Reducing Buildings' Greenhouse Emissions Will Require a Global Effort

A new survey of real estate and construction executives finds that cheap energy and lax regulations are obstacles to creating more-efficient buildings.

Real estate and construction companies around the world are taking more responsibility for the carbon footprints left by their buildings, and are even incorporating energy consumption into their strategies and risk assessments. But a recent survey of more than 400 businesses found many that still underestimate the value of energy efficiency and overestimate its costs.

Those are some of the key findings of a global survey of 423 senior executives from four sectors: residential real estate (which is the primary business of 37% of those polled), building construction (31%), commercial real estate (24%), and industrial real estate (9%). The respondents were evenly split among the United States, Europe, India, and China, and more than half generates annual revenues of $500 million or more.

The Economist Intelligence Unit conducted the survey on behalf of the Global Buildings Performance Network (GBPN), a partnership organization that disseminates knowledge about building energy efficiency and performance. Its findings were released last week.

Real estate development and construction account for anywhere from 30% to 40% of the world’s carbon emissions. GBPN advocates an 80% reduction in energy consumption from buildings by 2020. But that can happen, it says, only if real estate and construction companies, as well as lawmakers, are willing to take a “deep path” that optimizes technologies and codes. “Climate change targets will be nearly impossible to reach without industry’s full participation,” the survey’s authors state. “The real estate and construction sectors can play a critical role in shaping energy.”

A majority companies say they are already taking steps toward greater building efficiency. Nearly three fifths are replacing inefficient lighting, half are improving their HVAC systems, and more than one third are investing in “smart” systems. Somewhat surprisingly, three-quarters of executives surveyed agree that energy -efficiency legislation in their countries benefits the buildings sector.

The survey’s authors found that 69% of the respondents’ companies use energy efficiency as a risk management tool. More Europeans (38%) deliberately exceed government standards, compared with only 23% in other regions. Most companies—71%—are investing more in energy efficiency for new buildings rather than retrofits. Energy is also a major factor in investment decisions for 72% of those who rate their company as outperforming its competitors, compared with 56% of all other respondents.

However, the biggest obstacles to investing in energy efficiency include the lack of market demand for it (say 37% of respondents), the perception that energy efficiency doesn’t add value to a building (28%), and that there’s no compelling business reason to include it (25%). Indeed, only 31% of the executives polled say they audit their product’s energy use.

Insufficient government incentives, lack of government emphasis on energy-efficient policies, and the lack of regulatory enforcement were cited as policy barriers to energy efficiency in their buildings.

Energy efficiency and environmentalism are not as embedded in the business models of American companies as they seem to be in businesses in other countries. Only 60% of real estate and construction businesses in the United States see reducing carbon emissions as being their responsibility, whereas at least 83% of executives polled in Europe, China, and India agree that business has an important role in that reduction.

“The U.S. is also an outlier with regard to taking responsibility for its vast emissions to date,” says the survey. “Only 30% of [American] respondents believe that developed markets should contribute more to addressing climate change than the poorer developing economies. Respondents from Europe, India, and China are more evenly divided: 50-55% acknowledge that developed countries should contribute more.”

These responses seem to relate to the relative cost of energy in the respondents’ countries. Nearly two-fifths of executives in the U.S. identify “cheap energy costs” as their biggest challenge to investing in energy efficiency, compared to the global average of 20%, and 13% among non-U.S. respondents.

There’s a disconnect as well between what some real estate and construction companies believe energy costs and what those costs actually are. Heating and cooling typically account for between 20% and 60% of total energy use in a building, depending on its efficiency. Yet one third of respondents thought heating and cooling cost less than 20%.

Two-thirds of respondents also assert that energy-efficient buildings cost 15% or more to build than a standard structure; 18% of the executives polled estimate the difference at more than 25%. The actual cost varies by building type, climate, and expertise, “but should fall between 5% and 15%,” the survey’s authors state.

The survey concludes on a positive note, acknowledging that the real estate and construction sectors “have come a long way in their approach to energy efficiency.” Yet both the private sector and policymakers “can do much more.”