Real Estate Sector Under Pressure to Decarbonize

Yahoo

24-05-2025

Cities and countries around the globe are introducing strict new building regulations to support a green transition. From solar panels to heat pumps, governments are putting greater pressure on developers to incorporate clean technology and renewable energy into corporate, commercial, and residential construction. The real estate sector contributes a high proportion of global carbon emissions, both from constructing and powering buildings. Therefore, enforcing new sustainable construction and power standards can help governments cut emissions at the source.
Almost 40 percent of energy-related global carbon dioxide emissions come from the real estate sector, with approximately 70 percent being produced by building operations and 30 percent coming from construction activities. The world is undergoing rapid urbanisation, with around 2.5 billion more people expected to live in urban areas by the mid-century.
There are several reasons beyond basic decarbonisation aims to incorporate green energy and clean tech into new builds. Research from the OECD suggests that energy-efficiency improvements can support the alleviation of energy poverty, as a 1 percent efficiency gain correlates to a 0.21 percent decrease in energy poverty rates. Improved energy efficiency in buildings has also been found to be linked with better public health outcomes.
The OECD conducted a Global Survey on Buildings and Climate to collect comparable data and information across 28 countries in Europe, the Americas, Asia, The Middle East, and Africa. It found that 54 percent of countries surveyed had included building-related commitments in their NDCs; 46 percent of countries had set a target to phase out fossil fuel for heating and cooling buildings; and around 39 percent of responding countries had quantitative targets for the adoption of heat pumps and 32 percent for rooftop PVs. By contrast, only 18 percent of the countries polled had established targets for insulation and 60 percent of countries lacked monitoring frameworks to track progress on decarbonisation efforts at the local level.
The main challenge to introducing new measures into construction is cost. Governments need to ensure that introducing new building regulations does not drive up the cost for homebuyers so much that housing becomes unaffordable. With buildings constructed before 1945 contributing 23 percent of the EU's building stock, governments must also consider retrofitting existing buildings with energy-efficient technologies. However, this process can be extremely costly and disruptive.
Nevertheless, several countries have introduced ambitious housing strategies, striving for sectoral decarbonisation. The EU's Green Deal aims to achieve carbon neutrality by 2050, while initiatives such as the Fit for 55 packages and REpowerEU seek to reduce emissions. Meanwhile, the revised Energy Performance of Buildings Directive (EBPD) aims to renovate the worst-performing buildings and mandates all new EU buildings to be zero-emission by 2030. A 2024 SolarPower Europe preliminary analysis showed that the EBPD could drive the installation of between 150 GW and 200 GW of rooftop solar power in the coming years, assuming 60 percent of public buildings are suitable and fall under the EU Solar Rooftop Standard scope.
The EU Solar Rooftop Standard applies to new non-residential and public buildings from 2027, existing non-residential buildings undergoing major renovations by 2028, new residential buildings from 2030, and all suitable existing public buildings by 2031. Total rooftop solar capacity across Europe totalled over 170 GW at the end of 2023 and is expected to increase to 355 GW by the end of 2027.
Jan Osenberg, a Senior Policy Advisor at SolarPower Europe stated, 'Like the essential integration of smoke detections years ago, this new law propels rooftop solar toward becoming the standard. More buildings, businesses, and citizens will have access to clean, renewable, economical solar energy.'
In May, the U.K. government announced that almost all new homes in England must be fitted with rooftop solar panels during construction starting in 2027. The cost of adding solar panels to new developments is thought to be between $3,980 and $5,300. However, it is expected to save homeowners over $1,320 on their annual energy bills. The U.K.'s Labour government has set the goal of constructing 1.5 million homes by 2029. The government has pledged to decarbonise the country's electricity grid by 2030, as well as cut household energy bills significantly, which it hopes to achieve through incorporating renewable energy technology into housing.
Meanwhile, in Canada, its Energy Future 2023 Global Net Zero Scenario forecasts that greenhouse gas emissions from Canada's residential, commercial, and institutional buildings will fall by 71 percent between 2021 and 2050. To achieve this, the government must increase the use of heat pumps, to meet 13 percent of the residential space heating demand by 2030, 30 percent by 2040, and 50 percent by 2050.
With the real estate sector contributing heavily to the world's greenhouse gas emissions, governments worldwide are targeting developers with new building standards and regulations. Several countries have introduced strict measures requiring developers to incorporate renewable energy and clean tech into new builds, while others have mapped their potential to better understand the path to decarbonisation. '
By Felicity Bradstock for Oilprice.com
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