Editing IPCC:AR6/WGIII/Chapter-9 (section)

=== 9.6.3 Assessment of the Potential Costs ===

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The novelty since AR5 is that a growing number of bottom-up studies considers the measures as an integrated package recognising their technological complementarity and interdependence, rather than the linear process of designing and constructing buildings and their systems, or incremental improvements of individual building components and energy-using devices during building retrofits, losing opportunities for the optimisation of whole buildings. Therefore, integrated measures rather than the individual measures are considered for the estimates of costs and potentials. Figure 9.17 presents the indicative breakdown of the potential reported in Figure 9.16 by measure and cost, to the extent that it was possible to disaggregate and align to common characteristics. Whereas the breakdown per measure was solely based on the literature reviewed in [[#9.6.1|Section 9.6.1]] , the cost estimates additionally relied on the literature presented in this section, Figure 9.20, and Supplementary Material Table 9.SM.6. The literature reviewed reports fragmented and sometimes contradicting cost-effectiveness information. Despite a large number of exemplary buildings achieving very high performance in all parts of the world, there is a lack of mainstream literature or official studies assessing the costs of these buildings at scale ( [[#Lovins--2018|Lovins 2018]] ; [[#Ürge-Vorsatz--2020|Ürge-Vorsatz et al. 2020]] ).

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[[File:17f4b07b7bfc4a9b1e1f5a0a7ffbdbfa IPCC_AR6_WGIII_Figure_9_17.png]]

'''Figure 9.17''' | Indicative '''breakdown of GHG emission reduction potential of the buildings sector in developed and developing countries into measure and costs in 2050, in absolute figures with uncertainty ranges and as a share of their baseline emissions.''' Notes: (i) The baseline refers to the WEO Current Policy Scenario (International Energy Agency 2019c). It may differ from other chapters. (ii) The figure merged the results of Eurasia into those of Developed Countries.

Figure 9.17 indicates that a very large share of the potential in Developed Countries could be realised through the introduction of sufficiency measures (at least 18% of their baseline emissions). Literature identifies many opportunities, which may help operationalise it. These are reorganisation of human activities, teleworking, coworking, more efficient space design, planning and use, higher density of building and settlement inhabitancy, flexible space, housing swaps, shared homes and facilities, space and room renting, and others ( [[#Bierwirth--2019a|Bierwirth and Thomas 2019a]] ; [[#Ivanova--2020|Ivanova and Büchs 2020]] ; [[#Ellsworth-Krebs--2020|Ellsworth-Krebs 2020]] ). Whereas literature does not provide a robust cost assessment of the sufficiency potential, it indicates that these measures are likely to be at no or very little cost ( [[#Cabrera%20Serrenho--2019|Cabrera Serrenho et al. 2019]] ).

The exchange of lights, appliances, and office equipment, including ICT, water heating, and cooking technologies could reduce more than 8% and 13% of the total sector baseline emissions in developed and developing countries respectively, typically at negative cost ( [[#Department%20of%20Environmental%20Affairs--2014|Department of Environmental Affairs 2014]] ; [[#de%20Melo--2015|de Melo and de Martino Jannuzzi 2015]] ; [[#Prada-Hernández--2015|Prada-Hernández et al. 2015]] ; [[#Subramanyam--2017a|Subramanyam et al. 2017a]] ,b; [[#González-Mahecha--2019|González-Mahecha et al. 2019]] ; [[#Grande-Acosta--2020|Grande-Acosta and Islas-Samperio 2020]] ). This cost-effectiveness is, however, often reduced by a larger size of appliances and advanced features, which offset a share of positive economic effects ( [[#Molenbroek--2015|Molenbroek et al. 2015]] ).

Advanced HVAC technologies backed-up with demand-side management, and onsite integrated renewables backed-up with demand-side flexibility and digitalisation measures are typically a part of the retrofit or construction strategy. Among HVAC technologies, heat pumps are very often modelled to become a central heating and cooling technology supplied with renewable electricity. The estimates of HVAC cost-effectiveness, including heat pumps, vary in modelling results from very cost-effective to medium ( [[#Department%20of%20Environmental%20Affairs--2014|Department of Environmental Affairs 2014]] ; [[#Prada-Hernández--2015|Prada-Hernández et al. 2015]] ; [[#Akander--2017|Akander et al. 2017]] ; [[#Hirvonen--2020|Hirvonen et al. 2020]] ). Among demand-side management, demand-side flexibility and digitalisation options, various sensors, controls, and energy consumption feedback devices have typically negative costs, whereas advanced smart management systems as well as thermal and electric storages linked to fluctuating renewables are not yet cost-effective ( [[#Nguyen--2015|Nguyen et al. 2015]] ; [[#Prada-Hernández--2015|Prada-Hernández et al. 2015]] ; [[#Huang--2019|Huang et al. 2019]] ; [[#Uchman--2021|Uchman 2021]] ; [[#Duman--2021|Duman et al. 2021]] ; [[#Sharda--2021|Sharda et al. 2021]] ; [[#Rashid--2021|Rashid et al. 2021]] ). Several Developed Countries achieved to make onsite renewable energy production and use profitable for at least a part of the building stock ( [[#Horváth--2016|Horváth et al. 2016]] ; [[#Akander--2017|Akander et al. 2017]] ; [[#Vimpari--2019|Vimpari and Junnila 2019]] ; [[#Fina--2020|Fina et al. 2020]] ), but this is not yet the case for developing countries ( [[#Kwag--2019|Kwag et al. 2019]] ; [[#Cruz--2020|Cruz et al. 2020]] ; [[#Grande-Acosta--2020|Grande-Acosta and Islas-Samperio 2020]] ). Due to characteristics and parameters of different building types, accommodating the cost-optimal renewables at large scale is especially difficult in non-residential buildings and in urban areas, as compared to residential buildings and rural areas ( [[#Horváth--2016|Horváth et al. 2016]] ; [[#Fina--2020|Fina et al. 2020]] ).

Literature agrees that new advanced buildings, using design, form, and passive building construction equipped with demand-side measures, and advanced HVAC technologies can reduce the sector total baseline emissions in developed and developing countries by at least 10% and 25% in 2050, respectively, and renewable energy technologies backed-up with demand-side flexibility and digitalisation measures typically installed in new buildings could further reduce these emissions by at least 11% and 7% (see also Cross-Chapter Box 12 in Chapter 16). The literature, however, provides different and sometimes conflicting information of their cost-effectiveness. [[#Esser--2019|Esser et al. (2019)]] reported that by 2016, the perceived share of buildings similar or close to NZEB in the new construction was just above 20% across the EU. In this region, additional investment costs were no higher than 15%, as reported for Germany, Italy, Denmark, and Slovenia ( [[#Erhorn-Kluttig--2019|Erhorn-Kluttig et al. 2019]] ). Still, the European market experiences challenges which relate to capacity and readiness, as revealed by the Architects’ Council of Europe (ACE) (2019), which records a decline in the share of architects who are designing buildings to NZEB standards to more than 50% of their time, from 14% in 2016 to 11% in 2018. In contrast, the APEC countries reported additional investment costs of 67% on average ( [[#Xu--2017|Xu and Zhang 2017]] ) that makes them a key barrier to the NZEB penetration in developing countries as of today ( [[#Feng--2019|Feng et al. 2019]] ). This calls for additional R&amp;D policies and financial incentives to reduce the NZEB costs ( [[#Xu--2017|Xu and Zhang 2017]] ; [[#Kwag--2019|Kwag et al. 2019]] ).

Thermal efficiency retrofits of existing envelopes followed up by the exchange of HVAC backed up with demand-side measures could reduce the sector total baseline emissions in developed and developing countries by at least 18% and 7% respectively in 2050. There have been many individual examples of deep building retrofits, which incremental costs are not significantly higher than those of shallow retrofits. However, the literature tends to agree that cost-effective or low cost deep retrofits are not universally applicable for all cases, especially in historically urban areas, indicating a large share of the potential in the high-cost category ( [[#Department%20of%20Environmental%20Affairs--2014|Department of Environmental Affairs 2014]] ; [[#Akander--2017|Akander et al. 2017]] ; [[#Paduos--2017|Paduos and Corrado 2017]] ; [[#Semprini--2017|Semprini et al. 2017]] ; [[#Subramanyam--2017b|Subramanyam et al. 2017b]] ; [[#Streicher--2017|Streicher et al. 2017]] ; [[#Mata--2019|Mata et al. 2019]] ). Achieving deep retrofits assumes additional measures on the top of business-as-usual retrofits, therefore high rate of deep retrofits at acceptable costs are not possible in case of low business-as-usual rates ( [[#Streicher--2020|Streicher et al. 2020]] ).

For a few studies, which conducted an assessment of the sector transformation aiming at emission reduction of 50–80% in 2050 versus their baseline, the incremental investment need over the modelling period is estimated at 0.4–3.3% of the country annual GDP of the scenario first year ( [[#Markewitz--2015|Markewitz et al. 2015]] ; [[#Bashmakov--2017|Bashmakov 2017]] ; Novikova et al. 2018c; [[#Kotzur--2020|Kotzur et al. 2020]] ). These estimates represent strictly the incremental share of capital expenditure and sometimes installation costs. Therefore, these figures are not comparable with investment tracked against the regional or national sustainable finance taxonomies, as recently developed in the EU ( [[#European%20Parliament%20and%20the%20Council--2020|European Parliament and the Council 2020]] ), Russia ( [[#Government%20of%20Russian%20Federation--2021|Government of Russian Federation 2021]] ), South Africa ( [[#National%20Treasury%20of%20Republic%20of%20South%20Africa--2021|National Treasury of Republic of South Africa 2021]] ), and others, or the growing literature on calculating the recent finance flows ( [[#Novikova--2019|Novikova et al. 2019]] ; [[#Valentova--2019|Valentova et al. 2019]] ; [[#Kamenders--2019|Kamenders et al. 2019]] ; [[#Macquarie--2020|Macquarie et al. 2020]] ; [[#Hainaut--2021|Hainaut et al. 2021]] ), because they are measured against other methodologies, which are not comparable with the methodologies used to derive the incremental costs by integrated assessment models and bottom-up studies. Therefore, the gap between the investment need and recent investment flows is likely to be higher, than often reported.

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