impacts of carbon pricing on the building industry

GRAYSTONEENVIRONMENTAL

LEGAL ∙ TECHNICAL ∙ POLICY

Green Building Ottawa Conference Retrofit ‐

Sustainability for the FutureCarleton University

May 14, 2010

Impacts of Carbon Pricing for Buildings



Introduction

Carbon pricing is preferred way to shift from carbon intensive towards low‐carbon

Current and coming needs to retrofit and expansion our infrastructure are a unique

opportunity to shift towards cleaner and more sustainable energy

systems

Carbon pricing will impact all aspects of our society –

buildings are a important piece

of the puzzle representing a large source of greenhouse gas emissions and energy

demand

By understanding forthcoming carbon pricing policies, we can begin to shape our

buildings in a way that will help ease our transition the new economy



Basis of Government PolicyPutting a price on greenhouse gas (GHG) emissions (carbon pricing) is widely accepted

as the most effective way of mitigating the man‐made causes of climate change

There are three basic measures to implementing carbon pricing:

•

Command and ControlMandatory rules governing action which includes emission limits or requiring new technologyCosts are not directly related to emissions

•

Emissions TradingPuts limits on emissions but allows reductions elsewhere to count towards meeting limitsCosts related to market of reductions – reductions are more cost‐effective than other measures

•

TaxA levy is placed on goods based on emission from manufacture, transport, or useCosts are directly related to emissions



Emissions Trading

Much of the debate around mitigating greenhouse gas emissions has focused on

emissions trading, specifically cap and trade systems

Trading emission reductions allows reductions to occur at the lowest cost

Previous Canadian climate change plans and current U.S. congressional work has

focused on emissions trading

In cap and trade systems, the government put a limit on the emission from regulated

sources – the government then creates an allowance for each tonne of emissions

under this ‘cap’

The government then distributes these allowances into the market

either for free or

through an auction



Emissions Trading

Regulated sources must have allowances for each tonne of actual emissions each year

Sources that have more allowances than actual emissions can sell

allowances to

others for compliance

To further facilitate compliance and accommodate growth, GHG cap

and trade

systems have an ‘offset’

system –

reductions from non‐regulated sources can

generate credits that can be sold to regulated sources for compliance

The price on emissions arises from the costs incurred to either reduce emissions or

purchase reductions from others



Emissions Trading



Current State of PlayCurrent Canadian federal government policy is tied to action in the United States

U.S. congressional efforts on cap and trade are expected to continue –

White House is also proposing to regulate through command and control measures if

congressional efforts fail

Provincially, four provinces have committed to implementing a cap and trade system

under the Western Climate Initiative (WCI)

–

System set to start January 1, 2012

Both U.S. congressional efforts and WCI will capture building industry emissions

Any effort to make GHG emissions more expensive will lead to increased costs for the

building industry



Building Industry Emissions

Emissions from buildings in Canada are described in two broad categories:

1) Direct emissions – released from the building itself

Space heating

Hot water

2) Indirect emissions –

released elsewhere but result from construction or operation

Building materials and construction

Electricity use



Direct Emissions

Building industry represents 11% of Canada’s total direct GHG emissions

Space heating and hot water represent 95% ‐

99% of these emissions

Residential Emissions by Activity

Space Heating 74%

Hot Water 25%

Other 1%

Commercia/Institutional l Emissions by Activity

Space Heating 83%

Other 3%

Hot Water 14%



Indirect Emissions

Emissions from the manufacture, transport, and use of building materials represent

only a fraction of the lifetime emissions from building operation

Emissions from electricity generation represent a larger source of indirect emissions

Amount of emissions depends on the generating source (coal, oil,

natural gas, wind)

Both residential and commercial buildings in Canada each emit around 30Mt



Broad Costs of Carbon Price

Costs imposed through a cap and trade system are often dilute and re‐direct

There are estimates of carbon pricing that will flow from proposed cap and trade

systems

In Canada, prices are often forecasted to be initially between $10 ‐

$25 per tonne

These prices are forecasted to rise to between $60 ‐

$100 per tonne by 2020

The building sector in Canada should be expected to bear between

$800 million and

$4 billion per year in direct emissions costs between 2012 and 2020

Adding for growth and indirect emissions from electricity use and the number grows

significantly to between $1.5 billion and $16 billion per year between 2012 and 2020



Broad Costs of Carbon Price

$100

$60

$25

$10

0

2010 2012 2020

Costs to Building Sector

$3.75 billion

$1.5 billion

Emission estimates based on 1% growth per year in direct and indirect emissions

Costs to Building Sector

$16 billion

$9.6 billion



Costs for Residential Buildings

By 2020 a price on emissions could mean:

30% higher natural gas costs

30% higher electricity costs

10% higher home heat oil costs



Costs for Commercial Buildings

Costs for natural gas could be between $0.02/m3

and $0.20/m3

per year

Commercial and institutional buildings in Canada use roughly 500

cubic meters of

natural gas per year resulting in costs that range between $9.5 ‐

$95 million per year

Commercial and institutional buildings use is about 55,000 GWh

of electricity per year

resulting in between $120 million and 1.2 billion in added costs

per year

Light fuel oil use in commercial and institutional buildings represents the third largest

source of emissions and could result in between $60 million and $600 million in added

costs per year



Costs from Indirect Emissions

As direct emissions are reduced, indirect emissions from building materials become of

greater significance to a building’s carbon footprint

Source: Ayaz and Yang, Why Embodied Carbon in Materials Can’t be Ignored, Design Intelligence, 2009



Costs from Building Materials

Estimated emissions and costs resulting from building materials vary based on the

size and type of building

Residential

Building Type Estimated Indirect Emissions Estimated Costs ($10/t - $100/t)

1500sqft, single storey 50 tonnes $500 - $5,000

2000sqft, single storey 65 tonnes $650 - $6,500

3500sqft, single storey 110 tonnes $1,100 - $11,000

CommercialBuilding Type Estimated Indirect Emissions Estimated Costs ($10/t - $100/t)

5000sqft, two storey 160 tonnes $1,600 - $16,000

10,000sqft, five storey 300 tonnes $3,000 - $30,000

50,000sqft, ten storey 1,440 tonnes $14,400 - $144,000



Embodied Emissions

Emissions from building materials are based on embodied carbon

Embodied carbon is an estimation of the emissions that arise from the

manufacture, transport, and use of a product

Typical Embodied Carbon ValuesBuilding Material

Embodied CarbonConcrete

0.50 tonnes/m3

Lumber

0.27 tonnes/m3

Bricks

0.22 kg/kgSteel

1.77 kg/kgAsphalt

0.29 tonnes/ m3

Shingles

0.30 kg/kgABS Pipe

3.20 tonnes/ m3



Embodied Emissions

Commercial

Residential



ConclusionCosts to the building industry from a price on greenhouse gas

emissions has the potential to significantly increase costs

In less than two years, Ontario and Quebec are set to

implement a price on emissions

U.S. congressional efforts may yet yield a climate bill – this may

prompt the action in Canada at the federal level



ConclusionBy 2020 costs to buildings in Canada could reach upwards of

$16 billion

Both direct and indirect emissions will expose buildings to

carbon costs

Embodied carbon costs may only add 1‐2% building to building

costs

Direct building emissions could result in a 30% increase in

natural gas and electricity costs by 2020



Graystone Environmental A full service environmental consulting firm offering legal

counsel along with sound technical and policy advice

On the web at…

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www.envconsult.ca

www.climatechangelawyer.ca

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