Circular economy could significantly reduce construction sector CO2 emissions, report finds

The report revealed that construction CO2 emissions, from building to real estate and infrastructure, could be reduced by up to 75 per cent or four gigatons of CO2 by 2050 through the establishment of a circular economy.

The report also found that circularity presents ‘substantial economic advantages’, with the potential to yield an annual net profit gain of up to $46bn by 2030 and $360bn by 2050.

According to McKinsey and the WEF, as the population grows and urbanisation accelerates, 30bn square meters of new buildings will need to be constructed in the next 40 years, similar to building the equivalent of New York City every 40 days. Most of this growth will occur in emerging markets including Africa, the Middle East, and Asia.

The partners said that, with this, creating a sustainable and resilient built environment is crucial for people’s well-being and to stay within safe planetary limits.

In a statement, Sebastian Reiter, partner in the Munich office of McKinsey and co-author of the study, said: "The construction sector is a crucial industry for reducing greenhouse gas emissions in the long term.

"One-third of material consumption and 26 per cent of global carbon dioxide emissions come from this sector. At the same time, this sector employs seven per cent of people globally and accounts for 13 per cent of economic output."

The report considers the potential for CO2 abatement and potential net value gain for six key building materials: cement and concrete, steel, aluminium, plastics, glass and gypsum. 

Other key findings include the prediction that, in 2030, recirculation of materials and minerals and CCS/CCU are each expected to contribute around 40 per cent of total abatement, and that circularity in cement has the potential to create the highest value pool across materials, with an estimated net value gain of $10bn in 2030 and $122bn in 2050.

"Our analysis of the construction sector shows an extraordinary potential for circularity - not only through carbon dioxide savings but also on a financial level,” said Jukka Maksimainen, senior partner in the Helsinki office of McKinsey and co-author of the report.

“Nevertheless, we see hardly any solutions in the market that address this issue at scale yet – this makes it even more essential that we identify scalable solutions and make them visible.”

The report, ‘Circularity in the Built Environment: Maximizing CO2 Abatement and Business Opportunities,’ can be downloaded and read in full here.