Monday, March 7, 2022, at 14:00-15:30 Vienna time (CET) 

Introduction
Herve Joly, JVI Director

Presenters
Ms. Danae Kyriakopoulou, Grantham Research Institute, London School of Economics
Mr. John Muellbauer, Nuffield College and Institute for New Economic Thinking, University of Oxford
Mr. Petr Holub, Buildings21 and ISFC Senior Visiting Fellow

Moderator
Mr. Reiner Martin, Joint Vienna Institute

Global warming is the single greatest environmental challenge that the world is currently facing. A wide range of human activities is responsible for this rise in temperature, with construction and real estate being among the most important contributors of greenhouse gas emissions. This JVI Webinar shed some light on the range of links between construction, real estate, and climate change. 

Danae Kyriakopoulou (Grantham Research Institute, London School of Economics) stressed the urgency to tackle climate change and emphasized that the 2020s are a decisive decade to act. She recalled that the housing sector accounts for around 40% of emissions in continental Europe (compared to e.g. 3-4% for the aviation sector) and that around three quarters of the EU’s building stock is still considered energy inefficient. According to Ms. Kyriakopoulou, a consensus has been reached across central banks that climate risks are financial stability risks, which thus require central bank action. Some central banks go beyond that, trying to ensure that monetary policy operations do not undermine the transition to a low-carbon economy and / or exploring ways in which they can actively support that transition. There is, however, no consensus yet on this ‘second pillar’ of central bank climate change activity. She closed by stressing the additional benefits of improved energy efficiency in construction and real estate. These include better health, economic and social benefits, and improved resilience against future energy price increases and geopolitical events impacting energy security.

Mr. John Muellbauer (Nuffield College and Institute for New Economic Thinking, University of Oxford) referred to the recent OECD report “Brick-by-Brick: Building Better Housing Policies”. The report shows that complex links tie housing and environmental quality, e.g., land-use policies, regulations, subsidies, taxes as well as transport policies affecting housing. The report recommends designing regulations, taxes, and subsidies in a way to speed up the adoption of new technologies. Moreover, there are powerful carbon-saving arguments in favor of upgrading existing buildings instead of demolishing and reconstructing them. Mr. Muellbauer flagged that ‘green’ real estate policies could weigh most heavily on the poor, worsening housing affordability and fueling poverty. Public acceptance of ‘green’ housing policies thus requires that the distributional issues are at the front and center of policy design. In this context, he argued that a ‘green’ split-rate property tax could potentially resolve the conflict between affordability / equity and meeting climate goals. Such a tax would also have financial and regional stability benefits, e.g., less volatile real estate prices and reduced migration to real estate ‘hotspots’.

Mr. Petr Holub (Buildings21 and ISFC Senior Visiting Fellow) looked in more detail at the situation in the Czech Republic and recalled that 35 % of Czech carbon emissions come from the operation of buildings. In addition, 5-7 % of emissions stem from construction/demolition. He argued that 85% of emissions associated with the operation of buildings can be saved by appropriate building renovation. To achieve this, however, a three-fold increase in the rate and depth of renovations would be needed. Mr. Holub then discussed concrete building measures to mitigate climate and energy security risks while at the same time making buildings more resilient to climate change. These include for instance appropriate insulation, efficient heating, the use of local renewables, suitable outer shading, efficient cooling and vegetation roofs, trees around the building, rain-water utilization and water recycling and ventilation for fresh air. In addition, urban planning designed to avoid ‘heat islands’ and ensure sustainable transportation is very important. Finally, he recalled that high-quality, energy efficient buildings reduce energy bills and are valued more highly on the real estate market.

Reiner Martin, Lead Economist, JVI