Anticipating Sweeter Carrots and Bigger Sticks for Building Decarbonization

by Paul Deffenbaugh | 1 January 2023 12:00 am

In addition to increasingly stringent energy codes pushing up building performance, new municipal, state, federal and investor-driven mandates will require owners, developers and their project teams to focus on decarbonization of buildings.

One example is the growing number of cities adopting building performance standards. Following New York City’s lead with Local Law 97, Boston, Washington, D.C., St. Louis and San Francisco are imposing energy use or carbon emission reduction mandates on existing buildings. And 30 other municipalities, including Chicago, Houston and Miami, are phasing in similar standards for commercial real estate. While these requirements principally apply to existing buildings, new buildings will eventually be subject to them as well, requiring forethought in design to ensure low-carbon operations and climate resilience.

In addition to increasingly stringent energy codes pushing up building performance, new municipal, state, federal and investor-driven mandates will require owners, developers and their project teams to focus on decarbonization of buildings.

Similarly, the Securities and Exchange Commission (SEC) is expected to formalize rules for publicly traded companies to disclose carbon emissions and climate risk to investors. This will apply to new development and existing real estate portfolios, and it will ripple through the building industry value chain. The federal government has also announced new guidelines for carbon emission and climate risk reduction in supply chains, including those serving the General Service Administration’s (GSA) significant real estate footprint. This along with new state and local buy clean mandates will also elevate embodied carbon reduction efforts for building materials.

On the other side, pulling the building industry forward are increasing green incentives and investments. The 2022 Inflation Reduction Act (IRA) represents a seismic shift for decarbonization of the economy. Credit Suisse recently published a research note estimating that the federal spending in the IRA will catalyze private investment, more than doubling the projected IRA-related clean energy and climate-related spending to approximately $1.7 trillion over the next decade. The IRA includes a significant increase to the 179D tax credit for energy-efficient buildings, and expands tax credits for solar, energy storage and electrification of buildings and transportation. The financial incentives for high-performance building design, deep energy retrofits, efficient heat pumps, rooftop and building integrated photovoltaics (BIPV), energy storage batteries and integration of electric vehicle charging with building energy systems combined with the increasingly attractive return on investment will make it so that owners and developers can’t afford not to decarbonize buildings.

Additionally, commercial real estate with low carbon emissions and enhanced climate resilience will be increasingly attractive to investors, with low-performing buildings eventually becoming stranded assets. JP Morgan Asset Management recently reported that 2021 saw a 55% increase in environmental, social and governance (ESG) investments, with a continuation of this trajectory in 2022. ESG investors want resilient and sustainable asset portfolios that will retain and gain value through the clean energy transition and withstand the increasing intensity and frequency of climate hazard events and the threat of sea level rise.

This year and moving forward, for owners, developers, architects, engineers, contractors and building industry manufacturers, the key to competitiveness and prosperity will be staying ahead of mandates, taking advantage of incentives, and attracting green investments by focusing on low-carbon, high-performance, resilient buildings.

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Alan Scott, FAIA, LEED Fellow, LEED AP BD+C, O+M, WELL AP, CEM, is an architect and consultant with over 35 years of experience in sustainable building design. He is director of sustainability with Intertek Building Science Solutions in Portland, Ore.

Source URL: https://www.metalconstructionnews.com/articles/anticipating-sweeter-carrots-and-bigger-sticks-for-building-decarbonization/

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