Published – and not damned

It's been a while since my last blog back in February. That's because I have been extremely busy completing the second EEB report – Transforming the Market – that was launched at the end of April.

The big question was whether we could make energy efficiency in buildings “news”. We know is not exactly a “sexy” topic for most journalists, but it is important: buildings use around 40% of all energy (even more in most developed regions) and more than 30% of all greenhouse gas emissions can be attributed to buildings. Most people do not know this – even people in the building and construction sector underestimate the energy used in buildings.

In fact our report got much better coverage than anticipated. More than 100 news articles have been written and the report has been downloaded at a rate of more than a thousand copies a day. This was the result of media activity in Beijing, Washington and Paris – where we launched during the EE Global event. But I'm sure it was also because we have produced something different:

• First, it is a business report.
  
• Second, we adopted a “bottom-up” approach using real data on different building types, in developed and developing regions, warm and cold climates, etc.
  
• Third, we have tried to quantify the impact of policy, finance, technology and design and behavior changes on buildings' energy performance
  
• Fourth, we have assessed the cost implications at a global level
  
• Fifth, we have produced a full set of recommendations to transform the building sector
  
• Last but not least, we have developed a roadmap showing who needs to do what

How much will it cost?

My last blog questioned the optimism of Mckinsey's abatement cost curve. We have estimated that the net cost to achieve transformation would be 7% of total building cost worldwide. The Peterson Institute for International Economics (PIIE) has further qualified the cost implications based on our data. Its policy brief: “Energy Efficiency in Buildings: A Global Economic Perspective” reports the preliminary findings.

Based on the EEB findings about investment costs and energy savings, the PIIE's Trevor Houser concludes that building emissions can be cut by 8.2 gigatonnes a year by 2050 with global investment of US$ 1 trillion per year. This substantial sum is significantly reduced by energy savings, resulting in a net cost of US$ 180 billion a year and a negative net present value ranging from US$ 209 billion in the US to just US$ 9 billion in Japan.

That is a lot of money, especially in the current financial climate, and it reinforces the EEB's core finding that much desirable energy investment does not add up financially – it may be cost negative over its lifetime but does not meet short-term financial investment criteria.

But delaying action will only increase the ultimate CO2 reductions needed for climate stability and the associated costs. And while there is a cost, it is relatively low. The PIIE work finds that the “social cost” of this 50–75% improvement in building energy efficiency is cheap compared to other abatement opportunities. Houser calculates that the average abatement cost would be US$ 25 per tonne of CO 2 , and in the United States it would be as low as US$ 9 per tonne. These costs are lower than estimates from the International Energy Agency for achieving comparable emission reductions from power generation, industry or transport.

From a purely economic point of view, then, this emphasizes the importance of overcoming the barriers EEB identified, because otherwise the world will spend more than needed to achieve emission reductions. Furthermore, by removing these barriers we will reduce the costs of climate policy overall, which can be particularly important in alleviating the impact on consumers.

Houser supports our view that a price on carbon will not be enough to stimulate the necessary investment – because of short-term investment time horizons. Long-term, low-cost finance will be necessary, possibly supported by funds coming from government revenues raised through a carbon tax.

I look forward to the full PIIE research on the economics of energy efficiency in buildings, to be published soon.

What next?

Once we all of the material from this stage of the project is published, we will hit the road to reach out to stakeholders worldwide. At the same time, the WBCSD will propose a Manifesto to its members to take action as a result of this study and create demand for energy efficiency in their local markets.

Comments

[Alpha Lighting]

There are different ways to view energy efficiency and this blog post covers them well. I'd just like to add that the most efficient KW per hour is the one you don't use. We need to move closer to 'fridge light theory', where the light is only on when the fridge, or room is in use. In large commercial and industrial buildings, this can easily be achieved by installing motion sensors along side more energy efficient lighting systems.

[ice9web]

In our country Philippines these days make energy saving by schedule power interruptions (brownout)... if only there are solar panel in every building for powering up the entire building but i guess that dream is far to be true maybe 2050 or something.