SFC Correspondent Lu Taoran in Beijing
“Globally, less than 1 % of all buildings operate at net-zero carbon in their day-to-day use, and the figure is even smaller once embodied emissions from construction materials are counted,” said Roxana Slavcheva, Global Director for Built Environment at World Resources Institute (WRI) Ross Center for Sustainable Cities. She heads an international policy team that works with sub-national and national governments on resilient, regenerative, and equitable pathways to building decarbonization.
In her view, affordability remains the shared bottleneck for both developed and emerging economies, compounded by gaps in capacity-building, knowledge, and skills. To accelerate green and zero-carbon governance, she urged simultaneous progress across policy frameworks, incentive mechanisms, market scale, and technological innovation.
SFC Markets and Finance: From an international perspective, what stage is the global promotion of green and low carbon buildings currently?
Roxana Slavcheva: So globally we actually have less than 1% of the entire international building stock in zero carbon conditions operationally. If we're looking at also accounting for materials in the construction phase, the number is even less than 1%, and this is for existing buildings. 5% is the rate for new buildings that we've seen over the last five to ten years. And we actually need that rate to get up to 100%. So as you can tell, the gap is massive. We really need to accelerate actions both from the operational and embodied side. And we really need to equip countries and local authorities and also the private sector and industry with the right tools, with the right incentives to mainstream decarbonization in building stock.
We see differences across regions. There are particular regulatory challenges, there are common challenges as well. And those common challenges are, I should say, the most interesting ones and the ones where we can really make a difference.
SFC Markets and Finance: What notable differences exist in technological application and policy support across different regions such as Europe, North America and emerging markets?
Roxana Slavcheva: So in part of the emerging markets, we see more of data issues and data gaps, understanding and benchmarking the existing building structure to begin with and being able to implement life-cycle assessments, and life-cycle accounting for buildings. That seems to be a major gap.
There's fragmentation in the sectors supply chain and through to developers and decision-makers. So that is a big challenge, in terms of providing right incentives, more regulatory perspective for emerging market. But as I mentioned, high upfront costs remain a common challenge that are high and are also increasingly burden on those communities that cannot afford to make those investments in tools for low-carbon building. And for the more mature, more developed markets, it's still an affordability issue. There is also a gap in capacity building and knowledge and skills. We still need to equip both the local authorities and the construction workers with green building practices.
SFC Markets and Finance: Regarding the resilience equity in building decarbonization. What contradictions often arise in their practical advancement, for example, how to balance the cost of low carbon retrofit with affordability for the general public?
Roxana Slavcheva: That's an excellent question and continues to be a challenge. And as mentioned when we look into resilience, it is not only prudent, but it's paramount to invest in flood mitigation, in insulation and heat adaptation measures for buildings. But it's adding on all of these additional layers or additional levels of support. And to build these, of course, adds a burden on maybe renters or the owners. And what we're seeing is, so there is pressure on local governments to find solutions to increase the affordability of those already available technological solutions. And there's insurance and for the risk protection. But it also needs to look into ways to bring in the private sector to take on the risk sharing care forward for investment in these activities.
We see examples from places like New York with their Local Law 97, where they're looking into still maintaining high standard of decarbonization. So there are still carbon caps for most buildings, but there are certain exceptions, incentives and subsidy provided to the social housing and those that cannot afford it to make the decarbonization a reality as quickly and as cheaply as others.
SFC Markets and Finance: What are the pain points in financing global green and low carbon buildings project currently? In response to these pain points, what innovative financial models have you observed that have been proven effective in practice?
Roxana Slavcheva: The main pain point continues to be investors' perception of risk. For investment from financiers, they still don’t seem to get the desired return on investment as well making those either retrofitting investments or creating new buildings that are zero-carbon from scratch. And that is, in a way, a type of market failure. We were looking into ways to plug in that gap through blended finance and de-risking mechanisms. But there are also some additional regulatory and policy challenges and those continue to provide barriers to scale. So it has to be a concerted effort from the public sector to provide the right frameworks and the right guidance from why the investments need to flow in a certain way. So either provide financial tools, innovation, it is something that may already exist in the market but may not have been applied directly to the building sector, for example. Lowering the costs to the consumer, addressing split incentive, all of those tools do exist in the market, but they're not enough on their own. So we're looking into ways to combine them. So we can combine a green bond with an additional incentive for lowering, for example, the risk range for investor or providing guarantee in place and the payback period might be slightly longer for some of these investments, but there's still a guarantee in place that in the returning there.
SFC Markets and Finance: Looking ahead to the next five to ten years, what technologies or the financial tools do you believe will become the key drivers through the green and low carbon buildings? And so what plans does WRI have in the areas?
Roxana Slavcheva: So in terms of technologies, we actually see quite a bit of interest around, building passports and some smart home technology systems. And I think that is a really great way to continue to keep track of consumption, to incentivize behavioral change. But we also need to supplement that with not so much cutting-edge technologies, but existing technologies and to promote their scale.
The existing technologies such as carbon concrete become more mainstream and find the right incentives in the market to really ensure there is demand for it. And then the supply will follow in terms of the scale that is needed. But as I mentioned, there are also other cooling technologies that are more on the passive side that don't require the energy that mechanical cooling will require, but coupled with mechanical cooling can really achieve the impact to address the extreme heat that will continue to experience growth in intensity, frequency, and duration.
Chief Producer: Zhao Haijian
Supervising Producer: Shi Shi
Editor: Li Yinong
Reporter: Lu Taoran, Yang Yulai, Intern Tang Kun
Video Editor: Cai Yutian
New Media Coordination: Ding Qingyun, Zeng Tingfang, Lai Xi, Huang Daxun
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Overseas Content Coordinator: Huang Zihao
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Produced by: Southern Finance Omnimedia Group
