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The operations of buildings account for 30% of global final energy consumption and 26% of global energy-related emissions1 (8% being direct emissions in buildings and 18% indirect emissions from the production of electricity and heat used in buildings). Direct emissions from the buildings sector decreased in 2022 compared to the year before, despite extreme temperatures driving up heating-related emissions in certain regions. In 2022, buildings sector energy use increased by around 1%.
Minimum performance standards and building energy codes are increasing in scope and stringency across countries, and the use of efficient and renewable buildings technologies is accelerating. Yet the sector needs more rapid changes to get on track with the Net Zero Emissions by 2050 (NZE) Scenario. This decade is crucial for implementing the measures required to achieve the targets of all new buildings and 20% of the existing building stock being zero-carbon-ready2 by 2030.
1Energy sector CO2emissions include emissions from energy combustion and industrial processes.
2Zero-carbon-ready buildings are highly energy-efficient and resilient buildings that either use renewable energy directly, or rely on a source of energy supply that can be fully decarbonised, such as electricity or district energy. The zero-carbon-ready concept include both operational and embodied emissions.
Countries and regions making notable progress in decarbonising buildings include the following:
In 2022, direct emissions from buildings operations declined slightly year-on-year, in contrast to the trend over 2015 to 2021 when they grew on average almost 1% per year. At the same time, indirect emissions from buildings operations grew by around 1.4% in 2022, reflecting an increased reliance on electricity.
Emissions trends differed by region. In the European Union, emissions fell in 2022, aided by a mild winter, while in the United States, buildings emissions increased, driven by extreme temperatures. To get on track with the NZE Scenario, emissions must fall by 9% per year on average until 2030, more than halving by the end of the decade.
Beyond the direct and indirect emissions from buildings operations, another 2.5 Gt CO2 in 2022 were associated with buildings construction, including the manufacturing and processing of cement, steel, and aluminium for buildings. Altogether, buildings operations and construction emissions account for more than one-third of global energy-related emissions. Mitigation and adaptation measures are needed across the whole buildings value chain.
Operational energy use in buildings represents about 30% of global final energy consumption. This share jumps to 34% when including the final energy use associated with the production of cement, steel and aluminium for the construction of buildings.
In 2022, for the second year in a row, space cooling saw the largest increase in demand across all buildings end uses, up by more than 3% compared to 2021. By contrast, space heating energy consumption decreased by 4%, mainly driven by a mild winter in several regions, including Europe.
During the past decade, energy demand in buildings has seen an average annual growth of just over 1%. In 2022 energy demand in buildings increased by nearly 1% compared with 2021. Electricity accounted for about 35% of buildings'' energy use in 2022, up from 30% in 2010. Despite a progressive shift from fossil fuels to other energy sources and vectors – especially electricity and renewables – fossil fuel use in buildings has increased at an average annual growth rate of 0.5% since 2010.
In the NZE Scenario, energy consumption in buildings drops by around 25% and fossil fuel use decreases by more than 40% by 2030. The traditional use of biomass, associated with air pollution and its health consequences, is completely phased out and universal energy access, as delineated in United Nations Sustainable Development Goal 7, is achieved.
By 2030, global floor area is expected to increase by around 15%, equivalent to the entire built floor area of North America today. Around 80% of this floor area growth is expected to be in emerging market and developing economies.
In 2022 venture capital (VC) investment increased across the energy sector, providing support to entrepreneurs and acting as an important complement to R&D budgets allocated by governments and companies. In buildings, early-stage VC, which typically supports new companies developing less mature technologies, more than tripled. Growth-stage VC, which enables more mature companies to scale up and improve market uptake, was up 70% relative to 2021.
Among early-stage start-ups, construction and renovation (nearly 40%) and energy management and control systems (33%) were the top areas for buildings VC investments in 2022. There was strong growth in heating and cooling technologies: early-stage VC in this area jumped from USD 15 million in 2021 to over USD 100 million in 2022. By comparison, there was close to zero growth-stage VC investment in heating and cooling – nearly 70% of these being concentrated in construction and renovation and another 25% in energy management and control systems.
The feasibility and optimality of clean technology use in buildings relies on various elements of enabling infrastructure. These include distribution systems within buildings for ventilation and/or water, district energy networks for heating and cooling, electric and thermal storage devices, integrated control systems, and electric vehicle chargers.
Buildings equipped with digital technologies for demand-side response, such as smart thermostats and on-site renewable energy generation and storage, can interact with the power grid to limit spikes in energy demand that are costly to consumers and taxing for transmission grids. Efforts to make sure buildings strategies are compatible with future development of the electricity grid and other relevant infrastructure are critical to get on track with NZE Scenario milestones.
Several countries have strengthened regulations mandating net zero or zero-carbon-ready buildings in recent years:
Investment in energy efficiency in buildings increased by about 14% to over USD 250 billion in 2022, continuing the rapid growth of the past few years. Maintaining similar progress of at least 11% year-on-year growth could put the sector on track to reach 2030 annual investment levels needed in the NZE Scenario.
The increase in efficiency investment in 2022 was the result of continued spending in major markets including the United States, Germany and Italy. The Russian invasion of Ukraine also spurred the broader Europe region to use energy efficiency as a tool to ensure energy security, and the US Inflation Reduction Act is already having an effect. Meanwhile, spending decreased in China alongside a 10% reduction in construction sector investment, which also slowed the delivery of buildings meeting Chinese green building standards.
Early signals suggest that a major slowdown can be expected in 2023. Increased geopolitical uncertainty surrounding the length of the conflict in Ukraine combined with adverse global economic trends, including high inflation and stringent monetary policies, are expected to slow construction and energy efficiency spending. This is compounded by the end of a subsidy cycle in many markets, including in China and Europe. Such a setback may prevent the sector from reaching its end-of-the-decade target in the NZE Scenario, which calls for investment to more than double.
While construction remains a relatively localised industry, value chains for building materials, appliances, and equipment are increasingly globalised. International collaboration and alignment can support countries that have limited institutional capacity to design and enforce buildings policies and encourage private sector actors to better align their buildings products with net zero objectives. In recent years:
The Global Alliance for Buildings and Construction, the World Green Building Council and the Global Buildings Performance Network, among others, are key initiatives to catalyse buildings'' decarbonisation on an international scale. Other examples of governments and broader stakeholder groups sharing knowledge and best practice include the IEA Technology Collaboration Programmes and the Energy Efficiency Hub, which recently launched the Energy Efficiency in Buildings Task Group.
The buildings sector can contribute to achieving net zero emissions at the system level by tackling embodied emissions associated with building construction, equipment and materials. Several construction companies and equipment manufacturers are developing robust decarbonisation plans, pledging to use 100% net zero concrete, implement material efficiency strategies, and reuse and recycle materials.
Building energy codes are an essential policy tool for improving buildings performance. Adapting energy codes to include metrics for life cycle emissions and resiliency requirements is fundamental to reflect evolving needs for decarbonising buildings and improving building performance, comfort, and resilience. Regulations can also require that new buildings be "demand-response ready" to enable future flexibility.
Building energy performance certificate schemes or disclosure programmes can enhance compliance with building codes by publicising important data about buildings'' energy efficiency and informing consumer choices. Award and recognition programmes can further encourage low-carbon constructions.
Expedited administrative permitting procedures privileging high-performing new builds or retrofit projects can incentivise the implementation of efficiency measures. Enforcement, monitoring and compliance practices should be streamlined to reduce the bureaucratic burden on buildings stakeholders. Clear guidance for the accounting and reporting of buildings performance indicators is essential.
Policy makers should also introduce and strengthen product standards to accelerate the shift towards best-in-class appliances and equipment.
Setting mandatory targets towards zero-carbon-ready buildings fosters market growth and facilitates long-term investment decisions. Targets can include renewable penetration quota, fossil fuel bans, and target renovation rates to foster market growth and facilitate long-term investment decisions.
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