EIU: US Needs More Coherent Building Efficiency Codes

EIU picTackling rising energy consumption in US buildings will require a more coordinated and coherent approach to energy efficiency codes and regulation, one that is more focused on retrofits – where most potential gains lie, according to a report from The Economist Intelligence Unit.

A 2012 Deutsche Bank report claims that energy efficiency retrofits alone could bring $1 trillion worth of energy savings to the US economy over the next 10 years. Should the current wave of financial innovation in energy efficiency in buildings succeed, the potential exists for a rapid scale up of current piecemeal investments, according to Achieving scale in the US: A view from the construction and real estate sectors.

However, it won’t be smooth sailing, the report says. US actors tend to expect to recoup costs associated with energy efficiency investments within a very short time frame. Some 56 percent of US respondents to the EIU’s June 2012 survey, expect to recover such expenditure within three years or less. This is especially problematic for deep retrofit investments, which can have higher net present value compared with light retrofits but often require more time to recover investment cost, the report says.

One hurdle to widespread building energy efficiency is the US regulation landscape, which the report describes as “patchy, confusing, and inconsistent.” Building codes and other policies are too focused on new builds and often differ between states – and sometimes within them. As a result, the majority of US companies manage energy efficiency at the building level rather than at the portfolio level, the report says.

A lack of financial infrastructure is another barrier to energy efficiency. It is “crucial” to develop new financing mechanisms that help institutional investors assess the risks associated with energy-efficient projects, the report says. Aggregating projects across and within sectors through green banks and large mortgage financing organizations allows for a more efficient allocation of capital and would likely attract large institutional investors, according to the report.

Earlier this week, real estate services firm Jones Lang LaSalle and the Better Building Partnership formed a partnership to provide owners and occupiers in the UK with a single benchmarking system for comparing the environmental performance of their commercial property assets.

The combined database will include approximately 500 retail and office properties, nearly 7 million sq ft., covering approx. 400,000 metric tons of carbon emissions.

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