A roadmap for decarbonising construction sector and assessing transition risks
By Zofia Aniołkowska, carbon expert, Gleeds Polska
The Paris Agreement, signed and ratified by all European countries, aims to keep the increase in global average temperature to well below 2C above pre-industrial levels and to pursue efforts to limit it to 1.5C.(1) The target is to become carbon neutral by 2050. It requires action from all sectors of the economy.(2) As the construction and real estate sector accounts for about 38%(3) of global greenhouse-gas (GHG) emissions, there are more and more initiatives supporting its decarbonisation. We have solutions to make new-built projects sustainable, starting from the design – but what about the existing buildings?
How the owners of existing real estate can respond to the Paris Agreement?
One of most efficient ways to start is CRREM – Carbon Risk Real Estate Monitor. It’s a European Horizon 2020 research and innovation project providing decarbonisation targets, created in line with the Paris Agreement to enable the assessment of the potential transition risk for properties. CRREM is now considered a leading tool to manage CO2 emissions and associated risks. Investors and building owners are increasingly aware of the necessity of monitoring and responding to these risks, and CRREM analysis is more and more often a part of their inquiries.
CRREM is software that derives carbon footprint and energy consumption intensities either for a property or portfolio. To use it, information about the real estate assets (location, size, and use) must be provided to then be combined with data on energy consumption, fugitive emissions, renewable on-site and off-site energy sources and others, to calculate the carbon footprint of each asset.
The building’s carbon footprint is the estimated sum of greenhouse gas emissions over its life cycle. It is expressed as the equivalent of CO2 emissions per reference unit (one building or a square meter of usable floor space). It includes operational emissions (from heating, cooling, lighting, and other energy-intensive activities) and embodied carbon (from all the materials and systems built into the structure).
The CRREM is intended for existing building, therefore it focuses on the operational carbon footprint, however it also takes into account emissions resulting from refrigerant loses.
Compliance with the Paris Agreement goals is demonstrated by comparison of the building’s carbon footprint to pathways, which are decarbonisation targets forming a roadmap. It is a strategy on how to reduce carbon emissions until 2050, to the chosen 1.5C or 2C target. And CRREM provides pathways for energy intensity reduction, too.
What are the main results of CRREM analysis?
The main result of the analysis, also the one most requested by clients, is the asset’s performance comparison with the decarbonisation targets. It is presented in a form of a ‘stranding diagram’. It indicates the stranding point, which can be defined as the moment when the asset’s GHG intensity is higher than set decarbonisation target.
Should one be noted, beginning with the stranding year, the asset will not be deemed ‘Paris-proof’ unless retrofit actions are taken. The selected decarbonisation path assumes that lower and lower emission values are to be accepted year by year. Therefore, for the roadmap to be effective and fulfil its function, the building should be modernised before the stranding point. Otherwise, it will produce subsequent emissions above the permissible level (excess emissions), which makes a substantial risk indicated by CRREM. It is co crucial because a higher risk of economic obsolescence appears for assets where stranding point occurs. Effectively, a stranding year is an important date that will affect investment decisions, for instance on undertaking retrofit actions.
Fig.1: Stranding diagram. (based on: CRREM_Guidelines_2022.pdf)
Other sample CRREM findings cover estimated energy costs, cumulative emissions until 2050, the remaining emissions budget according to the targets, the amount of excess emissions with information on their amount per floor area and their costs, estimated costs of retrofitting to comply with the decarbonisation target.
When it comes to the portfolio’s analysis, the tool enables us to forecast how the percentage of stranded asset will grow in time, average portfolio GHG and energy intensity and summary of portfolio excess emissions’ costs.
So what does CRREM do and what value can it bring?
One of the CRREM’s advantages is its flexibility, which means that it may be tailor-made to meet the specific requirements of different investors and asset managers, no matter if they manage or own a single property or a whole portfolio. It might be implemented to the buildings of a variety of sectors. Its coverage includes office, hotel, retail, industrial, healthcare and mixed-use buildings.
Basically, CRREM by default calculates a building’s carbon footprint using location-based emission factors. However, more advanced users shall be entitled to set their own values for emission factors, carbon and energy prices, and even plan their own decarbonisation pathways.
Another essential, yet often underrated piece of information that CRREM provides is about the building’s energy intensity and the date on which the energy reduction pathway is exceeded. Its importance is caused by the fact that even when the GHG intensity of the building is low, it can still have high energy intensity. This should not be ignored as the energy efficiency is a significant feature of net zero building, and it is insufficient to buy green energy or offset emissions.
What are main risks/disadvantages of CRREM?
As every tool available CRREM is a sufficient solution only combined with a human/expert careful interpretation. All default data provided by the tool is based on international benchmarks and national averages that are known to be reliable. Moreover, a user may as well overwrite those data if there such need occurs.
The situation gets more complicated and sensitive, when it comes to the data input of energy consumption, and data coverage. The quality of the information may be poor, for the following reasons. Not all buildings are fully metered, especially those old ones. Sometimes information about data consumption is not available on tenants’ areas and every so often, due to lack of separate meters, it is impossible to exclude parking or external areas.
Even though CRREM is a tool designed to extrapolate data for missing information, the less of data is put in, the less believable results get. Consequently, it is highly relevant to approach this task diligently and put adequate data for 12 months responding period. All eventual data gaps should be well-known to the user.(4)
In conclusion, CRREM is a valuable tool for addressing the carbon risks of real estate. By using CRREM, one can assess the carbon footprint of the portfolio, identify the assets with the highest carbon emissions, and make informed decisions on reducing their carbon footprint. Its flexibility allows the specific needs of different investors and asset managers to be met. By using CRREM, investors and asset managers can improve their reputation and credibility by demonstrating their commitment to minimising their carbon footprint, and make informed investment decisions that are economically and environmentally sustainable.