2. RESIDENTIAL, COMMERCIAL AND INSTITUTIONAL BUILDINGS SECTOR5

2.1. Introduction

In 1990, the residential, commercial, and institutional buildings sector was responsible for roughly one-third of global energy use and associated carbon emissions both in the Annex I countries and globally. In that year, buildings in Annex I countries used 86 EJ of primary energy and emitted 1.4 Gt C, accounting for about 75% of global buildings energy use (112 EJ, with associated emissions of 1.9 Gt C). 6  However, the share of primary energy use and associated emissions attributable to Annex I countries is projected to drop; the IS92a scenario projects that global buildings-related emissions from Annex I countries will be about 70% in 2020 and slightly over 50% in 2050.

Greater use of available, cost-effective technologies to increase energy efficiency in buildings can lead to sharp reductions in emissions of CO2 and other GHGs resulting from the production, distribution, and use of fossil fuels and electricity needed for all energy-using activities that take place within residential, commercial, and institutional buildings. The buildings sector is characterized by a diverse array of energy end uses and varying sizes and types of building shells that are constructed in all climatic regimes. Numerous technologies and measures have been developed and implemented to reduce energy use in buildings, especially during the past 2 decades in Annex I countries.

Table 1 outlines measures and technical options to mitigate GHG emissions in the buildings sector, and provides a brief description of the climate and environmental benefits as well as economic and social effects (including costs associated with implementation of measures), and administrative, institutional, and political issues associated with each measure. Tables 2 and 3 provide estimates of global and Annex I, respectively, emissions reductions associated with both energy-efficient technologies and the energy-efficiency measures.7  The estimates for the reductions from energy-efficient technologies are based on studies described in the SAR, using expert judgment to extrapolate to the global situation and to estimate reductions in 2020 and 2050, because most of the studies in the SAR estimate energy savings only for 2010. The estimates for the reductions from energy- efficient technologies captured through measures are based on expert judgment regarding policy effectiveness. These two categories of reductions-"potential reductions from energy-efficient technologies" and "potential reductions from energy-efficient technologies captured through measures"-are not additive; rather, the second category represents an estimate of that portion of the first that can be captured by the listed measures.

2.2. Technologies for Reducing GHG Emissions in the Residential, Commercial, and Institutional Buildings Sector

A significant means of reducing GHG emissions in the buildings sector involves more rapid deployment of technologies aimed at reducing energy use in building equipment (appliances, heating and cooling systems, lighting, and all plug loads, including office equipment) and reducing heating and cooling energy losses through improvements in building thermal integrity (SAR II, 22.4.1, 22.4.2). Other effective methods to reduce emissions include urban design and land-use planning that facilitate lower energy-use patterns and reduce urban heat islands (SAR II, 22.4.3); fuel switching (SAR II, 22.4.1.1, Table 22-1); improving the efficiency of district heating and cooling systems (SAR II, 22.4.1.1.2, 22.4.2.1.2); using more sustainable building techniques (SAR II, 22.4.1.1); ensuring correct installation, operation, and equipment sizing; and using building energy management systems (SAR II, 22.4.2.1.2). Improving the combustion of solid biofuels or replacing them with a liquid or gaseous fuel are important means for reducing non-CO2 GHG emissions. The use of biomass is estimated (with considerable uncertainty) to produce emissions of 100 Mt C/yr in CO2-equivalent, mainly from products of incomplete combustion that have greenhouse warming potential (SAR II, Executive Summary).

The potential for cost-effective improvement in energy efficiency in the buildings sector is high in all regions and for all major end uses. Projected energy demand growth is generally considerably higher in non-Annex I countries than in Annex I countries due to higher population growth and expected greater increases in energy services per capita (SAR II, 22.3.2.2). Although development patterns vary significantly among countries and regions, general trends in Annex I countries with economies in transition and non- Annex I countries include increasing urbanization (SAR II, 22.3.2.2), increased housing area and per capita energy use (SAR II, 22.3.2.2, 22.3.2.3), increasing electrification (SAR II, 22.3.2.2), transition from biomass fuels to fossil fuels for cooking (SAR II, 22.4.1.4), increased penetration of appliances (SAR II, 22.3.2.3), and rising use of air conditioning (SAR II, 22.4.1.1). For simplification, the authors assume that by 2020 urban areas in non-Annex I countries will have end-use distributions similar to those now found in Annex I countries, so that energy-saving options and measures for most appliances, lighting, air conditioning, and office equipment will be similar for urban areas in both sets of countries. The exception is heating which is likely to be a large energy user only in a few of the non-Annex I countries, such as China (SAR II, 22.2.1, 22.4.1.1.1). In addition, it is assumed that the range of cost-effective energy- savings options will be similar for Annex I and non-Annex I countries by 2020.

2.2.1. Building Equipment

The largest potential energy savings are for building equipment. Cost-effective energy savings for these end uses vary by product and energy prices, but savings in the range of 10-70% (most typically 30- 40%) are available by replacing existing technology with such energy-efficient technologies as condensing furnaces, electric air- source heat pumps, ground-source heat pumps, efficient air conditioners, air-source or exhaust air heat pump water heaters, efficient refrigerators, horizontal axis clothes washers, heat pump clothes dryers, kerosene stoves, compact fluorescent lamps, efficient fluorescent lamps, electronic ballasts, lighting control systems, efficient computers, variable speed drives, and efficient motors (SAR II, 22.4) (see Table 1).

Residential buildings are expected to account for about 60% of global buildings energy use in 2010, falling to 55% by 2050. Based on this ratio, IS92a scenarios indicate that residential buildings will use energy that produces 1.5 Gt C in 2010, 1.6 Gt C in 2020, and 2.1 Gt C in 2050, while commercial buildings will be responsible for emissions of 1.0 Gt C in 2010, 1.1 Gt C in 2020, and 1.7 Gt C in 2050. Based on information presented in the SAR, the authors estimate that efficiency measures with paybacks to the consumer of 5 years or less have the potential to reduce global residential and commercial buildings carbon emissions on the order of 20% by 2010, 25% by 2020, and up to 40% by 2050, relative to a baseline in which energy efficiency improves (see section of Table 2) entitled "Potential Reductions from Energy-Efficient Technologies").

2.2.2. Building Thermal Integrity

Heating and cooling of residential buildings is largely needed to make up for heat transfer through the building envelope (walls, roofs, and windows). Energy savings of 30-35% between 1990 and 2010 have been estimated for retrofits to U.S. buildings built before 1975, but only half of these are cost-effective. Adoption of Swedish-type building practices in western Europe and North America could reduce space heating requirements by an estimated 25% in new buildings relative to those built in the late 1980s (SAR II, 22.4.1.1.1). Although large commercial buildings tend to be internal load-dominated, important energy savings opportunities also exist in the design of the building envelope (SAR II, 22.4.2.1.1). Considerably larger cost- effective savings are possible for new buildings than for existing ones (SAR II, 22.5.1). Since most of the growth in building energy demand is expected to be in non-Annex I countries and a large percentage of this will be new buildings, there are significant opportunities to capture these larger savings if buildings are designed and built to be energy-efficient in these countries (SAR II, 22.4.1).

Overall, based on information presented in the SAR and on expert judgment, the authors estimate that improvements in the building envelope (through reducing heat transfer and using proper building orientation, energy-efficient windows, and climate-appropriate building albedo) have the potential to reduce carbon emissions from heating and cooling energy use in residential buildings with a 5-year payback (or less) by about 25% in 2010, 30% in 2020, and up to 40% in 2050, relative to a baseline in which the thermal integrity of buildings improves. Heating and cooling are about 40% of global residential energy use and are expected to decline somewhat as a proportion of total residential energy. For commercial buildings, improvement in the thermal integrity of windows and walls with paybacks of 5 years or less have lower potential to reduce global carbon emissions, because only about 25% of energy use is due to heating and cooling, and reductions in these loads are more difficult in commercial than residential buildings (see section of Table 2 entitled "Potential Reductions from Energy-Efficient Technologies"). Most of these reductions will occur only in new commercial buildings, as retrofits to the walls and windows of existing buildings are costly.

2.3. Measures for Reducing GHG Emissions in the Residential, Commercial, and Institutional Buildings Sector

A myriad of measures have been implemented over the past 2 decades with the goal of increasing energy efficiency in the buildings sector. This discussion focuses on four general policy areas: (i) Market-based programs in which customers or manufacturers are provided technical support and/or incentives; (ii) mandatory energy- efficiency standards, applied at the point of manufacture or at the time of construction; (iii) voluntary energy-efficiency standards; and (iv) increased emphasis of private or public research, development, and demonstration programs for the development of more efficient products. Information and training programs are a necessary prerequisite for most of these measures, but it is difficult to directly estimate savings attributable to such programs (SAR II, 22.5.1.6). Direct government subsidies and loans will not be covered as a separate policy category but rather treated in the context of other measures as a means to reduce private investment costs. 8 

The measures discussed herein often work best in combination. Mutually reinforcing regulatory, information, incentive, and other programs offer the best means for achieving significant portions of the cost-effective energy-efficiency potential (SAR II, 22.5.1.8). Demand-side projects can be "bundled" in order to provide a larger energy "resource" and attract capital, especially in non-Annex I countries (SAR II, 22.5.1.7). Measures need to be carefully tailored to address specific issues and barriers associated with various building characteristics, including commercial versus residential buildings, new construction versus existing retrofits, and owner- versus renter- occupied buildings (SAR II, 22.5.1).

For all of the measures, environmental benefits associated with the use of more energy-efficient equipment and buildings include reduction of other power plant emissions (especially sulfur oxides, nitrogen oxides, and particulates), reduced impacts on land and water resulting from coal mining, reduction of air toxics from fossil fuel combustion, and the whole range of environmental benefits resulting from reduced extraction, transport and transmission, conversion, and use of energy (Levine et al., 1994).

2.3.1. Market-Based Programs

Market-based programs, which provide some sort of incentive to promote increased use of energy-efficient technologies and practices, can be divided into the following five types:

  • Government or utility programs that obtain voluntary agreements from customers (typically industries or owners/ operators of large commercial buildings) that they will implement cost-effective energy-efficiency measures in exchange for technical support and/or marketing assistance (e.g., U.S. Department of Energy and Environmental Protection Agency programs such as Green Lights, Motor Challenge, and Energy Star Computers) (SAR II, 22.5.1.6).
  • Procurement programs in which very large purchasers (typically governments) commission large numbers of high-efficiency units (SAR II, 22.5.1.1). Examples include the Swedish NUTEK technology procurement program and the International Energy Agency's Cooperative Procurement of Innovative Technologies.
  • Manufacturer incentive programs in which a competition is held and a substantial reward provided for the development/ commercialization of a high-efficiency product [e.g., the U.S. Super Efficient Refrigerator Program (SERP)] (SAR II, 22.5.1.1).
  • Utility demand-side management (DSM) programs in which incentives are provided to customers for the purchase of energy-efficient products (SAR II, 22.5.1.4).
  • Creation of energy service companies, often encouraged by government and utility programs, that pay the full cost of energy- efficient products in exchange for a portion of future energy cost savings (SAR II, 22.5.1.4).
  • Market-based programs can be used in place of, or in addition to, standards. In combination with standards, market-based programs can be designed to induce the acceptance of new and innovative technologies in the marketplace in advance of when they would otherwise be adopted. When combined with active, ongoing RD&D programs, such efforts are likely to have significant long-term impacts on the availability and performance of advanced, more efficient technologies. For appliances, lighting, and office equipment, such programs can influence a very large number of purchasers, many of whom have little knowledge of or interest in the energy efficiency of the product. Combining market-based programs and mandatory standards can help overcome some of the difficulties of imposing standards, and could have an impact greater than standards alone.

    Importantly, market-based programs can be directed toward building systems (as opposed to individual pieces of equipment) to reduce energy consumption resulting from inadequate design, installation, maintenance, and operation of heating and cooling systems. There are numerous examples of systems problems, such as mismatches between air-handling systems and chillers, absence or inadequate performance of building control systems, simultaneous heating and cooling of different parts of the same building, and so on.

    Based on expert judgment, the authors estimate that market-based programs will result in global carbon emission reductions of about 5% of projected (IS92 scenarios) buildings-related emissions by 2010, about 5-10% by 2020, and about 10-20% by 2050 (see section of Table 2 entitled "Potential Reductions from Energy-Efficient Technologies Captured through Measures"), after allowing for an estimate of the portion of savings that is "taken back" in increased services (usage).

    Surveys of the costs and benefits of these programs as they have been applied in the United States generally indicate that they are cost-effective (SAR II, 22.5.1.4). However, it is not possible to generalize, since there have been limited analyses and the costs and savings depend both on the specific technologies that are promoted and the method of implementation of the program.

    The major administrative, institutional, and political issues in implementing market-based programs for residential and commercial building equipment follow:

  • Difficulties in improving integrated systems
  • The need for, and shortage of, skilled persons capable of diagnosing and rectifying systems problems
  • The fact that energy users are often not those responsible for paying energy bills, creating a barrier to increased efficiency (SAR II, 22.5.1)
  • The need to structure incentives so that intervention in buildings aims at achieving all cost-effective energy efficiency measures
  • The need to create institutional structures for the market-based programs to work effectively
  • Perception (or reality) of cross subsidies and related unfairness of expenditures.
  • 2.3.2. Regulatory Measures

    Mandatory energy-efficiency standards-through which the government enacts specific requirements that all products (or an average of all products) manufactured and buildings constructed meet defined energy use criteria-are an important regulatory option for residential and commercial buildings; such standards have the potential to yield the largest savings in this sector (SAR II, 22.5.1.2, 22.5.1.3). Appliances typically have lifetimes of 10-20 years (SAR II, 22.4.1.5), while heating and cooling equipment is replaced over a slightly longer time period. These rapid turnover rates mean that inefficient stock can be relatively rapidly replaced with more efficient stock that meets established standards. Residential and commercial buildings, however, more typically last between 50 and 100 years.

    Depending on the stringency of the standard levels, the authors estimate (based on expert judgment) that mandatory standards applied to appliances, other energy-using equipment in the building, and the building envelope could result in global carbon emission reductions of about 5-10% of projected (IS92 scenarios) buildings- related emissions by 2010, about 10-15% by 2020, and about 10- 30% by 2050 (see section of Table 2 entitled "Potential Reductions from Energy-Efficient Technologies Captured through Measures"), after allowing for an estimate of the portion of savings that is "taken back" in increased services (usage).

    Mandatory energy-efficiency standards are typically set at levels that are cost-effective such that the benefits in terms of energy savings outweigh any additional costs associated with the more efficient product or building. Thus, such standards yield reductions in carbon emissions at a net negative cost on average. Using the impact of U.S. National Appliance Energy and Conservation Act (NAECA) residential appliance standards during the period 1990-2015 as an example, the cumulative net present costs of appliance standards that have already been implemented in the United States are projected to be $32,000 million and the net present savings are estimated to be $78,000 million (in $US 1987) (Levine et al., 1994).

    Project-level costs associated with mandatory standards include program costs for analysis, testing, and rating of the products. Testing laboratories and equipment to certify the performance of the appliances will be needed for a country or group of countries without such facilities but with a growing demand for appliances. Other major costs are the investment costs for initial production of the more efficient products, the need for trained personnel, and the need for new institutional structures.

    Administrative, institutional, and political issues associated with implementing mandatory energy-efficiency standards include the following:

  • Opposition from industry for a variety of reasons (perceived loss of profitability, government requirements for increased investments, potential for putting companies out of business and reducing competition)
  • Opposition from other groups that could be adversely affected (e.g., electric utilities for some standards)
  • Difficulty in obtaining agreement among different countries for uniform test procedures and comparable standards, where this proves desirable
  • Difficulty in raising investment money for testing laboratories and for the costs of performing the required tests (especially acute in non-Annex I countries in spite of the fact that the net benefits are much greater than these costs).
  • Overcoming these difficulties will require substantial effort. Because many appliances are designed, licensed, manufactured, and sold in different countries with varying energy costs and consumer use patterns, regional initiatives coupled with financing to set up standards and testing laboratories, especially in Annex I countries with economies in transition and non-Annex I countries, may be needed to overcome many institutional barriers.

    There also are administrative, institutional, and political benefits associated with mandatory energy-efficiency standards, including responding to consumer and environmental concerns, reducing future generating capacity requirements, and providing credibility to manufacturers that take the lead in introducing energy-efficient products through uniform test procedures. Harmonization of test procedures and standards could reduce manufacturing costs associated with meeting various requirements.

    2.3.3. Voluntary Standards

    Voluntary energy-efficiency standards, where manufacturers and builders agree (without government-mandated legislation) to generate products or construct buildings that meet defined energy use criteria, can serve as a precursor or alternative to mandatory standards (SAR II, 22.5.1.2). For products covered by these standards, there must be agreement on test procedures, adequate testing equipment and laboratories to certify equipment, and product labeling-thus satisfying the prerequisites of mandatory standards. Voluntary standards have been more successful in the commercial sector than in the residential sector, presumably because commercial customers are more knowledgeable about energy use and efficiency of equipment than residential consumers.

    Energy use and carbon emissions reductions for voluntary standards vary greatly, depending upon the way in which they are carried out and the participation by manufacturers. Based on expert judgment, the authors estimate that global carbon emissions reductions from these standards could range from 10-50% (or even more if combined with strong incentives) of the reductions from mandatory standards.

    Project-level costs associated with voluntary standards (costs of testing equipment and laboratories, and the initial investment costs) are the same as those for mandatory standards. The increased investment for more efficient products, however, will be lower than that for mandatory standards, as voluntary standards are expected to affect the market less.

    The administrative, institutional, and political issues surrounding the achievement of voluntary standards are similar to those for mandatory standards but of smaller magnitude, proportionate to their ability to affect energy efficiency gains in appliances, other equipment, and buildings.

    2.3.4. Research, Development, and Demonstration

    RD&D programs foster the creation of new technologies that enable measures to have impacts over the longer term. In general, only large industries and governments have the resources and interest to conduct RD&D. The building industry, in contrast, is highly fragmented, which makes it difficult for the industry to pool its resources to conduct RD&D. Government-supported RD&D has played a key role in developing and commercializing a number of energy- efficient technologies, such as low-emissivity windows, electronic ballasts, and high-efficiency refrigerator compressors. While Annex I RD&D results can often be transferred to non-Annex I countries, there are conditions specific to these countries that require special attention, such as building design and construction for hot, humid climates. For this reason, it is essential to develop a collaborative RD&D infrastructure between researchers based in non-Annex I countries and both Annex I and non-Annex I country RD&D specialists (SAR II, 22.5.1.5).

    A specific carbon emissions reduction estimate is not assigned to RD&D in Table 2; rather, it is noted that vigorous RD&D on measures to use energy more efficiently in buildings-encompassing improvements in equipment, insulation, windows, exterior surfaces, and especially building systems-is essential if substantial energy savings are to be achieved in the period after 2010. It is essential to note that the emissions reductions potentials for the residential, commercial, and institutional buildings sector will not be realized without significant RD&D activities.

    2.4. Global Carbon Emissions Reductions through Technologies and Measures in the Residential, Commercial, and Institutional Buildings Sector

    A range of total achievable emissions reductions for global residential, commercial, and institutional buildings is provided in Tables 1 and 2. These reductions are estimated to be about 10-15% of projected emissions in 2010, 15-20% in 2020, and 20-50% in 2050, based on IS92 scenarios. Thus, total achievable carbon emissions reductions for the buildings sector are estimated to range (based on IS92 scenarios) from about 0.175-0.45 Gt C/yr by 2010, 0.25-0.70 Gt C/yr by 2020, and 0.35-2.5 Gt C/yr by 2050.

    The measures described can be differentiated based on their potential for carbon emissions reductions, cost-effectiveness, and difficulty of implementation. All of the measures will have favorable impacts on an overall economy, to the extent that the energy savings are cost-effective. Environmental benefits are approximately proportional to the reductions in energy demand, thus to carbon savings. The administrative and transaction costs of the different measures can vary markedly. While building codes and standards can be difficult to administer, many countries now require some minimum level of energy efficiency in new construction. Many of the market programs introduce some complexity, but they often can be designed to obtain savings that are otherwise very difficult to capture. The appliance standards programs are, in principle, the least difficult to administer, but political consensus on these programs can be difficult to achieve.


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