Building decarbonisation report highlights biggest levers

Produced in partnership with the Net Zero Built Environment Council, Building value by decarbonizing the built environment looked at more than 1,000 potential decarbonisation levers, highlighting the 30 with the biggest near-term impact. It found that over 50 per cent of buildings emissions can be reduced with existing technology by 2030, and that many of the technologies required to do so are already cost-effective.

On average, space heating/cooling and water heating emissions account for roughly three-quarters of operational emissions for residential buildings, making them obvious low-hanging fruit for decarbonisation. According to the McKinsey report, heat pumps can reduce these emissions by about 60 per cent. A major challenge, however, comes in the form of bottlenecks in the heat pump supply chain as well as a shortfall in installer expertise.

"The report highlights potential pathways to decarbonise the built environment and presents many proven and available technologies and solutions that companies in the ecosystem can implement today, and often cost-effectively,” said Erik Sjödin, partner at McKinsey.

“We have aimed to focus on some of the largest opportunities that industry players could realise by scaling production, building future operating models, and developing skills and expertise across the value chain.”

The built environment accounts for 14.4 metric gigatons of carbon dioxide equivalent (GtCO₂e) of emissions around the world annually. Approximately 26 per cent of all GHG emissions and 37 per cent of combustion-related emissions come from the construction and operation of the built environment.

As well as identifying the biggest levers to address the issue, the report also examines the most prominent business opportunities around building decarbonisation, and where supply chains should focus their net zero efforts. These include the industrialised production of green materials and energy-efficient building technology, electrification upgrades, improved green finance and increased offsite construction technology. The report estimates that offsite construction will help reduce construction time by approximately 20 per cent and that modular construction in European and US markets can potentially create $22 billion in annual savings.

"The built environment is a crucial sector for decarbonisation, and companies in this sector have a unique opportunity to capture value and build businesses, while enabling the transition to a low-carbon world,” said Brodie Boland, partner at McKinsey.