How we can build our way out of the crisis

By Kim Fausing, CEO of Danfoss. Originally posted on WEF

  • Improving the energy efficiency of buildings is vital if we want to reduce emissions.
  • Optimizing heating, ventilation and air conditioning saves energy, with a payback time of just two to four years.
  • Investing in buildings protects and creates local jobs.

If 2020 turned out to be a true, global "annus horribilis" – what will it take to make 2021 a joyful turning point and maybe even become the "annus mirabilis" we hope for? The first deployments of vaccines promise some light on the horizon, but it will take much more than that to ensure a swift recovery from the economic crisis and make our way out of the climate crisis by taking effective action prior to COP26 in November.
Delivering on both tasks requires determined and bold action by leaders of businesses and governments and by visionary investors.

Sources: (IEA 2020d; IEA 2020b). All rights reserved. Adapted from “IEA World Energy Statistics and Balances” and “Energy Technology Perspectives".

Buildings as the cornerstone for reducing emissions and creating growth

The good news is that we can tackle both challenges at the same time in a very efficient way, if we make smart choices. Our building stock, for example, holds a significant potential just waiting to be seized. And, as the facts point out, there’s no way around focusing on the building stock, if we want to reduce emissions substantially across sectors and across the globe.

Buildings and the construction of them account for over one-third of final energy consumption throughout the world and nearly 40% of total direct and indirect CO2 emissions. Current policies will take us to at least 3 degrees C of global warming by the end of the century. This would have devastating consequences for people and for the planet and is far from the ambitions set by the Paris Agreement. We need to do better, and we can.

Approximately two-thirds of today’s building stock will still exist in 2050. This emphasizes the need to significantly increase the renovation rate of existing buildings to improve their energy efficiency.

Globally, heating and cooling account for up to 80% of the energy consumption of a building. However, this can be brought down considerably by applying existing solutions that we have at hand today. In Helsinki, Finland, one of the largest housing associations achieved a 20% reduction of energy consumption during peak hours with one measure alone: installing a software solution to intelligently monitor and control the heating of apartments. Just imagine all the opportunities within our reach if we apply the full range of energy efficiency solutions we have available in a smartly integrated energy system. The most sustainable energy is, after all, the energy we do not use, does not pollute or generate emissions.

Buildings are a way to cost-effective climate action

The focus on buildings is not only about reducing emissions but also about doing it cost-effectively. Optimizing heating, ventilation and air conditioning systems can bring an average energy saving of 30% with a payback time of just two to four years.

In Copenhagen, Denmark, the Crowne Plaza Hotel operates with state-of-the-art energy technology including an innovative ground water cooling system as well as 2,500 m2 of specially adapted solar panels. By applying relatively simple measures such as these, the hotel has reduced electricity consumption by 77% and its water consumption by 25% compared with comparable properties. Solutions like these free up resources that can be spent elsewhere and further boost the economy, as urgently needed.

Investing in buildings protects and creates local jobs

Focusing on buildings is not only a cost-effective way to reduce emissions massively. It is also a job generator. In 2019, 220 million jobs across the world depended on investments within the building sector. In 2020, more than 25 million jobs in the sector were lost or at risk due to the crisis. We can turn this around. According to the IEA, an estimated 9-30 jobs would be created for every million dollars invested in energy efficiency measures in the building sector and many of these jobs could be created quickly. As much as 60% of expenditure on home energy efficiency retrofits could be allocated to labour, activating local value chains and boosting the economy.

We know that this works. Following the global financial crisis of 2008, a United States stimulus programme focused on building renovation created over 200,000 jobs. And governments are starting to make the right choices. The currently announced stimulus spending on energy efficiency of buildings could create around 3.4 million jobs-years. (One job-year is equivalent to a year of work for one person).

To ensure “could” becomes “will” we must build our way out of the crisis, create jobs, and lower emissions as well as energy bills. And we will do it together, in a joint effort by business leaders, investors, and policymakers. The technical solutions are well-proven and available, so realizing the potential is only a question of ramping up the implementation of them.

Achieving this will require an adequate policy framework that sets ambitious energy performance standards for new and existing individual buildings, but also looks beyond that at the possibilities offered by the smart integration of the energy system, for instance through a district approach.

Solutions within district energy and sector integration can boost the potential of the building stock’s contribution to climate action, create flexibility, and support economic recovery. Financing, of course, is the lever to reaching this ambition. Investments must be directed to recover our climate and our economies.

Let’s act to make 2021 a turning point.

Let’s utilize the most sustainable energy we have: the energy we never have to use at all.

Let’s activate a job generator. And above all; let’s build our way out of the crisis.

Learn how we can implement green solutions on a greater scale that will lead the sustainable transformation to limit climate change.