Published 2 months ago.
About a 4 minute read.
Image: Andre Furtado
Cities and states are incentivizing retrofits because buildings are major emitters — and because retrofit investments offer significant long-term ROI through energy savings alone.
In the US, building operations account for almost 40 percent of national
As a result, a growing number of cities and states are tackling emissions from
their real-estate portfolio by incentivizing building owners to perform
low-carbon retrofits — building upgrades that reduce operating emissions while
also, over time, saving money through energy-efficiency paybacks.
In North America, it's estimated that the rate of buildings retrofitted,
currently at about 1 percent, needs to at least
in order to meet the climate goals outlined in the Paris Agreement. An
estimated $3 trillion in investment will be required — making the low-carbon
retrofit economy a major new source of economic growth, jobs and labor
development in the next two decades.
As a result, policymakers are prioritizing low-carbon retrofits as a way to meet
emissions targets, while also creating jobs and growth.
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For example, in 2019, the City of New York (where buildings account for 68
percent of all emissions) passed Local Law
which sought to aggressively reduce the city’s footprint by requiring building
owners to decrease emissions in all buildings larger than 25,000 square feet by
25 percent by 2024, and 40 percent by 2030.
To support these efforts, the city also opened a “retrofit
accelerator” — where building owners get expert
technical advice, learn about incentives and financing options, and more.
Low-carbon retrofits can seem like just another cost to businesses, especially
commercial real-estate portfolio owners and retailers — many of whom are still
recovering from demand shifts that began during the
when remote work and online shopping trends accelerated. But in reality, these
investments can offer significant return on investment and reasonable payback
periods, once incentives and cost savings are accounted for.
Catalys Labs — a Canadian AI company that helps
retailers and other building owners develop low-carbon retrofit plans for their
portfolios — says that given the technical complexity of low-carbon retrofits,
many building owners delay investments or make investments that aren't
optimized, leaving money on the table.
“Reducing energy and carbon emissions is one of the most reliable investments a
retail organization can make,” said Catalys CEO Luke
Ferdinands. “But it’s an
incremental process — and relies on the accumulation of dozens of small changes
in equipment, operating parameters and policies. These add up quickly to deliver
avoided costs, reduced maintenance expenses and higher operating efficiencies.
Low-carbon retrofits also generate a very strong return on investment; one of
the best in the current market,” he added.
As a result, other North American jurisdictions are following New York's lead,
with their own tailored retrofit policies.
In Vancouver, British Columbia, 55 percent of emissions comes from
buildings; and new
is targeting existing commercial and multi-family residential buildings with the
goal of reaching net zero emissions from buildings by 2040. The city, similar to
New York, is limiting the emissions "intensity" of buildings and will impose
penalties on properties when the emissions per square foot exceed a prescribed
limit. This improves the business case, and increases the time pressure, for
investment in low-carbon retrofits.
Vancouver is also requiring all building owners to report their emissions and
energy use by January 2025 for all multi-family buildings over 100,000 square
feet, and by January 2026 for all buildings over 50,000 square feet.
Back on the east coast, Toronto has plans for similar policies. The city's
plan recommends a law
that existing buildings meet emissions-performance standards aligned with the
city’s climate targets. Building owners and operators who don’t meet those
targets will be fined, with the revenue directed to further municipal climate
action. Toronto's buildings account for 61 percent of the city's carbon
Cities and states are targeting buildings because they are major
— and also because retrofit investments can pay for themselves through energy
savings over time, with significant long-term ROI possible for many building
However, for larger portfolio owners, emissions-reduction planning can be
technical and involve complex tradeoffs and new skillsets. Building owners may
want to both improve building
and add other beneficial customer-facing upgrades such as EV charging or onsite
renewables that demonstrate their commitment to sustainability to their
customers and other stakeholders, but may not know where to start.
Waiting can create costs — as the most lucrative financial incentives for
retrofits are coming online now to promote early adoption and may not be as
generous in 5-10 years — while emissions penalties are increasing quickly.
It’s essential to take a proactive approach to retrofits — ideally, with a
portfolio-wide strategy that takes full advantage of incentives and financing
opportunities and seeks to offset any potential penalties in the most
cost-effective way possible.
Those who are prepared to access support when it is first made available will
see the greatest rewards — as some programs, like Vancouver’s support for
multi-family building retrofits, have caps on the number of participants and
limits to the amount of funding available.
As Ferdinands says, “The time to act is most definitely now.”
Published Sep 29, 2023 8am EDT / 5am PDT / 1pm BST / 2pm CEST
Jeremy Osborn is a NYC-based entrepreneur and and senior consultant with a background in marketing and communications, tech, strategy, governance, and sustainability. He holds an MA in Resources, Environment, and Sustainability from the University of British Columbia and has worked for leading brands in a wide range of industries and sectors — including food and ag, consumer goods, built environment, industrial manufacturing, energy, finance, transportation, and more.