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Tracking Buildings 2021

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Tracking buildings

About this report

Direct and indirect emissions from building operations plummeted to about 9 Gt in 2020, after having risen an average 1% per year since 2010. Although minimum performance standards are tightening, heat pump and renewable equipment deployment is accelerating and the power sector is continuing to decarbonise, the 2020 drop in buildings sector CO2 emissions resulted primarily from lower activity in the services sector.

Despite the expected rebound in emissions in 2021 being moderated by continued power sector decarbonisation, buildings remain off track to achieve carbon neutrality by 2050. To meet this target, all new buildings and 20% of the existing building stock would need to be zero-carbon-ready as soon as 2030.

Global CO2 emissions from building operations in the Net Zero Scenario, 2010-2030

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Tracking progress

In 2020, the falling of CO2 emissions was mostly a result of the Covid-19 pandemic and the decarbonisation of power generation. Reduced service sector activity (resulting from teleworking, closed schools and empty hotels and restaurants) was the main reason why service buildings registered the largest-ever drop in energy demand. In parallel, increased renewable energy generation combined with lower total electricity demand made electricity lower-carbon in 2020 relative to 2019. As activity resumes, and electricity demand rebounds, consumption and emissions could rise again in 2021. 

Noticeable advances in energy efficiency in the past year have boosted progress in decoupling energy consumption from buildings sector floor area growth. Final energy use in buildings increased from 118 EJ in 2010 to almost 130 EJ in 2019 at an average annual rate of 1%, falling behind average annual 2% expansion in floor area during the same period.

The fastest-increasing end uses of energy in buildings – for space cooling, appliances and electric plug-loads – drive buildings sector electricity demand growth. While electricity made up one-third of building energy use in 2020, fossil fuel use has also increased at a marginal annual average growth rate of 0.7% since 2010.

The decline in building energy intensity (energy use per square metre) was prompted by the development of building energy codes in 80 countries; additional and more stringent minimum energy performance standards (MEPS) for appliances; and shifts to higher-efficiency heating technologies such as heat pumps, whose total stock reached 180 million units in 2020, up from 100 million in 2010.

Nevertheless, buildings sector energy intensity needs to drop nearly five times more quickly over the next ten years than it did in the past five to be in line with the Net Zero Emissions by 2050 Scenario. This means the energy consumed per square metre in 2030 must be 45% less than in 2020.

Furthermore, the traditional use of solid biomass – extremely inefficient and linked to around 2.5 million premature deaths from household air pollution in 2020 – should be completely phased out by 2030. The Net Zero Emissions by 2050 Scenario achieves universal energy access by 2030 (UN Sustainable Development Goal 7) by shifting to the use of modern solid biomass, biogas, electricity and LPG.

Global building energy use and floor area growth in the Net Zero Scenario, 2010-2030

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Even without the Covid-19 pandemic, it is likely that CO2 emissions would have levelled off in 2020, thanks largely to the combined effect of moderate energy efficiency gains and lower power sector carbon intensity (which decreased 6% over the past 2 years). 

Since 2010, rising demand for energy services in buildings – particularly electricity for powering cooling equipment, appliances and connected devices – has been outpacing energy efficiency and decarbonisation gains. In particular, the share of households with access to space cooling globally grew from 27% in 2010 to 35% in 2020.

Very high temperatures and prolonged heatwaves set records in many countries, driving up demand for air conditioning. In fact, 2020 was the warmest year on record, tied with 2016 (when a strong El-Nino phenomenon and climate change raised temperatures across the globe), and nine of the ten warmest Augusts (the month with the largest global cooling demand) have occurred since 2009. Average temperatures across Asia over the summer of 2021 were more than 1.5°C higher than the pre-industrial average, and a number of cities had record-breaking temperatures, for example Mexico (50.4°C on 3 August 2021).

Globally, final energy use covered by MEPS is now above 80% for residential refrigerators and air conditioners, up from two-thirds in 2010, and just over 75% for lamps, an improvement of more than 30 percentage points in the same period. One hundred countries already have MEPS in place for at least one of these key end uses, and another 20 are currently developing policies. While it is important that countries without MEPS (mainly in developing regions) adopt them, it is also crucial that countries that already have them for some end uses set standards for other major energy-consuming products as well, as their energy needs are growing rapidly.

The only moderate expansion in policy coverage is due in part to market changes, as growth in energy demand is shifting from China – where policy coverage improved substantially in the last two decades – to other emerging economies, where policies cover a smaller share of buildings sector energy use.

Achieving the Net Zero Emissions by 2050 Scenario for the buildings sector requires a rapid shift to best-available technologies in all markets by 2030, dependant on rapidly stepping up the stringency of MEPS for all end-uses – on top of expanding coverage.

Historical examples show that upgrading MEPS bears fruits. In the European Union for instance, new refrigerators now have to be 75% more efficient than 10 years ago, while comparative labels were rescaled in 2021 to help consumers identify the most efficient products. However, progress remains slow for some technologies. For example, lighting policies in many countries have not been revised to phase out halogen lamps, which are only about 5% more efficient than incandescent bulbs.

Final residential energy use covered by labels, 2000-2021

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Final residential energy use covered by mandatory minimum energy performance standards (MEPS), 2000-2021

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Driven by existing emissions reduction policies and some stimulus-related government programmes, energy efficiency investments in buildings received a boost in 2020, reaching almost USD 180 billion - a growth of 11% compared to 2019. Investment in Europe was strong enough to boost global efficiency spending, highlighting investment gaps in various other regions.

Total energy efficiency investments in the global buildings sector is expected to increase even more in 2021. Nearly half of these investments are for construction of new efficient buildings, while the rest is spent on energy-related retrofits and efficient appliances. Economic recovery in the buildings and transport sectors is the primary driver of the expected rise in total energy efficiency investments globally in 2021.

Despite the recent increase in efficiency investments, spending needs to triple by 2030 relative to last half-decade averages to achieve the Net Zero Emissions by 2050 Scenario’s milestones of reaching deep energy retrofit rates of ~2.5% per year by 2030, and to ensure that new buildings constructed over the next decade meet high efficiency standards. 

The buildings sector has a very large carbon footprint when indirect emissions are accounted for. About 9% of global energy-related CO2 emissions result from the use of fossil fuels in buildings, another 18% come from the generation of electricity and heat used in buildings, and an additional 10% is related to the manufacturing of construction materials.

A building’s entire lifecycle is therefore responsible directly and indirectly for ~37% of global energy-related CO2 emissions, which calls for whole-lifecycle emissions restrictions. US Environmental Product Declarations are a good example of publicly available documents that certify the environmental impacts of construction materials. 

Global energy use and energy-related CO2 emissions by sector, 2020

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Implementing mandatory zero-carbon-ready building codes for all new buildings by 2030 is crucial to put the buildings and construction sector on track to reach the Net Zero Emissions by 2050 Scenario’s key decarbonisation milestones. These standards would cover both operational and construction-phase energy intensity and emissions, in line with the most recent EU policy developments such as France’s new RE2020 standard supported by the E+/C- label. They would also include EV charging, demand management and flexibility requirements to help buildings accommodate variable renewable energy sources and a net zero electricity system.

Governments need to ensure their commitments are clear and ambitious to establish long-term market signals.

Such commitments should identify specific policy measures, such as fair taxation and subsidies schemes as well as mandatory MEPS for equipment, to enable and encourage the uptake of key energy technology solutions, hasten the transition to clean energy and reduce the costs involved.

In 2020, the Super-efficient Equipment and Appliance Deployment (SEAD) Initiative and the UK government launched the COP26 Product Efficiency Call to Action to double the efficiency of key products by 2030, including general lighting-service lamps, residential air conditioners and residential refrigerators and freezers. The IEA is developing an energy performance ladder to bring different appliance efficiency policies together under consistent performance thresholds to progressively raise policy ambition, or leapfrog to best-available products when feasible.

Product standards and technical engineering specifications need to be based on quantitative rules with scientific proof to comply with codes and exceed the MEPS. The use of renewable resources should be promoted through a strict lifecycle carbon accounting mechanism built on existing international standards.

Commitments should also include improved demand-supply integration and demand-side measures to support more ambitious targets in the buildings sector.

Policies should endorse the most energy-efficient products on the market to make them affordable and increase their deployment. High-efficiency performance standards, which define thresholds for highly efficient products, can be the basis for endorsement labels such as the Energy Star in the United States as well as other policies and initiatives, including:

  • Financial incentives for consumers, such as subsidies or rebates, which reduce the costs of highly efficient products.
  • On-bill or on-wage financing, which make it easier for consumers to buy highly efficient products by spreading the purchase cost over many energy bills or salary deductions. The ECOFRIDGES programme in Ghana is an example of on-wage financing.
  • Technology product lists that provide consumers with information to help them make decisions about highly efficient products. In many places they are associated with incentives such as preferential taxation and loans.
  • Procurement schemes that allow governments to create markets for highly efficient products or encourage private sector investment in efficient products – either to benefit a company’s bottom line or to meet corporate social responsibility commitments. Initiatives such as the EP100 group demonstrate private sector commitments to purchase highly efficient products.
  • Technology awards, such as the Global Cooling Prize, that reward leading-edge innovation efforts to increase efficiency and reduce costs.

Government support for low-carbon and energy-efficient products can increase market uptake by early adopters, with the resulting economies of scale stimulating private R&D investment and enabling technological advancement and enhanced innovation. Paired with market signals, including energy performance requirements, efficiency gains can be achieved with little increase to manufacturing costs or consumer prices.

Financing and market mechanisms, as well as innovative business models, are required to accelerate the clean energy transition.

Governments can stimulate action through policy interventions that shape market rules to improve access to financing, de-risk clean energy investment and broaden the availability of market-based instruments that reduce barriers to the transition and enhance the attractiveness of buildings sector investments.

Governments need to collaborate to make sustainable buildings a reality. Institutional capacities, along with regional and global co-operation, need to be expanded to enable the clean energy transition.

Governments can co‑operate to share knowledge, best practices and solutions through multiple initiatives such as the IEA Technology Collaboration Programmes and the IEA Global Exchange for Energy Efficiency.

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Analysis