22 Jun 2020

It’s hard to recall a starker warning than the latest pronouncement by Fatih Birol, executive director of the International Energy Agency (IEA). Speaking to mark the launch of the IEA’s Sustainable Recovery report, Birol claimed in an interview with the Guardian that the world has only six months to change the course of the climate crisis. The alternative? A post-lockdown rebound in greenhouse gas emissions that would overwhelm efforts to stave off climate catastrophe.

Yet the IEA’s report is less panic inducing than Birol’s comments would suggest, with a range of proposals for governments to boost economic growth. Central to the IEA’s proposals is a necessity that has long gone underappreciated: energy efficiency.

Buildings: an asset and a liability

Buildings are simultaneously the UK’s most valuable financial asset and its biggest environmental liability.

While perhaps not the obvious choice, there is good reason to focus on buildings. Homes are by far the world’s biggest asset class. Globally they are worth £150 trillion, more than 20 times all the gold ever mined. But these buildings are also the largest contributor to climate change. In the UK, more than a third of greenhouse gas emissions come from buildings, mostly from heating. This means that buildings are simultaneously the UK’s most valuable financial asset and its biggest environmental liability.

Making waves in the EU

As major economies unite around the idea of a green recovery, the momentum behind improving building efficiency has gathered pace.

As part of the European Green Deal, placed at the centre of the EU’s recovery by European Commission President Ursula von der Leyen, there is broad consensus that the renovation of Europe’s building stock is a good place to start. Known as the “Renovation Wave”, plans are expected to be announced in September to minimise potential regulatory barriers and stimulate a faster pace of building renovation across the EU.

Will the UK follow suit?

In the UK, the green recovery certainly appears to be embedded in plans to rebound from the pandemic. The Labour Party has been quick to seize the initiative, issuing a consultation on what the recovery should look like. Feedback from business will be critical to shaping these proposals, which will in turn help to influence the Government’s approach.

But with the EU prioritising energy efficiency, will the UK follow its lead? Chancellor Rishi Sunak and Business Secretary Alok Sharma are said to be looking hard at investment in sustainable energy jobs and infrastructure as a central part of the Covid-19 recovery package. In addition, a range of influential figures have identified home energy efficiency as a key opportunity, from Nobel-winning economist Joseph Stiglitz, to Lord Stern and Sir John Armitt, chair of the National Infrastructure Commission.

With unemployment climbing and the construction sector facing severe job losses as the recession worsens, a recent report from the Green Finance Institute’s Coalition for the Energy Efficiency of Buildings (CEEB) showed how the green recovery could be translated into actionable policies and new business models that could deliver emissions reductions, demand across the economy, and a new wave of 150,000 post-crisis jobs. The Government response has been positive, with Energy Minister Kwasi Kwarteng praising the report as a “positive step towards achieving our Green Finance Strategy ambition to build the market for green home finance”.

The big question now is whether the Government’s interest can translate into the framework of policy tweaks, funding support and tax incentives needed to accelerate a revolution in green building finance and bring about thousands of associated jobs.

In the meantime, for the construction sector, its supply chain and adjacent industries, one thing is clear. With such a prime opportunity at stake, now is the moment to engage with Government and communicate their contributions – both to the recovery and to changing the course of the climate crisis.