Taking carbon out of building construction just became today’s growth industry

By Larry StewartNovember 16, 2022

Operations of SLI’s 303 Battery project in Seattle are carbon-neutral, and modular construction trimmed embodied carbon. (Image: SLI)

Buildings and construction set a new record in 2021 for carbon output, creating new opportunities for building constructors to develop skills working with new building materials and processes.

The global community is moving with urgency. Greenhouse gas pollution in general will set a record this year, with emissions increases in the past year from both the United States and India. China and the European Union will probably report small declines.

Big changes needed by 2030

A report released this month by the UN Environment Programme revealed that construction activities rebounded in 2021 to pre-pandemic levels in most major economies, alongside more energy-intensive use of buildings as workplaces reopened. Plus, more emerging economies increased their use of fossil fuel gases in buildings. Buildings energy demand posted its largest increase in ten years. As a result, CO2 emissions from buildings operations reached an all-time high, about a 5% increase from 2020 and 2% higher than the peak in 2019.

Add in CO2 emissions from producing building materials (mostly concrete, steel, aluminum, glass, and bricks), and buildings represented around 37% of global CO2 emissions in 2021.

Global spending on green buildings by 2030 is expected to reach $1.3 to $1.8 trillion, second only to transportation. (Graphic: McKinsey)

The CO2 rebound demonstrates that few structural changes have yet occurred in the buildings sector to reduce energy demand or cut emissions, and that the 2020 building-emissions reduction was merely a pandemic-related outlier. The UN’s Global Status Report for Buildings and Construction highlights that some policy progress has been made since 2015 and global energy-efficiency investment has increased about 16%, but greater effort is obviously necessary in the face of increasing square footage.

The gap between the actual climate performance of the building sector and the necessary decarbonization pathway is growing despite more countries committing to energy efficiency in 2021 and offering extensive details for decarbonizing buildings, and investments of more than $230 billion in energy efficiency.

As building square footage trends upward, U.N. leaders set goals to halve emissions from the “built environment” by 2030 and for all new buildings to operate with net-zero in carbon by 2050. The targets are necessary to ensure global temperatures do not increase more than 1.5 degrees Celsius. Beyond that threshold, it is projected that weather disasters will become routine, much of the global south will become too hot and/or dry to support its current population and some regions will face famine.

Pressure to reduce carbon emissions from the built environment comes from far more than altruism. More than 3,000 companies across the world have set or are in the process of committing to an emissions reduction through the Science Based Targets initiative, an institution that created a framework around reduction commitments for businesses. Regulation, investor activism, rising consumer interest and competition for environmentally conscious employees are key factors pushing companies to benchmark and improve their sustainability performance. Even if contractors aren’t sensitive to those influences, they are influencing developers, industries, governments and other clients that contractors serve.

Contractors’ opportunities

A recent McKinsey report found that reaching a net-zero economy by 2050 could entail a 60% increase in global capital spending on physical assets, compared with current levels. Required investments amount to $9.2 trillion per year until 2050. McKinsey’s analysis also suggests that growing demand for net-zero offerings could generate more than $12 trillion of annual sales by 2030 across 11 value pools, including transport ($2.3 trillion to $2.7 trillion per year), buildings ($1.3 trillion to $1.8 trillion), power ($1.0 trillion to $1.5 trillion), and water ($1.1 trillion to $1.2 trillion).

McKinsey’s observation on the opportunity: “Such a transformation of the global economy could create significant growth potential for climate technologies and solutions.”

The biggest part of building CO2 emissions comes from construction. Embodied carbon – the greenhouse-gas (GHG) emissions associated with construction – is irreversible once an asset is built. Embodied carbon includes the CO2 emitted in extraction and manufacturing processes to create construction materials and transport them and equipment to a project site, as well as all the emissions associated with the actual construction operations.

With most bulding CO2 emissons enbodied before commissioning, materials and construction will become a primary carbon-reduction target in the race to halve building emissions by 2030. (Graphic: McKinsey)

Construction emissions are a major contributor to lifetime emissions for capital projects, but McKinsey points out that reducing embodied carbon during construction is a low priority at best for the building industry and an afterthought at worst. Design usually focuses on operational-carbon reduction, which is also the focus of several certifications, such as LEED. Operations do have decarbonization opportunities, but up-front carbon emissions account for up to 50% percent of total life cycle emissions.

Three best practices – repurposing existing assets or materials, using lower-emission materials and using greener construction equipment – can each lower embodied carbon on most construction projects, regardless of what is being built.

  1. Repurposing an existing structure or materials can expand a business’ physical footprint without producing as much embodied carbon. Adaptive reuse usually requires less material, which can potentially increase the incentive to use sustainable products for materials that are required. Adaptive reuse can revitalize underused areas of cities, which can further reduce the need for new infrastructure. Contractors who have experience building adaptive-reuse projects can also help provide customers their time and cost savings compared with their new-build projects.
  2. Materials provide most of the embodied carbon in building construction, and contractor collaboration with materials suppliers to reduce carbon emissions from not only concrete and steel but also lesser-emitting materials is an opportunity. Aggressively developing expertise in use of low-carbon materials and experience helping get those products into the specifications of new buildings can help make contractors trusted go-to resources for clients who are trying to buff their ESG record. Contractors can also work through industry groups to help clarify funding options, incentives, and sustainability requirements that will push material suppliers to prioritize reducing the carbon footprint of their products.
  3. Traditional diesel-powered construction equipment used in construction operations contributes roughly 3% of embodied carbon for new-build construction projects, according to McKinsey analysis. Availability of low-emission, electric construction equipment is growing by leaps and bounds, with new applications in larger machines coming regularly. Hydrogen and other low-carbon fuels are also making their way quickly toward commercial availability. Such innovations will be important to fostering scale in green-construction equipment and practices.

With deadlines for carbon reduction looming, pressure on the businesses and organizations that pay for construction to reduce their footprint are accelerating their efforts to change their infrastructure. The building industry won’t continue to overlook embodied carbon. Companies at the forefront of low-emissions processes and materials could quickly demonstrate what it looks like to be a leader in one of the fastest-growing specialties in the construction industry.

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