Building Partnerships For A Low-Carbon Future

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Below is an article submitted to Masdar’s 2016 Engage Blogging Contest. The article is being reposted from the Masdar contest site and markbessoudo.com (with minor edits).

By Mark Bessoudo

In 1800, only 10% of the world’s people lived in cities. By 1990, it jumped to 40%. Today, over half live in cities. It’s estimated that by the end of this decade, 60% people will live not only in cities, but in megacities (cities with population of 10 million or more). By 2030, a staggering 80% will live in cities. This has had — and will continue to have — huge environmental and social consequences.

Therefore, while the transition to a low-carbon society will require action by various sectors and at multiple scales, the most important actions — and most pragmatic — will be those related to cities, in general, and buildings, in particular. As the world is quickly becoming more urbanized, if we are to transition to a low-carbon society, we must not merely make this the century of the city, but rather the century of the low-carbon city.

In this blog post, I will outline some of the major low-carbon programs and initiatives that governments and businesses, working together, have implemented in cities around the world. There are far too many to list them all, so I will focus on those that I think are most innovative, replicable, and scalable to other parts of the world. For some of the more drastic measures, refer to those I described in my response to last year’s Masdar blogging contest. Also, I consciously chose to use the term “low-carbon society”, rather than “low-carbon economy”, because achieving low-carbon cities is ultimately of civilizational importance — far more important than just the economy alone.

Cities In Context

Carbon, cities, and the economy are deeply interconnected. Cities are responsible for an estimated 75% of the world’s carbon emissions, with buildings and transportation being among the largest contributors; cities also contribute to an estimated 75% of the global economic production. There’s no single solution to achieving a low-carbon society; it will require a diversity of solutions from various stakeholders at various scales. Creating new net-energy positive and regenerative buildings will be vitally important to achieving this; however, to really achieve the deep carbon reductions required to limit the global temperature increase below 2°C, efforts must be focused on improving the performance of the existing assets of the built environment.

Cities can provide environmental benefits due to their density and efficiencies-of-scale, but it’s important to note that cities aren’t inherently low-carbon; some cities actually have a bigger environmental impact per-capita than their non-urban counterparts. What this means is that the transition to a low-carbon society will require specific, measurable, and ambitious plans by both government and businesses.

Buildings That Bare All

Mandatory public disclosure and benchmarking of building performance is gaining momentum in jurisdictions around the globe, with related programs and ordinances already in effect in parts of Europe, Australia, and North America. Mandatory performance disclosure is a way for building owners to annually report on their building’s environmental performance, such as energy use or carbon emissions. As data from cities that have adopted building performance disclosure laws are beginning to show, it has the ability to achieve energy and carbon savings in a relatively short period of time. Part of the reason is that when performance is made public, it can create friendly competition between tenants and buildings to publicly demonstrate their ability to cut energy use and carbon emissions.

Australia’s Commercial Building Disclosure (CBD) Program, for example, requires that large office buildings disclose energy performance through a Building Energy Efficiency Certificate at point of sale or lease. In just the second year of implementation, 28% of buildings showed improvement in their NABERS Energy Rating, with an average improvement of over 13% on NABERS’ 6-star scale.

Other cities in North America have also had similar success with both mandatory and voluntary disclosure and benchmarking initiatives: in New York City, office energy use was reduced by 10% in just three years, buildings participating in Toronto’s Race to Reduce program cut energy use by 9% in just two years, and San Francisco’s participating buildings reduced energy use by 8% in under four years. We can expect to see similar outcomes as more cities around the world adopt mandatory building performance disclosure and benchmarking.

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Cap-And-Trade… For A City?

In 2010, Tokyo implemented a cutting-edge cap-and-trade carbon trading scheme focused primarily on the emissions from its most energy-intensive office buildings, which account for over 40% of the city’s emissions. While similar programs have been implemented at the national level in Europe and North America, Tokyo’s trading scheme is the world’s first at the municipal level as well as the first to focus exclusively on buildings. The program works like this: city government sets an upper limit (the “cap”) on emissions for commercial buildings. Building owners who reduce their emissions below this cap earn credits which can be sold (the “trade”) to building owners who exceed the upper limit.

Since the program’s inception in 2010, buildings have already reduced energy use and emissions by 23%. It  has been so successful in terms of achieving carbon reductions, that the market itself has had very few trades of carbon credits. That’s because the program accomplished its goal of having building owners incentivize and encourage their tenants to switch to low-carbon technologies and adopt more efficient operations, thereby reducing most buildings’ emissions to under the upper limit. Other cities could learn from these lessons.

Overcoming Split Incentives

It’s often the responsibility of the landlord to pay for the capital upgrades related to energy efficiency, but it’s the tenants who pay the utility bills and therefore receive the immediate benefit of the upgrades. So how can buildings actually improve energy performance if this type of split incentive needs to be overcome? Without cooperation from tenants it’s difficult for building owners to meet their energy and carbon targets, and vice versa.  

Melbourne, Australia, has found a solution that works to overcoming this obstacle. To help achieve the city’s goal of becoming carbon-neutral by 2020, building owners, banks, and municipal government have come together to create an innovative financing mechanism called an Environmental Upgrade Agreement (EUA). An EUA is a bank loan used to finance the capital costs of energy efficiency upgrades in which funds are paid back to the city through property taxes. This makes it easier for building owners to pass the costs of efficiency upgrades and retrofits onto tenants, who end up receiving the immediate benefits of reduced utility bills. The city has since created the Sustainable Melbourne Fund to help administer the EUA process for specific projects such as solar energy installations and lighting upgrades. The primary recipient of these loans are small- and medium-size businesses.

Hubs Of High-Performance Buildings

Individual buildings can make efforts on their own to achieve carbon reductions, but more can be accomplished if hubs and communities of building owners, businesses, local government, and community stakeholders work together collectively.

A city that best exemplifies this type of collaboration is New York City, which aims to reduce its urban carbon emissions by 80% by 2050.  At the forefront of their approach is the Carbon Challenge program, which works by inspiring a high-level commitment within organizations, creating a platform for the exchange of information and ideas, and providing simple tools and resources to track progress along the way. The city has committed to energy retrofits, investment in clean energy, and piloting leading-edge technologies across all public buildings. In addition, commercial buildings will be given ambitious reduction targets to meet. The resulting efforts are estimated to save $8.5 billion in energy costs over ten years and create 3,500 new jobs.

Another example  is the 2030 Districts initiative. 2030 Districts are unique hubs of private-public partnerships in designated commercial areas across North America that are committed to reducing energy use and carbon emissions by 50% by 2030. Together, the stakeholders are able to leverage economies of scale to advance both market-based strategies and government-supported solutions for carbon reduction efforts. They also share resources in terms of best practices, training, tools, and verification methods for measuring progress. To date, the dozen 2030 Districts created across North America account for over 241 million square feet of commercial property. With districts set up in cities as disparate as Seattle, Pittsburgh, Los Angeles, and Albuquerque, it’s clear that collaboration for this type of hub for low-carbon urban sustainability can be adopted by cities of various scales.

Innovation Incubators

Innovation hubs are another type of collaboration effort that has the potential to unleash creative carbon-cutting strategies and smart city technologies. London’s Canary Wharf business district, for example, designed the Cognicity Challenge to do just that. Cognicity is an accelerator program established to support the development of future smart city and low-carbon technologies with positive economic, social and environmental impacts. The program awards winners with the opportunity to pilot their projects at Canary Wharf. This type of program demonstrates how facilitating interaction between developers, large technology firms and startups can create novel strategies for reducing carbon. This type of innovation and collaboration could easily be implemented in commercial zones of other cities with the help of local government.

Leading From The Top

Federal government also have a role to play in supporting public-private partnerships for buildings and cities. In 2015, the Australian government introduced a new position in their cabinet with the creation of the Minister for Cities and the Built Environment. This long-awaited post is meant to support collaboration across local government and businesses in different regions to achieve sustainable and liveable cities. Other federal governments interested in making serious cuts to urban carbon emissions could create similar a position in order to send a strong signal to businesses and citizens that issues related to cities and the built environment are a national priority. The international climate agreement established at the recent climate talks in Paris, as well as the UN’s Sustainable Development Goals, should help bolster federal governments to make a similar move.

Conclusion

This is by no means an exhaustive list. It will take much more to achieve any kind of meaningful low-carbon society by 2030. Demand-side initiatives, such as those outlined here, can only go so far. What’s also required is a push for low-carbon supply-side energy generation and infrastructure, similar to those currently being adopted in cities such as Vancouver and San Diego, and researched/developed at institutions such as Masdar.

I aim to have shown readers how there are already a variety of meaningful and pragmatic low-carbon programs in place in different cities and at different scales. Pathways leading to a low-carbon society by 2030 are already starting to take shape. What’s needed next is to build on this diversity, carry the momentum, scale up the impact, and make these initiatives more ambitious.

Let’s make it happen.