Accelerating Building Efficiency

Eight Actions for Urban Leaders

With buildings responsible for 32 percent of global energy consumption and a quarter of CO2 emissions, there is a huge, under-tapped opportunity to create more sustainable cities through building efficiency. More efficient buildings can generate economic benefits, reduce environmental impacts and improve people’s quality of life.

Developed in partnership with Johnson Controls, the report offers practical advice for city leaders, including eight clear and specific recommendations to unlock building efficiency. It presents a politically smart, common-sense approach that will help usher in a new era of better buildings suited for the 21st century.

To read the interactive version of the report, click here

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Key Findings

Executive Summary

This guide provides local governments and other urban leaders in cities around the world with the background, guidance, and tools to accelerate building efficiency action in their communities. The primary intended audience is local government officials in urban areas.

Efficient buildings—those that make highly productive use of natural resources—are vital to achieving sustainable development: They align economic, social, and environmental opportunities, creating so-called “triple bottom line” benefits.

  • Economic development: Buildings are responsible for 32 percent of global energy consumption and one-quarter of global human-induced CO2 emissions.1 Energy costs can be a significant burden on a household or business budget. Increasing energy productivity through measures like building efficiency has the potential to slow the growth of energy demand in developing countries by more than half by 2020. Each additional $1 spent on energy efficiency avoids more than $2, on average, spent on energy supply investments.2 Building efficiency frees up capital for other strategic investments, helping city governments face multiple competing demands for scarce financial and human resources.3
     
  • Social development: Current projections indicate that 66 percent of the world’s population will live in cities by 2050.4 Buildings form the fabric of our urban landscapes. There is a tremendous opportunity today to shape tomorrow’s cities and buildings and avoid “locking in” inefficiencies by applying resource efficient planning and design to buildings and the urban environment. In the coming decades, as these cities face rapid urbanization, buildings will play an ever-increasing role. Efficient buildings can help improve the quality of life of millions of people because they are often higher-quality buildings, with greater comfort and improved indoor and outdoor air quality. Energy efficiency can stretch existing electricity resources further, helping to provide better energy access, reliability, and security to urban residents.
     
  • Environmental sustainability: A study by the International Energy Agency (IEA) shows that, if implemented globally, energy efficiency measures in the building sector could deliver CO2 emissions savings as high as 5.8 billion tonnes (Gt) by 2050, lowering greenhouse gas emissions by 83 percent below the business-asusual scenario.5 Most of these technologies are commercially available today and many of them deliver positive financial returns within relatively short payback periods.6 

​Rapid rates of urbanization in much of the world will lead to an unprecedented expansion of the built environment. The choices being made today about how to build, design, and operate these buildings will affect urban services and livability for decades. Efficient, high-performance, and productive buildings will be a major factor in creating sustainable cities, which, in turn, contribute to sustainable development goals at the regional and national level. 

Local governments can influence the efficiency of new and existing buildings in their communities as owners/investors, conveners/facilitators, or regulators. They can deploy a variety of policy options, ranging from setting targets and leading by example to implementing codes and performance systems, providing financial and non-financial incentives, and supporting stakeholders in buildings in ways that improve the business case for pursuing or financing energy or water efficiency. 

Efficiency goals should connect to specific priorities of local governments and communities, ensuring that the government and citizens optimize, minimize, or manage water, energy, and waste, as appropriate. Policies and programs can support efficient use of resources to provide heating, cooling, lighting, and domestic water, as well as to operate appliances and equipment installed or used in a building. This report serves as a reference guide for identifying and prioritizing appropriate actions to advance efficiency in both communities and organizations.

Policy design processes incorporating multistakeholder, integrative planning efforts can be an effective tool. Integrative planning that engages the buildings sector will help inform governance, policies, and decision-making. Integration of building efficiency in broader urban planning activities can also help institutionalize efficiency strategies across disparate departments within a government.

Policy can help align the interests of all actors around implementing cost-effective efficiency options at each stage of a building’s lifecycle. These stages and their relationship to energy and resource performance comprise the following:

  • Land-use and other urban planning decisions may affect buildings both before and after their construction is proposed. Policies already in place determine many aspects of building design. Urban planning acts as a constraint on private development, and may be intended to improve health, safety, or other desired characteristics of a city or neighborhood. Combining urban planning with energy and resource planning provides a unique opportunity to accelerate efficiency in the built urban environment.
  • The design and construction process includes the siting, orientation, shape, and height of a building as well as the materials and design features of the building. These factors, and the quality of the construction process, will determine indoor and outdoor comfort and energy performance of the building.
     
  • When the building is put up for sale or lease, the developer, realtor, appraiser, owner, and lender should be able to consider the building’s efficiency in the property value assessment. In addition, future operating costs, including energy use, should be a factor in the bank’s loan evaluation of potential buyers.
     
  • Building out new tenant space inside an existing building creates an opportunity to invest in high-performance, resource efficient options, including lighting and energy control systems.
     
  • Tenants and owners make ongoing operations and maintenance decisions. Many of these decisions—from setting the schedule for heating or cooling to how often equipment is tuned up—affect resource usage, and provide an opportunity to improve efficiency.
     
  • Existing buildings periodically need an efficiency retrofit to upgrade equipment, renovate the design, and ensure that building systems are performing well and are energy and water efficient. Improvements to space heating, ventilation and air conditioning (HVAC), water heating, insulation, water fixtures, energy control systems, and lighting are common retrofit measures.
     
  • Finally, a building may experience major rebuilding, or be identified for deconstruction or demolition, which starts the cycle over again and offers new opportunities for finding efficiencies.

Multiple barriers to building efficiency exist, which may make efficiency a lower priority for investment. More specifically, local governments are often confronted with an “efficiency gap,” which can be defined as the difference between technically possible savings, and the savings that are easily achieved. The barriers to improving efficiency are well established, although their severity varies among countries and cities.7 Barriers consist of market, financial, technical, institutional, and awareness-related issues, which can prevent or deter people from making efficiency investments. Policies can help overcome these barriers when they align the interests of all actors at each stage of a building’s lifecycle in order to make pursuing building efficiency a compelling choice (see Figure ES.1). Policy packages can be designed to target key barriers to energy efficiency in any given market, bridge the efficiency gap, and create an opportunity for scaling up efficiency solutions and investment.

The options for local government actions to improve the energy efficiency of the built environment fall into eight categories:

  • ACTION 1: Building efficiency codes and standards are regulatory tools that require a minimum level of energy efficiency in the design, construction and/or operation of new or existing buildings or their systems. When well designed and implemented, codes and standards can cost-effectively decrease energy expenses over a building’s lifetime.
     
  • ACTION 2: Efficiency improvement targets are energy reduction goals that can be set by a local government, either at the citywide community level, or applied to its own publicly owned or rented building stock. City governments can also introduce voluntary targets as a way to incentivize the private sector.
     
  • ACTION 3: Performance information and certifications enable building owners, managers, and occupants to make informed energy management decisions. Transparent, timely information allows decision-makers and city leaders to measure and track performance against targets. Examples of building performance policies include: requiring energy audits, retro-commissioning, formalizing rating and certification programs, and implementing energy performance disclosure requirements. 
     
  • ACTION 4: Incentives and finance can help energy efficiency projects overcome economic barriers, such as those related to upfront costs and “split incentives.” They include grants and rebates, energy-efficient bond and mortgage financing, tax incentives, priority processing for building permits, floor-area allowances, bond and mortgage financing, revolving loans, dedicated credit lines, and risk-sharing facilities.
     
  • ACTION 5: Government leadership by example involves policies and projects undertaken by the government that serve as anexample to create greater demand/acceptance for efficient buildings in the market. This approach can take the form of improving the public building stock, private-public partnership pilot projects, setting ambitious energy efficiency standards and targets, encouraging or mandating procurement of efficient products and services, and stimulating the energy service company (ESCO) market through municipal energy performance contracting (EPC) tenders.
     
  • ACTION 6: Private building owner, manager, and occupant engagement includes technical programs that help motivate building stakeholders. These include local partnerships for efficient buildings, “green lease” guidance, and behavioral mechanisms such as competitions and awards, user-feedback information via kiosks or computer displays, and implementing strategic energy management activities.
     
  • ACTION 7: Technical and financial service provider engagement can facilitate the development of skills and business models to meet and accelerate demand for efficiency. These include technical workforce training, procurement officer education on performance contracting, engagement with the financial industry to help standardize investment terms and reduce transaction costs, establishing revolving loan funds or dedicated credit lines, and considering public-private risk sharing facilities for investments. 
     
  • ACTION 8: Working with utilities can improve access to energy usage data and support utilities’ efforts to make their customers more energy efficient. These programs include energy-use data access, utility public benefit funds, on-bill financing, revenue decoupling, and demand-response programs, to name a few. 

Individual policies can strengthen and complement each other. City planners or officials may improve the outcomes and impact by considering and planning for a set of integrated, related policies through a buildings sector action plan or package of policy measures. This guide is designed to help with the development of such a plan. Key steps of an action plan include identifying the goal, identifying governance of the process, working with local technical experts, securing financing, mobilizing stakeholders, and tracking progress. 

A central question faced by policymakers is how to get started with building efficiency and related policy development. One recommendation is to define the following (see Figure ES.2):

  • What tools can be employed to accelerate energy efficiency in buildings
  • How policy and programs can support and accelerate efficiency in buildings
  • Who can leverage the acceleration of energy efficient buildings

What?

  • A necessary first step in answering the question of “What?” is assessing and understanding a city’s current institutional and legal setting and framework, the data availability on building stock and energy use, and the key stakeholders (scoping).
  • The next step is to focus on the selection of objectives and targets. Targets should be bold and ambitious. Cities can choose to set broad targets in terms of energy savings, CO2 reductions, or other specific benefits. A target should also include a clear timeframe.  Designing a strategy to transform the built environment to be more energy efficient, however, is not a simple process, and to be successful it requires prioritization.

How?

  • An action plan is an important part of the “How?” step because it helps to establish targets and assists in the transition from planningto implementation. A robust action plan will include a set of performance indicators allowing policymakers to assess progress over time
  • Identifying the local capacities that need to be developed is important. Early identification of workforce capacity strengths and gaps can inform a package of technical support measures and trainings that may be required on aspects related to enforcement, legal affairs, and technological knowledge.
  • Investing time and resources in the design of a financial pathway is critical to successful implementation of a package of building efficiency policies. Without a quality financing strategy, these actions are unlikely to deliver much change.

Who?

  • The question “Who?” helps to establish the stakeholders who need to be involved in the process, and their roles.
  • As part of the process, local governments can start by thinking about their own institution. Successful implementation generally requires significant coordination among municipal departments as well as with provincial/state and national governments. Problems tend to arise when actions taken by government ministries or departments are not aligned. In order to tackle institutional challenges and ensure that the right capacities are in place, it is helpful to specify key roles and players early in the planning process.
  • The creation of multi-stakeholder processes allows cities to identify needs and interests of different groups and facilitates early assessment of program or policy feasibility. Stakeholder engagement can further serve to foster cooperative relationships with industry players and drive program acceptance. In the case of regulatory requirements such as mandatory building audits, it also encourages higher compliance rates.
  • When policies fail or underperform, lack of clear authority or accountability is often to blame. Sufficient attention must be paid to the governance structure underpinning the program. In order to define a governance framework, it is necessary to define who within government will be responsible for what parts of the action plan. 

Finally, to confirm that policy goals are being met, policymakers should include in their planning the metrics and evaluation approaches for tracking progress over time. The results of building efficiency actions can be tracked at the city, policy, building, or even building-occupant level. A suite of tools, focusing on either building efficiency policy or technical assessment, is freely available in the market. Policy tools can help municipal policymakers go through the policy cycle and effectively implement policy packages, while project tools help to design a construction or renovation building project, calculate building energy performance, and estimate potential savings.

In conclusion, although no single government policy or program can drive the transformation toward more efficient buildings on its own, a clever combination of policies and other relevant actions can help transform buildings to be far more efficient over time, providing many benefits to cities and their residents for decades to come.

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