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Real Estate: Towards Net-Zero Emission

Thirumalavan Panchaksharam • 07/12/2021

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Climate change is having a serious impact on human beings and the environment. The Intergovernmental Panel on Climate Change (IPCC) warns that a hotter future is certain but just how hot it will get, is down to us and what we do from here on to drive sustainability. 

The message is very clear that a rapid switch towards a low-carbon economy is required to curb Greenhouse Gas (GHG) emissions triggered by anthropogenic activities – referring to environmental change caused or influenced by people - and mitigate climate change. To this end, the building and construction sector plays a vital role in this switch. 

Emission footprint of the Built Environment

The sector’s GHG emissions account more than a third of global energy-related emissions. Building operations accounted for 28% of global emissions while construction-related industries (embodied carbon) added another 10% . To get on track to Net-Zero by 2050, the sector’s emission needs to fall by around 6%  per year until 2030 - close to the 7% fall in global energy use in 2020, amid the lockdowns and travel bans due to the Covid-19 pandemic.

Although Singapore contributes 0.1% of global GHG emission, The Singapore Green Plan 2030 shows the nation’s efforts in strengthening its commitment towards the Paris Agreement. In addition, the Building & Construction Authority (BCA) launched its Super Low Energy (SLE) Building programme External Linkto extend the environmental sustainability agenda in Singapore. Organizations are highly encouraged to adopt vigorous sustainable alternatives and solutions in line with the government’s direction towards the Net-Zero target. 

Operational Vs Embodied Carbon

In many cases, while designers and builders are focusing on constructing Net-Zero-energy buildings to reduce operational carbon, embodied carbon – the GHG emissions related to extracting, transporting, manufacturing, and installing building materials - continues to grow. Though embodied carbon only accounts for approximately a third of operational carbon now, it may be equal to the operational carbon level by the year 2050 due to an estimated increase in construction activities. 

A very first step in the Net-Zero pathway is to understand the difference between embodied and operational carbon.

  • Embodied Carbon: Emitted during the construction of a building. This consists of extraction of raw materials, manufacture & refinement of materials, transport, the building phase of the structure, and the deconstruction and disposal of materials at the end of life.
  • Operational Carbon: Emitted during the operational or in-use phase of a building. This consists of energy use, management, and maintenance of the building.  

Embodied carbon can be tackled only in construction phase and not in operation phase - unless they are offset by carbon credits.  

Net-Zero Pathway

The concept of Net-Zero emission (also referred “carbon neutral”) is essential for mitigating climate change and meeting the Paris Agreement’s target. Net-Zero should be achieved by no later than 2050, but some organizations are committed short-term targets and are moving faster than others. A credible target must cover the entire carbon profile (includes Scope 1, 2 & 3) of the organization. The largest sources of emissions for many organizations are often the Scope 3 emissions. Science-Based Target (SBT) is a well-known framework and widely adopted by many organizations for achieving Net-Zero emission.

Scope 1 emissions are GHG emissions that occur from sources that are controlled or owned by an organization; Scope 2 emissions are those related to the purchase of electricity, steam, heat, or cooling; while Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization. 

In short, the Net-Zero journey consists of four main pillars:

  1. Business Strategy Integration: Measure emission footprint and determine baseline and targets
  2. Operational Reductions: Reduce direct & in-direct (Scope 1 & 2) emissions 
  3. Supply Chain Reductions: Measure and target other in-direct (Scope 3) emissions
  4. Residual Emissions: Implement carbon offset strategy

TOWARDS NET-ZERO EMISSION

Carbon Credits – Tackling Residual Emissions

An organization aiming for Net-Zero must reduce all the avoidable emissions as close to zero as possible and the remaining unavoidable emissions (also called “residual emissions”) can be balanced by using carbon offsets/credits or sequestration technologies. 

Carbon offsets/credits are measurable, verifiable emission reductions units generated by certified climate action projects which avoid or remove GHG emissions. 

The two categories of climate actions are:

  • Avoidance – Preventing emissions that would have been released into the atmosphere (e.g. using renewable energy)
  • Removal – Removing emitted carbon from the atmosphere by natural (e.g. tree planting) or technological (e.g. carbon capture technologies) means

The price of carbon credits varies in accordance with demand & supply in the market, project location, size, type of technology utilized, and sustainable development contributions by the project. The two types of carbon credit markets are:

  1. Compliance market: Regulated by a national, regional or international carbon reduction regime (e.g. California’s cap-and-trade3)
  2. Voluntary market: Not regulated and therefore come with a significant number of additional risks (e.g. VCS by VERRA4)

In recent years, the demand for voluntary carbon credits has grown significantly. A McKinsey study said in 20205 , buyers retired around 95 million tons of CO2, which would be more than twice as much as in 2017. In addition, the study forecast that the annual global demand for voluntary carbon credits could reach up to 15 times by 2030 and 100 times by 2050 of current demand. One of the biggest challenges of carbon credits is that there aren’t enough high-quality credits to offset the massive level of carbon emitted by organizations. 

So, the bottom line is to reduce the emissions as much as possible before approaching offsets for residual emissions; and it’s not too late for organizations to commit, plan and act for Net-Zero target!


1   https://www.worldgbc.org/news-media/launch-2020-global-status-report-buildings-and-construction 
2  https://www.unep.org/news-and-stories/press-release/building-sector-emissions-hit-record-high-low-carbon-pandemic 
3  https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program 
4  https://verra.org/project/vcs-program/ 
5  https://www.mckinsey.com/business-functions/sustainability/our-insights/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate-challenge

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