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

=== 9.6.4 Determinants of the Potentials and Costs ===

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The fact that the largest share of the global flow area is still to be built offers a large potential for emission reduction that is, however, only feasible if ambitious building energy codes will be applied to this new stock (see [[#9.9.3|Section 9.9.3]] on building codes). The highest demand for additional floor area will occur in developing countries; the building replacement is also the highest in developing countries because their building lifetime could be as short as 30 years ( [[#Lixuan--2016|Lixuan et al. 2016]] ; [[#Alaidroos--2015|Alaidroos and Krarti 2015]] ). Whereas as of 2018, 73 countries had already had building codes or were developing them, only 41 had mandatory residential codes and 51 had mandatory non-residential codes (Global Alliance for Buildings and Construction et al. 2019). Therefore, the feasibility of capturing this potential is a subject to greater coverage, adoption, and strength of building codes.

Low rates of building retrofits are the major feasibility constraint of building decarbonisation in Developed Countries. Long building lifetime and their slow replacement caused a lock-in of low energy performance in old buildings of Developed Countries, especially in urban areas. A few studies of developing countries, mostly medium and high-income, also considered building retrofits ( [[#Prada-Hernández--2015|Prada-Hernández et al. 2015]] ; [[#Yu--2018|Yu et al. 2018]] b; [[#Zhou--2018|Zhou et al. 2018]] ; [[#Krarti--2019|Krarti 2019]] ; [[#Kamal--2019|Kamal et al. 2019]] ). The studies in Developed Countries tend to rely on either of the strategies: very ‘deep’ envelope retrofits followed by the exchange of HVAC with various advanced alternatives ( [[#Csoknyai--2016|Csoknyai et al. 2016]] ; Novikova et al. 2018c,b; [[#Duscha--2019|Duscha et al. 2019]] ; Filippi [[#Oberegger--2020|Oberegger et al. 2020]] ) or more shallow retrofits followed by switching to low-carbon district heating or by the exchange of current HVAC with heat pumps linked to onsite renewables backed up energy storages ( [[#Yeh--2016|Yeh et al. 2016]] ; [[#Kotzur--2020|Kotzur et al. 2020]] ; [[#Hirvonen--2020|Hirvonen et al. 2020]] ). The factors, which impact the feasibility of these strategies, therefore, are the building retrofit rates and replacement rates of building systems. To achieve the building stock decarbonisation by 2050, most studies reviewed in Figure 9.16 assume ‘deep’ retrofit rates between 2.5% and 5%, and even 10% per annum. [[#Esser--2019|Esser et al. (2019)]] reported that the annual renovation rate in EU-28 is around 0.2%, with relatively small variation across individual EU member states. [[#Sandberg--2016|Sandberg et al. (2016)]] simulated retrofit rates in eleven European countries and concluded that only minor future increases in the renovation rates of 0.6–1.6% could be expected. Therefore, without strong policies supporting these renovations, the feasibility to achieve such high ‘deep’ retrofit rates is low.

Among key factors affecting the costs-effectiveness of achieving high-performance buildings remain low energy prices in many countries worldwide ( [[#Alaidroos--2015|Alaidroos and Krarti 2015]] ; [[#Akander--2017|Akander et al. 2017]] ) and high discount rates reflecting low access to capital and high barriers. [[#Copiello--2017|Copiello et al. (2017)]] found that the discount rate affects the economic results of retrofits four times higher than the energy price, and therefore the reduction in upfront costs and working out barriers are the feasibility enablers.

The good news is that literature expects a significant cost reduction for many technologies, which are relevant for the construction of high energy-performance buildings and deep retrofits. Applying a technology learning curve to the data available for Europe and reviewing dozens of studies available, [[#Köhler--2018|Köhler et al. (2018)]] estimated the cost reduction potential of biomass boilers, heat pumps, ventilation, air conditioning, thermal storages, electricity storages, solar PVs and solar thermal systems of 14%, 20%, 46–52%, 29%, 29%, 65%, 57%, and 43% respectively in 2050; no significant cost reduction potential was found, however, for established and wide-spread insulation technologies. More investment into Research, Development and Demonstration (RD&amp;D) to reduce the technology costs and more financial incentives to encourage uptake of the technologies would allow moving along this learning curve.

Furthermore, some literature argues that the key to cost-effectiveness is not necessarily a reduction in costs of technologies, but a know-how and skills of their choosing, combining, sequencing, and timing to take the most benefits of their interdependence, complementarity, and synergy as illustrated by many examples ( [[#Lovins--2018|Lovins 2018]] ; [[#Ürge-Vorsatz--2020|Ürge-Vorsatz et al. 2020]] ). However, the scenarios reviewed lack such approaches in their cost assessments. Few indicative examples of cost reduction at scale were provided though not by the scenario literature, but case studies of the application of One-Stop Shop (OSS) approach at scale ( [[#9.9.4|Section 9.9.4]] ). In 2013, the Dutch Energiesprong network brokered a deal between Dutch building contractors and housing associations to reduce the average retrofit costs from EUR130,000 down to EUR65,000 for 111,000 homes with building prefabrication systems and project delivery models while targeting energy savings of 45–80% ( [[#Ürge-Vorsatz--2020|Ürge-Vorsatz et al. 2020]] ); out of which 10,000 retrofits have been realised by 2020. The French Observatory of Low Energy Buildings reported to achieve the cost-effective deep renovations of 818 dwellings and 27 detached houses in France setting a cap for absolute primary energy consumption to achieve after renovation and a cap for the budget to deliver it. The cost-effectiveness was, however, calculated with grants and public subsidies ( [[#Saheb--2018|Saheb 2018]] ).

The literature emphasises the critical role of the time between in 2020 and 2030 for the building sector decarbonisation ( [[#IEA--2020a|IEA 2020a]] ; [[#Roscini--2020|Roscini et al. 2020]] ). To set the sector at the pathway to realise its whole mitigation potential, it is critical to exponentially accelerate the learning of this know-how and skills to reduce the costs and remove feasibility constraints to enable the penetration of advanced technologies at speed that the world has not seen before. The World Energy Outlook ( [[#IEA--2020c|IEA 2020c]] ) shown in the Net Zero Emissions by 2050 Scenario (Box 9.2) the challenges and commitments the sector will have to address by 2030. These include bringing new buildings and existing buildings to near zero, with a half of existing buildings in Developed Countries and a third of existing buildings in developing countries being retrofitted by 2030. These also mean banning the sale of new fossil fuel-fired boilers, as well as making heat pumps and very efficient appliances standard technologies. The Net Zero Emissions by 2050 Scenario achieves almost fully to decarbonise the sector by 2050, with such commitments reflected neither in the planning and modelling efforts ( [[#9.9|Section 9.9]] ) nor in policies and commitments ( [[#9.9|Section 9.9]] ) of most world countries, with the countries of South-East Asia and Pacific, Southern Asia, Africa, and Latin America and Caribbean having the least research.

As discussed in [[#9.6.1|Section 9.6.1]] , the alternative and low-cost opportunity to reduce the sector emissions in the countries with high floor area per capita and the low stock turnover is offered by the introduction of the sufficiency approach. [[#9.9.3.1|Section 9.9.3.1]] discusses a range of policy instruments, which could support the realisation of the sufficiency potential. As the approach is new, the literature does not yet report experiences of these measures. In the framework of project OptiWohn, the German cities of Göttingen, Köln und Tübingen just started testing the sufficiency approach and policy measures for sufficiency ( [[#Stadt%20Göttingen--2020|Stadt Göttingen 2020]] ). Therefore, the feasibility of realising the sufficiency potential depends on its recognition by the energy and climate policy and the introduction of supporting measures ( [[#Samadi--2017|Samadi et al. 2017]] ; [[#Ellsworth-Krebs--2020|Ellsworth-Krebs 2020]] ; [[#Goldstein--2020|Goldstein et al. 2020]] ). More research is needed to understand which measures will work and which will not.

Similar to buildings, the energy consumption and associated emissions of appliances and equipment is driven by the replacement of old appliances and the additional stock due to the increase in penetration and saturation of appliances. The feasibility of appliance stock replacement with efficient options is higher than the feasibility of building stock replacement or retrofit due to their smaller size, shorter lifetime, and cheaper costs ( [[#Chu--2006|Chu and Bowman 2006]] ; [[#Spiliotopoulos--2019|Spiliotopoulos 2019]] ). Some literature argues that once appliances achieve a particular level of efficiency their exchange does not bring benefits from the resource efficiency point of view ( [[#Hertwich--2019|Hertwich et al. 2019]] ). Even through the data records a permanent energy efficiency improvement of individual devices (Figure 9.12), their growing offsets energy savings delivered by this improvement. The emerging literature suggests addressing the growing number of energy services and devices as a part of climate and energy policy ( [[#Bierwirth--2019b|Bierwirth and Thomas 2019b]] ). [[#9.5.2.2|Section 9.5.2.2]] describes measures for limiting demand for these services and [[#9.5.3.6|Section 9.5.3.6]] addresses reducing the number of technologies through their ownership and use patterns. ( [[#Grubler--2018|Grubler et al. 2018]] ) also suggested redefining energy services and aggregating appliances, illustrating the reduction of energy demand by a factor of 30 to substitute over 15 different end-use devices with one integrated digital platform. More research is needed to understand opportunities to realise this sufficiency potential for appliances, and more research is needed to understand policies which may support these opportunities ( [[#Bierwirth--2019a|Bierwirth and Thomas 2019a]] ).

The difference between baselines is among the main reason for difference between the potential estimates in 2030 reported by [[IPCC:Wg3:Chapter:Chapter-6|Chapter 6]] on buildings of AR4 (Levine et al. 2017) and the current section of AR6. For Developed Countries, the sector direct and indirect baseline emissions in AR6 are 43% and 28% lower than those in AR4 respectively. For developing countries, the sector direct baseline emissions in AR6 are 47% lower than those in AR4, and the sector indirect baseline emissions are 3% higher than those in AR4. As AR6 is closer to 2030 than AR4 and thus more precise, the likely reason for the difference (besides the fact that some potential was realised) is that AR4 overall overestimated the future baseline emissions, and it underestimated how quickly the fuel switch to electricity from other energy carriers has been happening, especially in developing countries. As illustrated, the baseline is one of determinant of the potential size and hence, all reported estimates shall only be interpreted together with the baseline developments.

The potential is a dynamic value, increasing with the technological progress. Most potential studies reviewed in [[#9.6.1|Section 9.6.1]] consider today mature commercialised or near to commercialisation technologies with demonstrated characteristics ‘freezing them’ in the potential estimates until the study target year. Until 2050, many of these technologies will further improve, and furthermore new advanced technologies may emerge. Therefore, the potential estimates are likely to be low estimates of the real potential volumes. Furthermore, models apply many other assumptions and they cannot always capture right emerging societal or innovation trends; these trends may also significantly impact the potential size into both directions ( [[#Brugger--2021|Brugger et al. 2021]] ).

With the declining amount of emissions during the building operation stage, the share of building embodied emissions in their lifetime emissions will grow, also due to additional building material ( [[#Peñaloza--2018|Peñaloza et al. 2018]] ; [[#Cabeza--2021|Cabeza et al. 2021]] ). Reviewing 650 lifecycle assessment case studies, [[#Röck--2020|Röck et al. (2020)]] estimated the contribution of embodied emissions to building lifetime emissions up to 45–50% for highly efficient buildings, surpassing 90% in extreme cases.

Recently, a significant body of research has been dedicated to studying the impacts of using bio-based solutions (especially timber) for building construction instead of conventional materials, such as concrete and steel, because more carbon is stored in bio-based construction materials than released during their manufacturing. Assuming the aggressive use of timber in mid-rise urban buildings, [[#Churkina--2020|Churkina et al. (2020)]] estimated the associated mitigation potential between 0.04–3.7 GtCO 2 per year depending on how fast countries adopt new building practices and floor area per capita. Based on a simplified timber supply-demand model for timber-based new floor area globally by 2050, [[#Pomponi--2020|Pomponi et al. (2020)]] showed that the global supply of timber can only be 36% of the global demand for it between 2020 and 2050; especially much more forest areas will be required in Asian countries, such as China and India and American countries, such as the USA, Mexico, and Argentina. Goswein et al. (2021) conducted a similar detailed analysis for Europe and concluded that current European forest areas and wheat plantations are sufficient to provide timber and straw for the domestic construction sector.

The increased use of timber and other bio-based materials in buildings brings not only benefits, but also risks. The increased use of timber can accelerate degradation through poor management and the pressure for deforestation, as already recorded in the Amazon and Siberia forests, and the competition for land and resources ( [[#Carrasco--2017|Carrasco et al. 2017]] ; [[#Brancalion--2018|Brancalion et al. 2018]] ; [[#Hart--2020|Hart and Pomponi 2020]] ; [[#Pomponi--2020|Pomponi et al. 2020]] ). [[#Churkina--2020|Churkina et al. (2020)]] emphasised that promoting the use of more timber in buildings requires the parallel strengthening of legislation for sustainable forest management, forest certification instruments, and care for the people and social organisations that live in forests. In tropical and subtropical countries, the use of bamboo and other fibres brings more benefits and less risks than the use of timber (ibid). One of the main barriers associated with the use of bio-based materials in buildings is fire safety, although there is extensive research on this topic ( [[#Östman--2017|Östman et al. 2017]] ; [[#Audebert--2019|Audebert et al. 2019]] ). This is a particularly important criterion for the design of medium and high-rise buildings, which tend to be the most adequate typologies for denser and more compact cities. Overall, more robust models are needed to assess the interlinkages between the enhanced use of bio-based materials in the building stock and economic and social implications of their larger supply, as well as the associated competition between forest and land-use activities (for food), and ecological aspects. Furthermore, more research is required on how to change forest and building legislation and design a combination of policy instruments for the specific political, economic and cultural county characteristics ( [[#Hildebrandt--2017|Hildebrandt et al. 2017]] ). Benefits and risks of enhanced use of wood products in buildings are also discussed in Chapter 7, [[IPCC:Wg3:Chapter:Chapter-7#7.4.5.3|Section 7.4.5.3]] .

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