and this is leading to a huge surge in demand for equipment, such as Smart LED lights and motion sensors, air curtains and FAHUs, energy-efficient AHUs, FCUs or split units and VAV systems. This has also led to greater demand for water usage reduction through the use of low-flow fixtures, sensors, waterless urinals and low-flush WCs, and also for photovoltaic panels on rooftops to generate electricity from the solar power, among other solutions.
A renewed focus on IAQ
While the return on investment (ROI) from retrofitting for energy efficiency is becoming clear, stakeholders are hopeful that the new wave of retrofits would also accommodate enhancements of indoor air quality (IAQ), which has been typically overlooked over the past years. Di Gregorio says that he believes this would be the case. “There is increasing interest in IAQ, partly driven by COVID-19 concerns,” he says. “Some awareness and technical barriers are there; nonetheless we foresee development in this area in the future.”
Jha shares a similar opinion. He says: “Fear of pandemic is looming large in the minds of the people, and therefore, while carrying out the retrofitting of their buildings, owners are ensuring that retrofit projects also take into consideration IAQ of the buildings, where people are currently spending more than 90% of their time and also to reduce the chances of contamination through virus, bacteria, moulds and fungi.”
Di Gregorio says there is a lot of focus on safety and security from building owners, particularly in what concerns disinfection of common areas. “This sometimes adds to other measures, like filtration, turning into improved air quality,” he says. Jha adds that some of the measures that building owners are taking include Demand Control Ventilation through C02 sensors, fitting volume control dampers, ultraviolet lamps in AHUs, ultraviolet germicide irradiation and MERV 13/14 filters. He further adds that there has been an increase in the use of humidifiers and dehumidifiers to maintain humidity in the range of 40-60%, where the microbial and fungal growth is minimal.
Jha also says that the majority of the offices are allowing their staff to work from home and that people are spending more than 90% of their time indoors. “This further necessitates that apt measures are taken by the occupants to ensure proper lux levels, ergonomics and IAQ, as these will have a profound impact on their health and wellbeing and, in turn, impact their productivity,” he says. “Hence, there cannot be a better time than now to address the Indoor Environment Quality (IEQ) issues, if any.” Jha says these are the factors driving a lot of investment being done by the property owners in the built-environment to retrofit their buildings to ensure proper IAQ against the traditional retrofit, where emphasis was mainly towards energy efficiency.
Making a case for retrofits
Keeping in mind the tangible and intangible benefits of retrofitting, Di Gregorio believes there is more than enough evidence to drive building owners to invest in such initiatives. “If building owners are not thinking about retrofits, they definitely should!” he says. “Retrofit projects tend to have very favourable returns. We are observing that for comprehensive retrofits of commercial buildings in Ras Al Khaimah, the payback time is 3-5 years. And the contracting standards that are being adopted often provide forms of guarantees for the investor on those returns.”
Jha, agreeing, says that in spite of the change in the occupancy profile of buildings, property owners must continue to retrofit within the built-environment. “Retrofitting of existing buildings offers tremendous opportunities for improving asset performance in terms of utilities,” he says. “Retrofitting also offers a potential upside in the overall performance of the building through improved energy efficiency, increased staff productivity, reduced maintenance costs, and better thermal comfort.” Jha believes that such key drivers should serve as a motivation and incentive for building owners, who are on the fence about investing in retrofit projects.
A complete 180
In view of the shifting political landscape, how will the new administration affect the country’s commitment to climate change mitigation?
It’s going to be a complete 180 from the [Donald] Trump administration. In [Joe] Biden’s plan, he mentions “a historic investment” in upgrading four million commercial buildings to return almost a quarter of the savings from retrofits to cash-strapped state and local governments. Specifically, it says that he will “mobilize a trained and skilled American workforce to manufacture, install, service and maintain high-efficiency LED lighting, electric appliances, and advanced heating and cooling systems that run cleaner and less costly”.
Given our focus on energy savings, I think that this will be great for business as well as for building owners. Some suggest that large rebates may be involved to directly incentivise businesses and make it affordable to pursue these upgrades.
That being said, although the Trump administration was not at all focused on energy conservation, I found that individual building owners and managers were still pursuing these measures during the Trump administration. Most organisations in the US are interested in conserving energy and saving money. With government focus and incentives, it will just accelerate the demand.
In view of COVID-19, do you see a greater uptake of IAQ equipment throughout the country?
Yes, for sure. However, these things come with a cost, and with COVID destroying the economy, there is going to have to be some kind of funding or incentives given to get these types of retrofits in place. I will give you an example. Two of our clients in the US requested ultraviolet lighting proposals to be retrofitted into their air handlers and FCUs. We put together the proposals and delivered them; however, neither has been approved yet due to the difficulties these buildings are facing financially due to delinquent tenant rent payments and occupancy.
Another interesting fact is that most of these IAQ retrofits are not intended to deliver energy savings. That is another hurdle to getting these projects approved. One last point – and I don’t think this is limited to the US – customers in the UAE have also asked for ultraviolet lighting to be installed, and it is still difficult to get the approval here, for the same reasons mentioned earlier.
Has there been a heavier-than-usual concentration on the air side of things from building owners, tenants and manufacturers?
The EPA has recommended that guidance provided by the American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE) for managing IAQ during the current pandemic be followed. ASHRAE’s statement is as follows: “Transmission of SARS-CoV-2 through the air is sufficiently likely that airborne exposure to the virus should be controlled. Changes to building operations, including the operation of heating, ventilating, and air-conditioning systems, can reduce airborne exposures.”
The two solutions we have seen implemented in the buildings we service in the USA are AHU filter upgrades and increasing the intake of outside air into the building. Both of these changes are very effective and relatively easy to implement as well as low cost.
How has the change in occupancy profile thrown everything into a state of chaos in terms of commercial and residential property requirements? Will this be a driving force towards more retrofit projects?
In terms of energy conservation measures, this has thrown everything into a state of chaos. One, the commercial buildings are hardly occupied, which has led to energy bills dropping dramatically. However, with less occupancy comes less rent, thus less money to invest in retrofit projects. In addition, building owners, who are still looking for energy savings, are hesitant to move forward, because they are not sure if and when tenants will be returning to the buildings, so to be honest, unless it’s a well-funded customer, this could actually slow the conservation efforts.
Residential buildings face the same issue. People are leaving the dense, populated cities, preferring the suburbs right now, leaving residential multi-family buildings unoccupied and no rents being paid. Until we get herd immunity with the vaccine, and people are comfortable returning to the cities to work and live, this will continue to be challenging.
How have these trends potentially influenced building owners?
As I stated earlier, most building owners are hesitant even if they want to move forward on new projects, given the current situation. However, some forward thinkers, with ability and the confidence that things will return to normal, are taking this time to invest in conservation efforts, so that when the buildings are occupied, they can take advantage of the maximum savings.
Have there been efforts to retrofit among specialised facilities such as healthcare?
At the moment, it is difficult to even get a meeting with a healthcare facility in the US. They are overwhelmed and have overcapacity with COVID patients and are focused on saving lives before anything else. Their priority right now is the conservation of life.
Has the pandemic finally trained the spotlight on the importance of having a balance between energy efficiency and IAQ?
I think that yes, people will be investing in IAQ, or at least investigating their options, especially healthcare facilities and the like. However, in my experience, to be honest, it’s a tough sale, unless there’s a Return on Investment (ROI) in the project. Having said that, UV lighting does have some energy-saving benefits, so maybe a combination of IAQ and energy savings should be highlighted to the building owners in the presentation of these retrofit solutions.
Retrofitting in Kuwait, Oman and the UAE
COVID-19 has had a significant adverse impact on organisations, people’s health, their livelihoods and the economy at large in the GCC region countries, says Ashok Jha, Head, FM & Retrofit Projects, Universal Voltas LLC. However, Jha is quick to point out that while the duration and severity of COVID-19’s impact on economies and sectors will undoubtedly vary, companies and governments in the GCC region have done well to set in motion a “look ahead, anticipate, innovate and adjust” roadmap, which has led the construction sector to focus on energy optimisation and retrofitting in existing buildings, which is a key to sustainable construction.
Citing figures from Global Data, a leading data and analytics company, Jha says that Oman’s construction industry contracted sharply in 2020, plummeting by nearly around -10.3%. “The industry is struggling with challenges presented by the COVID-19 outbreak, low oil prices, and the impact of sovereign credit rating downgrades,” he says. Further compounding the downside risks to the outlook for the industry, the Omani Government has had to rationalise spending.”
Jha adds that given the limited prospects for the government to boost investment in infrastructure and other investment projects, a recovery in the construction sector is expected to be very slow. “Global Data currently expects the construction industry to fall further in 2021, with output contracting by -5.8%,” he says. “The fiscal plan by the Oman Government is intended to reduce public debt, increase the state’s reserves, and diversify revenue away from the oil sector.”
Owing to these factors, Jha believes that new construction spend will be very minimal, and more impetus will be on the retrofitting, deep retrofitting, fit-outs and energy performance optimisation in the built-environment in Oman.
Kuwait has faced similar challenges, Jha says, adding that the construction market shrunk in the year 2020 at about -9.5% approximately, as per Global Data. “The construction industry is struggling with the challenges presented by the outbreak of COVID-19, low oil prices and the impact of sovereign credit rating downgrades,” he says. “Because of this, focus is more towards existing buildings in Kuwait.”
Jha adds that within the built-environment in Kuwait, residential buildings constitute around 81%, commercial buildings are 11%, whereas government buildings constitute four per cent; the remaining four per cent includes commercial, industrial, agricultural and services. “Also, Kuwait has one of the highest per capita electricity consumption and carbon footprint globally, which further necessitates the retrofitting of the buildings to make them more sustainable,” he says. “All the above factors, along with the economic strain, is forcing Kuwait to focus on energy conservation, deep retrofitting, retrofitting and fit-outs in the built-environment with a very minimal spending on new construction.”
Sharing observations on the UAE market, in particular, Jha says that the COVID-19 outbreak, coupled with low oil prices, has led the construction output in the UAE to contract by nearly 4.8% in 2020, but that a rebound is expected in 2021, as per Global Data. “New project opportunities are expected to be minimal in the coming quarters, as the government is consolidating its widening fiscal debt and COVID-19-related force majeure,” he said. “Over the medium- to longer-term, government investment will remain focused on upgrading physical infrastructure and reforming the financing and regulatory environment.”
Jha adds that the UAE has set high targets for building retrofit, which are reflected in the UAE Energy Strategy 2050 and the Dubai Integrated Energy Strategy. “The latter targets an overall 30% reduction in energy and water use by 2030,” he says. “To support this, Etihad ESCO aims to retrofit 30,000 buildings in the next 10 years and generate 1.68TWh energy savings and around 5.64 BIG of water savings by year 2030.”
‘The UAE leadership has a view of the future – and it is not just tomorrow’
Congratulations on your appointment as Denmark’s Climate Ambassador. Could you speak on the potential areas of cooperation between the UAE and Denmark?
I think it’s remarkable the far-sighted leadership the UAE has taken as an oil- and gas-producing country. The leaders have a view of the future – and the future that is not just tomorrow, not just five or 10 years, but they are thinking ahead to 20 or 50 years from now.
We are talking about the major transformation of energy systems. The largest solar farms in the world are in the UAE, and a lot of investment is being done in this area. The country is taking energy efficiency in buildings seriously and addressing the challenge of having had, years ago, the highest carbon footprint per inhabitant.
In that sense, cooperation between the UAE and Denmark on energy and other topics related to food and maritime issues makes imminent sense. We are the country in the EU with the largest oil -production. We have oil and gas in the North Sea. But we are slowly ending our exploration of that oil and gas, and in December 2020, the Danish Parliament decided to end fossil extraction in the North Sea by 2050 with a plan for the just transition of impacted workers and a conversion of the oil and gas fields to Carbon Capture Utilization and Storage (CCUS)].
There is also a huge market for renewable energy, globally, as this transformation [can be seen] worldwide. In Denmark, we are building better and taller wind farms and offshore wind farms, including over the next two years in two new energy islands. As a result, there has been global interest surrounding Danish windfarm operators and wind constructors, many of whom are now in demand in a number of countries such as the US, Korea and Australia.
Could you speak more about the competitive advantage that countries such as the UAE can have from specialising in sustainable cooling solutions, both in terms of developing the expertise within the country and in terms of pioneering solutions? Do you see this to be a growing market?
The world is undergoing an energy transformation, and the UAE is also very well positioned to be part of it and, in some instances, to lead this transformation. As such, a partnership with a country like Denmark makes great sense.
When it comes to the development of cities, it’s clear that if you look at trends as a whole, [the population] is moving from the countryside to cities at an increased rate. I think the latest figures from UN Habitat and other global organisations is that almost half of the human population lives in cities. We have been going from 30-40% of the population to half, and the trajectory is pointing towards a world where most of the people are in cities.
There have been large movements in the Global South. In China, you have more than 70 cities with more than one million inhabitants, and many are newly constructed with poor quality of buildings that need to be retrofitted and rebuilt. In India, you have a growing middle-class population, and this has led to growth of new buildings in new cities or more modern buildings in new parts of the city. The same trend can be seen in the Gulf region. For a very long time, Dubai was home to most of the cranes in the world. In Africa, large cities that are already big, continue to grow. In Indonesia, we see a population in the process of moving Jakarta to a new island, because it is sinking.
Basically, in many places, the built-environment is not a done deal. We are at the beginning, not at the end. It’s only in older industrial countries in the West that the city structure is permanent. I would think the opportunities for both new buildings and retrofitting are very large, especially in warmer climates, where expertise is needed in challenging environments.
For us, in Denmark, it’s more about reverse engineering our experience with energy efficiency and insulation, and usinge and applying them in the UAE. Also, there would be solutions we need to develop from scratch, based on the circumstances and the physical environment.
It’s clear that cooling also has some attributes different from heating. [In Denmark], some companies are experimenting with district cooling, but most are district heating, with a lot of combined power and heat plants. Also, some of them are doing this with garbage waste disposal and heat and power. With the more recent climate law, because of the move towards circular economy, we are now looking at recycling and reusing our waste rather than incinerating it.
What can further drive the development of expertise and solutions in the sustainability arena in a country?
A combination of energy pricing and embedding efficiency in building codes and regulation by central and local governments are key here. The building owner and operator might not be interested in building more efficiently because of the perceived cost, and they will try to defer the cost onto the tenants. That means rent goes up, bills go up, and they are not too happy either. That’s always a question for the less well off, that’s also the question of the fair and equitable distribution of the cost and benefit, [[when it comes to implementing sustainable solutions.].
In Denmark, people have been investing in energy efficiency because of energy cost and due to strict regulation since the 1970’s. Because of the cost of energy, there are huge paybacks at a shorter time.
In what ways can the public sector in the GCC region incentivise sustainability initiatives in the built-environment, both in terms of introducing retrofit targets and also ensuring new buildings adhere to higher energy- efficiency goals?
For one, I would say that educating the general public is extremely important, in terms of the cost, economy, sustainability and potential social benefits.
The very practical education of engineers and economists, integrating energy efficiency into curricula in the built-environment, so that you have your own skilled engineers and technicians ¨to operate systems, do the buildings and learn from it. It is a mentality and way of thinking. We have done it for the last 50 or more years; we didn’t do it before that. It took us a long time and heavy regulation, strong incentives and a lot of private discussion among government and private sector and institutions of higher education to get that sector to operate in an efficient and integrated way. I would encourage public policy makers to think through different dimensions of how to establish a cluster of knowledge and expertise. The young students of today will be the leaders of tomorrow, and they have to make it work 10-15 years down the road.
Climate change and the larger picture of finances
Q&A: James Brainard, Mayor of Carmel, Indiana, United States
We have succeeded admirably in our fight against the depletion of the ozone layer through collective effort, through a cohesive, consensus-based approach of finding economically and technically sound alternatives to ozone-depleting refrigerants. How much confidence do you take from what has been a marvellous example of social cooperation?
We did the summit in the form of the Montreal Protocol over concerns of huge spike in cancer deaths, so it was a great example of world leaders coming together to study a problem, devise a solution and then go back to their countries to fix the problem. It shows diplomacy and recognition of common challenges can be good.
In the same way, could we not find a financially feasible, well-structured long-term plan to curb the widespread misuse of energy and general profligacy through steady and substantial investment in the infrastructure needed to achieve the goal?
You have identified the problem in the question, and we have to find the means of accomplishing this. We have to look at the larger picture of finances – the health impact of pollution; the cost of famines; the cost of relocation, if we have a rise in sea level, leading to the displacement of people from major cities; and the cost of possible conflicts arising out of this. But more specifically, we need to recognize many jobs are dependent on the fossil fuel industry. So, we can make those changes, but we have to recognize that we need to look out for investment of industry, we still need to fly airplanes. But, we have a saying in the US, ‘low- hanging fruit’. So, there are many easy things we can do to clean the environment and reduce fossil fuel use, and those are what we can focus on with recognising that we have to protect people’s jobs in the fossil fuel industry and that many are invested in the fossil fuel industry.
Would an approach of self-financing the fight against global warming by developing an energy budget in every city, town, state and country across the world be a possible way out, as propounded by George Berbari, the CEO of DC Pro Engineering? I am referring to a structured, long-term carrot-and-stick approach, where individuals and organisations occupying residential and commercial buildings could be rewarded for being energy efficient and penalised for being inefficient, with the penalty being slightly higher than the reward to create a positive budget, a surplus, which could be used for giving rebates to homeowners for improving insulation, glazing, etc., for developing infrastructure to lower primary energy use, for building thermal energy networks, even District Energy schemes… anything that would effectively fight climate change.
I think it would help. The colloquial shotgun approach, where we undertake to do a lot of small things. I think your idea of financial incentives and disincentives is good; and tied to that what needs to happen is disincentives need to increase over time and incentives need to go up and come down. It is certainly a system we need today. You could still pass laws, where each year, the incentives and disincentives change, to encourage disincentives to go up and incentives to go away. The tax system is also there. Or, it could be a separate tax, a carbon tax, and it has been discussed here since the late 1980s.
Economists believe such an approach to conserving primary energy is feasible, but democratically elected local and federal government leaders and local mayors have limited terms and, generally speaking, give priority to short-term problems, the solving of which gives them immediate political benefits, as opposed to decades-long and daunting task of curbing energy use through a financial mechanism and other initiatives, which might also be viewed by the city’s inhabitants that make the electorate, as adding to existing costs and impairing their personal and corporate competitiveness. In your case, you are one of the longest-serving mayors in the state, having been in office since 1996 over seven consecutive terms. Did that give you a canvas to paint a long-term vision? How effective was the approach? Did it help you shape regulation and enforcement at a city level? Were you able to raise greater awareness on the human impact on climate change and bring about a consensus-based change in energy use behaviour in Carmel?
We are a suburb of Indianapolis, which has a population of two million people. We are 100,000 people in Carmel. Now, places like Dubai and Doha require automobiles, owing to the urban sprawl. Generally, we need the automobile to go anywhere. We have looked at the problem and have a series of PPPs, where one can live, work, go to restaurant and engage in recreational activities without having to get into an automobile and, as a result, lower the consumption of fuel.
The average American spends two hours a day in automobiles, but in Carmel, businesses, houses, schools are all here. We have adopted land use development differently, so people can live, work and go to a restaurant all in the same area, and we tried to design our downtown not for automobiles, and it has cut down fuel use. In Carmel, it is 15 minutes to half an hour of automobile use per person, so it is much, much less [than the national average].
We have a legal structure in the state of Indiana that makes decisions on building codes, and they have done less than what I would like to see, but we have contract to have a much more efficient build. We have the example of the Energy Center in Carmel. We have cold winters and hot summers in Carmel, and we are using energy all year long to either heat or cool our buildings. And if you have an individual heating or cooling system, it starts and stops and is energy inefficient. And so, we have developed the Energy Center in the city, and it uses 50% less energy. And we would like to see this being applied across the city.
If energy is scarce and its excessive use damaging to the environment, should people be allowed to consume as much as they want to, as long as they are paying for it? Should affordability be a sole factor? Could we change that mindset and, at the same time, take care not to infringe on personal freedom and quality of life?
I have thought about it, and I believe in a capitalistic and free market approach. And there is a way to fix it, which is you pay USD 10, say, for 100 units of use, USD 15 for the next 100 units, and USD 20 for the next 100 units. And so the more you use, the higher the price. And it is a good system, because it penalizes the people to use it, and at the same time, they have the freedom to use it. In the case of steel production, maybe that may be very important for the economy and jobs, and so there should be a different model. You have to look at the situation where we can improve the environment, decrease carbon and increase quality of life.
Have you established a carbon neutrality goal for Carmel, like Copenhagen, for instance, where we are seeing a consensus-based approach involving all political parties, underpinned by the thought process that environmental action needs to be bipartisan in nature? Or are the political dynamics different in the United States?
It’s a good question. Our city is mainly Republican, and is fiscally and economically conservative. Some years ago, a seven-member council introduced a carbon neutrality goal, which is not mandated, however. We know we will get there, because the technology is there. It is not time bound. It is a legislative body that passed a law that laid out a carbon neutrality goal.
We have been measuring progress in reducing carbon. Every year, we are measuring how much energy the city is using on a per capita basis, because the city is growing. I don’t know if we have done enough yet, but we are making progress. I firmly believe technology will save us.
The fight against climate change needs to be a non-partisan effort within cities, states and nations. What we have seen is a vastly polarising view within the United States. With Joe Biden set to take the reins, how soon can we expect to see the United States aligning itself in a more profound manner to the Paris Agreement?
I am a Republican, and my undergraduate degree was in history, so I tend to think not today but historically. At the turn of the century, Ted Roosevelt, a Republican, set aside millions of acres in the US for the National Parks system. And President Eisenhower in 1952 established the Arctic Reserve in Alaska, and he was Republican, as well. And President Nixon was the one who set up the federal EPA. Republicans signed a law that amended our Clean Water Act. They passed a whole series of environmental laws. President Reagan led on the Montreal Protocol for the ozone protection initiative. George HW Bush and George Bush came from a state that produces a lot of oil, and yet they established a system of hundreds of windmills. Over 120 years, Republicans and Democrats have come together in a non-partisan manner. And they will come back; this anomaly has been only for a sort period of time. Clean air and water are non-partisan issues. Disagreement will come only in terms of jobs.
On December 11, 2020, the United States observed a new daily death record of 3,055 individuals, more than the number of people who died in Pearl Harbour or the September 11 attacks on the twin towers in New York City. The coronavirus cases have risen sharply in Carmel, as they have elsewhere in Indiana and across the country. What measures have you taken in Carmel to safeguard residents through better indoor air quality (IAQ), with science advocating more fresh air changes and maintaining Relative Humidity between 40% and 60% in buildings?
I think one good thing that has come from the pandemic is recognition of IAQ being important, and there are great many entrepreneurs in the US selling systems that clean the air. Our City Hall operates a new system that every few minutes recycles the air and filters and cleans the air in the building; and it is energy efficient. And building owners throughout the US are adopting this. I see this as a positive thing that has emerged.
I have put a taskforce in Carmel. We also have generated messages through emails and print newsletters and social media. We have used an entire gamut of ways to talk to people, not just about IAQ but also about things to do to handle the pandemic in a better way. Our city had done a good job till the first week of October, testing and quarantining people. It worked through summer, but when people came indoors when the temperatures fell, it went bad. We had our first set of vaccinations, yesterday (the interview with Mayor Brainard took place on December 15), so we hope to be in good shape by March or April 2021.
There are those that are saying building industry stakeholders simply need to reverse the polarity on their thinking when it comes to budgeting for indoor air quality and that we need to raise buildings fit for purpose.
Yes, it’s a good point. Energy for buildings is important, but I think IAQ is something that would work very well. We have tax incentive to make buildings more energy efficient, and over time if building owners do not take action, a penalty would start; and simultaneously, there will be a reduction in taxes for people who make more energy-efficient buildings. And that puts the burden away from the average taxpayer. Yes, I do believe in an incentive and disincentive system for establishing good IAQ.
Buildings-related emissions hit record high: UN
NAIROBI, Kenya, 17 December 2020: Emissions from the operation of buildings hit their highest-ever level in 2019, moving the sector further away from fulfilling its huge potential to slow climate change and contribute significantly to the goals of the Paris Agreement, according to a new report released on December 16.
However, pandemic recovery packages provide an opportunity to push deep building renovation and performance standards for newly constructed buildings, and rapidly cut emissions. The forthcoming updating of climate pledges under the Paris Agreement – known as nationally determined contributions, or NDCs – also offer an opportunity to sharpen existing measures and include new commitments on the buildings and construction sector.
The 2020 Global Status Report for Buildings and Construction, from the Global Alliance for Buildings and Construction (GlobalABC), found that while global building energy consumption remained steady, year-on-year, energy-related CO2 emissions increased to 9.95 GtCO2 in 2019. This increase was due to a shift away from the direct use of coal, oil and traditional biomass towards electricity, which had a higher carbon content due to the high proportion of fossil fuels used in generation.
When adding emissions from the building construction industry on top of operational emissions, the sector accounted for 38% of total global energy-related CO2 emissions.
“Rising emissions in the buildings and construction sector emphasize the urgent need for a triple strategy to aggressively reduce energy demand in the built environment, decarbonize the power sector and implement materials strategies that reduce lifecycle carbon emissions,” said Inger Andersen, Executive Director of the UN Environment Programme (UNEP). “Green recovery packages can provide the spark that will get us moving rapidly in the right direction. Moving the buildings and construction sector onto a low-carbon pathway will slow climate change and deliver strong economic recovery benefits, so it should be a clear priority for all governments.”
To get on track to net-zero-carbon building stock by 2050, the International Energy Agency (IEA) estimates that direct building CO2 emissions need, by 2030, to fall by 50% and indirect building sector emissions by 60%. This equates to building sector emissions falling by around six per cent per year until 2030, close to the seven per cent decrease in 2020 global energy sector CO2 emissions due to the pandemic.
Worryingly, the GlobalABC’s new Buildings Climate Tracker – which considers measures, such as incremental energy efficiency investment in buildings and the share of renewable energy in global buildings – finds that the rate of annual improvement is decreasing. It, in fact, halved between 2016 and 2019. To get the buildings sector on track to achieving net-zero-carbon by 2050, all actors across the buildings value chain need to increase decarbonization actions and their impact by a factor of five.
Even though progress in efficiency efforts has not kept up with an increase in sectoral growth, there are positive signs and opportunities to catch up on climate action, the report finds.
Green recovery potential
The recent Emissions Gap Report 2020 from the UN Environment Programme (UNEP) found that a green pandemic recovery could cut up to 25% off predicted 2030 greenhouse gas emissions and bring the world closer to meeting the 2 degrees C goal of the Paris Agreement on Climate Change; much more needs to be done to get to the 1.5 degrees C goal, though.
Governments can help achieve these gains by systematically including building decarbonization measures into recovery packages – increasing renovation rates, channelling investment into low-carbon buildings, providing jobs and increasing real estate value.
While construction activities have dropped by 20-30% in 2020 compared to 2019 as a result of the pandemic and around 10% of overall jobs have been lost or are at risk across the building construction sector, stimulus programmes for the building and construction sector can create jobs, boost economic activity and activate local value chains. Under its Sustainable Recovery Plan, the IEA estimates that up to 30 jobs in manufacturing and construction would be created for every million dollars invested in retrofits or efficiency measures in new builds.
“Buildings are a strategic sector to simultaneously address various global challenges, such as climate change, the economic crisis resulting from the COVID-19 pandemic, [and the need to] improve living conditions and the resilience of our cities. For Mexico, the implementation of mitigation measures that improve the thermal and energy performance of buildings is a key ingredient for sustainability,” said Sergio Israel Mendoza, General Director of Environmental, Urban and Tourism Promotion, Mexico’s Secretariat of Environment and Natural Resources (SEMARNAT).
NDC updates open window for faster action
Most countries have yet to submit their second NDCs. Buildings remain a major area that lacks specific mitigation policies, despite its importance to global CO2 emissions. Of those who have submitted an NDC, 136 countries mention buildings, 53 countries mention building energy efficiency, and only 38 specifically call out building energy codes.
National governments must step up commitments in NDCs, longer-term climate strategies and support for regulation to spur uptake of net-zero-emissions buildings. This means prioritizing performance-based, mandatory building energy codes alongside widespread certification measures and working closely with sub-national governments to facilitate adoption and implementation.
“We urgently need to address carbon emissions from buildings and construction, which constitute almost 40% of global carbon emissions,” said Nigel Topping, United Kingdom High-Level Climate Champion. “We must give governments visibility of this at COP26 to inspire policies and decisions that result in the significant decarbonisation of this sector. We need to challenge the incumbency of steel and concrete. Whether or not zero carbon steel and concrete become the materials of the future will depend on how fast those industries innovate in the face of new and disruptive technologies. We have some far-reaching commitments under the Science-Based Targets Initiative by leading materials companies, which can serve as examples pushing the industry to go further, together.”
Energy-efficient building investment rising
In 2019, spending on energy-efficient buildings increased for the first time in three years, with building energy efficiency across global markets increasing to USD 152 billion in 2019, three per cent more than the previous year.
This is only a small proportion of the USD 5.8 trillion spent in total in the building and construction sector, but there are positive signs across the investment sector that building decarbonization and energy efficiency are taking hold in investment strategies.
For example, of the 1,005 real estate companies, developers, REITS, and funds representing more than USD 4.1 trillion in assets under management that reported to The Global ESG Benchmark for Real Assets in 2019, 90% aligned their projects with green building rating standards for construction and operations.
Green buildings represent one of the biggest global investment opportunities of the next decade, estimated by the IFC to be USD 24.7 trillion by 2030.
Aside from calling for a green recovery, post-pandemic, and updated NDCs, the report recommends that owners and businesses use science-based targets to guide actions and engage with stakeholders across the building design, construction, operation and users to develop partnerships and build capacity. Investors should reevaluate all real estate investment through an energy-efficiency and carbon reduction lens.
Other actors across the value chain should adopt circular economy concepts to reduce the demand for construction materials and lower embodied carbon and adopting nature-based solutions that enhance building resilience.