How RMI Is Accelerating Demand-Side Transformation to Deliver Ambitious Equitable Climate Outcomes for Buildings

The passage of the US Inflation Reduction Act last week signifies an unprecedented level of funding from the US federal government for bold climate action. However, it is critical that we ensure our actions are focused on the most impactful solutions. To chart the best path forward, we need to know where our pollution is coming from — and critically, what actions to take to reduce this pollution.

The chart below shows our most commonly held belief — that the reduction of greenhouse gas emissions “supply” from well-known sources will help avert the most severe consequences of climate change.  However, that is only half the picture.

Source: https://wedocs.unep.org/xmlui/bitstream/handle/20.500.11822/34428/EGR20ch2.pdf?sequence=3

To understand why these emissions sources are at their current levels and how we can meet mid-century reduction targets, we must evaluate what is driving the demand for these energy sources. While some demand-side answers are relatively obvious (i.e., transportation needs drive demand for oil), there are some noteworthy exceptions — one standout being the buildings sector.

Globally, energy demand for buildings translate to, shockingly, nearly 40 percent of climate-disrupting carbon dioxide pollution. This is due to:

• Buildings’ demand for electricity, often generated from fossil fuel power plants to turn on the lights and run appliances
• On-site burning of fossil fuels, primarily gas, in buildings for heating and cooking
• The heavy dose of fossil energy consumed to produce raw materials that go into constructing a new building — including cement, steel, and more

The demand-side evaluation is critical because it demonstrates the best way to reduce these emissions and chart a climate-aligned path forward.

We can achieve transformational change by reducing the demand that drives climate pollution from the buildings industry through the strategic and equitable deployment of a few key concepts:

• Electrification of all direct pollution sources in buildings (e.g., space heating and cooking appliances)
• A massively increased dedication to holistic retrofits, including deep energy efficiency (e.g., for high cooling loads) of our existing buildings to drive down energy demand and support affordability
• Leveraging the technology innovation and procurement power of the buildings sector to slash the embodied carbon footprint of building materials like concrete and steel
• Focusing delivery of solutions and benefits to frontline, overburdened, and underserved communities and centering those most impacted by climate change during decision-making processes

Electrifying Our Buildings

In the United States alone, over 70 million buildings burn fossil fuels on-site for heating, cooking, or other operations, including an astounding 24 million low-income households. To put this in perspective, in 2010, the United States had approximately 530 large coal-fired power plants operating and generating electricity. Retiring 530 coal plants and replacing them with clean energy isn’t easy, but the idea of “retiring” fossil infrastructure in 70 million buildings is a challenge unlike any the US climate movement has only recently begun to address in earnest.

Thankfully, technology improvements have made it possible to heat our buildings with efficient, electrified systems like heat pumps and cook our food with safer, healthier induction stoves. And, critically, decreased costs means it makes more economic sense to electrify a building than to run it off price-volatile fossil fuels or even more expensive biogas or hydrogen.

Electrifying 70 million buildings in the United States is a tall order but it is entirely achievable if we combine smart policy choices that advance electrification opportunities in new and existing buildings and plan for a shrinking fossil fuel market; continue to modernize the grid while accelerating clean energy capacity additions; drive market evolutions that scale up deep retrofits and make it easier for consumers; and properly account for the harmful health impacts of building-sector pollution. RMI has been leading and collaborating on these fronts for many years, and this recipe is replicable across much of the globe, giving us a good chance at taking the 10 percent of global emissions tied to direct burning of fossil fuels in our buildings down to zero of global emissions tied to direct burning of fossil fuels in our buildings down to zero.

Improving Energy Efficiency through Holistic Building Retrofits

It may be a cliché but the truth in the saying remains — the greenest unit of energy is the unit of energy that is never generated thanks to efficiency and conservation. The “indirect emissions” tied to the built environment (i.e., the pollution from power plants associated with the generation of electricity that is consumed in buildings) can be eliminated with a large-scale build-out of clean energy technologies like wind, solar, and energy storage to replace all fossil-fuel power plants. However, energy efficiency and conservation upgrades to our buildings will also play a massive role in reducing overall costs of the clean energy transition. Lower energy consumption allows us to avoid unnecessary buildout of some of that clean energy infrastructure. The less electricity we use, the less power sector infrastructure we need and need to pay for.

But building retrofits, at their core, are about people — expanding energy affordability; improving comfort, health, and safety for occupants; and eliminating pollution to lower climate and air quality impacts of appliances. Siloed building retrofit programs are essentially a game of whack-a-mole, tackling one issue but leaving another unaddressed. Whole-building, comprehensive retrofits that are delivered at little to no upfront cost to low-income families while also addressing health and safety, energy cost burden, and bill assistance are some of the most critical tools we have to equitably reduce the indirect climate emissions tied to the built environment.

Thankfully, programs like Energiesprong in Europe and REALIZE in the US are already innovating retrofit delivery models to create entire net-zero communities from existing structures. The Advanced Building Construction Collaborative — a group of governments, industry leaders, technology developers, designers, and construction experts — is streamlining energy efficient, industrial construction practices. The green mortgage industry holds a trillion dollar opportunity to leverage point-of-sale financing and the housing market to make retrofits more affordable. And federal, state, and local governments can play a critical role by creating and funding one-stop-shop holistic retrofit programs and adopting strong, ambitious energy codes.

Reducing Embodied Carbon in Building Construction

Possibly the most overlooked source of energy demand from the built environment is all of the electricity, heat, and resulting pollution associated with the production of construction materials, like steel and concrete. The first chart presented above “assigns” the emissions from building construction and materials to “industry” or “electricity and heat production.” But the reality is the buildings industry is driving the demand for energy associated with those emissions — emissions that equate to approximately 10 percent of all global climate pollution. This means we must catalyze change and reduce the embodied carbon emissions of construction materials.

Although lower-carbon industrial technologies to produce raw materials like steel and concrete are necessary, reduction in embodied carbon is more than a technological challenge at a manufacturing plant. Through whole-building design, one-to-one material replacement, and specification and procurement practices, we have found that a building could achieve 19–46 percent reduction in embodied carbon at no more than a 1 percent premium. These game-changing approaches, when scaled via construction portfolios and policy shifts, would have massive trickle-up impacts in the building construction materials market, signaling to manufacturers a greater demand for low-carbon building materials.

Focusing on Equitable Solutions

Throughout all efforts to fully decarbonize our building stock, there must be a core commitment to delivering benefits to historically overburdened and underserved communities. Historic burdens and injustices from the housing and energy sectors have fallen on low-income and communities of color, while the devastating impacts of climate disruption already are and will continue to be experienced by those same communities.

Policymakers need to invite and collaborate directly with impacted constituencies to hear what needs to change in their homes and buildings, bringing communities into decision-making spaces to stay accountable and ensure transparent processes. Building energy policies must be holistic and deliver health, climate, and economic benefits to those that will be impacted the most. Markets need to reflect and evolve to break down historic barriers and exclusionary practices that could impede the delivery of benefits to environmental justice communities. We must recognize that we’re talking about, working in, and crafting policy that will actively impact life around kitchen tables across the globe. If we do not center inclusivity, justice, and equity in our work, we simply will not succeed.

Building-Sector Transformation Is Possible

Although we have policy, market, and technology solutions to achieve building-sector decarbonization, the urgency at which we need to act could not be greater. In the United States, we are connecting a new customer to the fossil gas distribution system every minute. In the Global South, we are constructing a new city the size of New York every month, increasing the electricity demand as more mechanical cooling solutions are installed in ever-warming climates like those in India. Through ambitious policy change, innovative market transformation, and scalable technology solutions, a concerted focus on demand-side solutions to drive down and ultimately eliminate fossil fuels from the buildings sector is not only achievable but will also deliver climate and health benefits to families and communities across the world.