Buildings are responsible for 37% of all global emissions and 34% of energy demand. With emissions continuing to grow at 1% per year, net-zero goals seem impossible to achieve.

To meet greenhouse gas (GHG) reduction goals, 100% of new buildings must be net-zero by 2030, and operational emissions from existing buildings must fall to 50%. Yet, in 2022, just 5% of new buildings were net-zero.

A February 2024 report from not-for-profit think tank The Conference Board, “Decarbonizing Buildings,” questions the success of the current process of decarbonizing buildings and suggests key strategies for reducing global emissions.

Building emissions come in two forms: embodied carbon emissions from manufacturing, transportation, installation and demolition of building materials like concrete, and operational carbon emissions from heating, cooling, ventilating, lighting, etc. Roughly 85% of commercial buildings are heated with natural gas, which accounts for about one-third of operational emissions.

How does the real estate sector’s carbon footprint continue to grow, despite profits earned by building owners when they adopt cleaner energy?

Although the cost of renewables and all-electric systems has declined, making decarbonization profitable long-term, two-thirds of commercial buildings continue to rely on fossil fuels. Speculation is that the upfront capital cost of retrofitting building systems and finding non-fossil-fuel energy sources have not been priorities for businesses, despite federal, state and local government pressure (and incentives) to implement change—and penalties for not doing so.

“It’s clear that net-zero goals will require rapidly diminishing reliance on fossil fuels for building heating and power,” said Erin McLaughlin, senior economist at The Conference Board. “For companies that own or invest in commercial real estate, the economics of electrification and renewables now make this transformation feasible. Delaying it will mean incurring operational, financial, and reputational risk.”    

According to the report, states and cities can affect climate change policy through permitting, design and inspection of buildings to ensure they align with local codes and standards. To date, at least 30 of the country’s largest cities have implemented stringent benchmarking and disclosure ordinances. New York City began enforcing a local law intended to cut GHG emissions by 40% by 2030, with million-dollar fines for noncompliance. Many of these new rules require retrofitting 80% or more of existing buildings by 2050.

The Conference Board report suggests an interdisciplinary team, including operations, technology, finance, C-suite and outside consultants, to audit buildings, identify the most carbon-intensive operations, establish a baseline for GHG emissions and set goals.

“Companies should prioritize activities to realize the best path to upgrading, retrofitting, and replacing building components and systems to achieve maximum emissions reductions for their efforts,” the report states.

Their list of tactics for decarbonizing buildings includes the following:

• Energy efficiency: occupancy-based HVAC systems, building envelope retrofits, meters
• Electrification: replace fossil fuel systems with efficient electric ones, heat pumps
• Renewable energy: commercial solar, solar thermal, on-site microgrid, power purchase agreement/energy savings performance contract
• Water efficiency: water conservation, water reduction, water recycling, reduction of fertilizers and pesticides
• GHG reductions: carbon offsets, renewables energy certificates, carbon sequestration