Real estate: Incentivizing energy efficiency for cities
The problem
Buildings are responsible for nearly 40 percent of global greenhouse gas emissions. Addressing these emissions will be essential for decarbonization in cities. One challenge right now is incentivizing the necessary changes like retrofitting older buildings with smart thermostats, solar panels, heat pumps or energy-efficient insulation. Owners are responsible for the cost of efficiency investments like these. But tenants are the ones who will benefit from lower energy bills.
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Fixing it
The energy transition is capital intensive, but there are a growing number of energy infrastructure investments that address the split-incentive problem in multifamily buildings, according to Canary Media. Boosting energy efficiency in older buildings is necessary to meet climate goals. One of Fifth Wall’s portcos, Runwise, is tackling this issue with wireless sensor technology that improves building heating systems. Runwise’s technology replaces building management systems that, in many cases, were installed in the ’60s and ’70s. Plus, it’s a low upfront cost for owners and quick to set up, Reuters reported. There’s more too: Some other climate-friendly updates to older buildings include shared solar and backup battery installations and electric vehicle chargers in multifamily building garages and parking lots.
Looking ahead
Policies like New York’s Local Law 97 will continue to put pressure on building owners to improve efficiency. In fact, Local Law 97 is expected to drive demand for $18.2 billion in efficiency retrofits from 2024–2030. That’s 13 times the current spending trends, according to Canary Media. The bottom line: Energy efficiency remains one of the cheapest way to combat climate change for the built environment.
