• krisverhellen

Decarbonising the built environment

Updated: Feb 7

McKinsey organized a round table at the COP26 Climate Conference on the ways the cement and construction industry – accounting for roughly 25% of global emissions - will achieve net zero by 2050

Almost all of the emissions of this industry come from materials processing and building operations, so the focus should be:

For new buildings:

- Incorporating alternative materials in new buildings

- Decarbonized cement and steel

- Reduced embodied carbon

For existing buildings:

- Renewable energy sources

- Efficient building operations, measuring performance

- More convenient end-to-end retrofit solutions

This requires the industry to decarbonize 3 times faster in the next thirty years than it did in the last three decades. On a stand-alone basis, companies are hindered by a first mover problem between policy, funding and projects. However they become aware that it is now a point of competitive differentiation and that they will need to form or join coalitions to keep up the pace of investment and innovation.

The industry historically has relied on GDP and population growth to focus on volume rather than value. Meeting new green demand will require a focus on value. Those who do not decarbonize will / should have less access to funding or planning approval and face an existential threat.

The industry should boost innovation by developing common standards, shared R&D resources and a forum to navigate and align decarbonization levers and new technologies.

There is no shortage of patient green financing. Investors rather face a shortage of large-scale green projects. Corporates can channel capital by making bigger bets on sustainability and partnering with green startups serving the built environment.

In the retrofit market, customers are deterred by complexity, unattractive offerings and unclear financial benefits. A design-thinking approach should lead to high-quality, convenient solutions with a clear payback.

However the construction industry is notoriously slow to change. Setting targets for net new growth, promoting “test and learn” with minimum viable products, deploying venture capital-style metered funding, increasing R&D budgets, using certifications to drive a sustainability premium and fostering precompetitive collaboration will take valuable time.

Policy and capital will make skills the bottleneck down the line: the retrofitting workforce of tomorrow is not in place today. Industry leaders across the public and private sectors need to start developing the skills and capacity to deliver on the anticipated demand.

The public sector also needs to align “decarbonomics” incentives:

- Carbon pricing

- Higher building performance standards

- Building code changes

- Clarity on investment horizons for transitional solutions (e.g. biomass)

5 views0 comments

Recent Posts

See All