CRREM Retrofit Harmonisation Roadmap. A Guide to Policy Formulation in the European Commercial Real Estate Industry. CRREM Report No. 3

M Haran, PT Davis, Michael McCord, Daniel Lo, Jens Hirsch, Julia Wein, Sven Bienert, Maximilian Spanner, Peter Geiger Peter Geiger, Juan José Lafuente, Erik Landry, Paloma Taltavull, Raul Perez, Ana Maria Martinez, Dirk Brounen

Research output: Book/ReportCommissioned report

Abstract

Material and insights gained within the CRREM project enable the identification of strategies for European policy makers to move towards a more harmonised commercial property retrofit support system, thus encouraging an uptake of actions from the industry. CRREM research to date has shown that the real estate sector has in the main exhibited willingness and determination to embrace its environmental responsibilities. Nonetheless, transitional mobility and levels of intervention and adaptation vary considerably across the sector. Moreover, knowledge and understanding of the implications and transitional risks posed by policy evolution needs to be more powerfully reinforced. Further to supporting the implications and outcomes of policy change there is a pertinent need to transpose national and international goals depicted within the Paris Agreement into meaningful “hard targets” and corresponding timelines for the real estate industry. CRREM has devised a series of decarbonisation pathways for the real estate sector predicated +1.5oC to +2oC scenarios. This report synthesises and analyses existing policy initiatives in order to devise a set of policy recommendations for altering, developing and introducing energy efficiency policies for European regulation which support the upscaling of retrofit actions and seek to mobilise more proactive interventions – particularly targeting the mitigation of carbon intensive assets. The Paris Agreement put in place a global collaborative framework to mitigate the impacts of climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C. As at the end of March 2020 a total of 189 of the initial 197 signatories had formally endorsed their commitments to the 2015 Paris Agreement. Following on from the Paris Accord, the United Nations published their Sustainable Development Goals (SDG) in 2016. These two initiatives have radically transformed the landscape for commercial property owners and investors prompting reform of business operations and transformation in organisational cultures. Conventional asset management frameworks have been reviewed and revised whilst risks models have been overhauled to account for physical and policy risks attributable to climatic change. The commercial real estate sector is undergoing the most radical process of adaptation witnessed in the lifetime of many of the stakeholders and industry leaders tasked with overseeing and conceptualising the necessitated change. Based on a science-based methodology, the CRREM pathways take account of property location and asset class/usetype in order to create meaningful assessment and evaluation of stranding risks and devise optimal retrofit intervention points in the asset lifecycle from an economic and ecological perspective. The visualisation and analytical evaluation afforded by the CRREM tool serves to deepen the understanding of stranding risk and of the need for immediate and impactful intervention strategies across the real estate sector if the targets laid down in the Paris Agreement are to be attained. The economic business case supporting the decarbonisation of the commercial real estate sector is very strong in terms of impact relative to money spend and shows to be more favourable than other key industry sectors. Optimising the real estate decarbonisation opportunity is nonetheless fraught with a series of barriers and challenges. Technical competence and resource capacity feature prominently as barriers to decarbonisation. However, the quality and robustness of data on energy performance and carbon intensity of buildings as well as inconsistencies in embodied carbon capture methodologies are the most persistently cited barriers. The lack of robust and credible data prevents evidence-based decision making, detracts from meaningful performance assessment all of which combines to compromise the business case for the upscaling of green retrofitting. Given the magnitude of emissions, the decarbonisation of buildings and the commercial real estate sector has been identified as a key contributor to the realisation of aspirations laid out in the Paris Agreement. In this context however a lot of obvious questions are still (partially) unanswered: To what extent does the commercial real estate sector or even a specific property need to reduce its prevailing carbon emissions to conform with the 1.5°C and 2°C scenarios and still be “aligned” in 2050? In financial and economic terms what does this mean with respect to direct and indirect investment within the value chain and with regard to expected (energetic) retrofitting costs vs. potential carbon pricing expenditures? How can policy makers and other stakeholders best facilitate and enable this transition towards a decarbonised European real estate sector? Central questions in the development of the “right” regulatory framework and policies in connection with the achievement of the climate targets of the commercial real estate industry are: How high is the CO2 strain on the real estate sector at present? How can the efficiency of existing regulatory instruments be assessed in relation to achieving the 2020/2030/2050 targets? What gap is there in relation to target achievement? How can the goals be achieved through “smart” and market-oriented regulation? How are the instruments used to ensure static efficiency, accuracy of target achievement and dynamic efficiency (as a further incentive to innovate)? How can tenants and landlords in particular be incentivised to work on this common goal? What are potential pitfalls to achieve efficiency targets and what are on that basis well-defined policy recommendations? Our resulting policy recommendations are summarised and cross-referenced in the next chapter as “Key recommendations”. A more detailed narrative and contextual appreciation of the recommendations can be found within the corresponding section of the main text.
Original languageEnglish
Number of pages75
Publication statusPublished - 18 May 2020

Keywords

  • Real estate
  • Commercial real estate
  • Decarbonisation
  • Policy and practice
  • Abatement
  • Climate change
  • Energy efficiency
  • Retrofit

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