The EU Green Deal and building retrofits: making it work for everyone

The European Green Deal sets out one of the most ambitious road maps for an entire continent, outlining a series of key initiatives to bring greenhouse gas emissions to net zero by 2050.

Exploring plans to create a climate-neutral, sustainable economy transforming sectors like transport, manufacturing and energy; the policy and legislative proposals also look at ways to decarbonise our cities and buildings – ensuring it benefits citizens across the EU while keeping housing affordable.

But with around 97% of our existing building stock requiring major upgrades to meet 2050 decarbonisation targets, a few pressing questions emerge regarding the next steps: how can these initiatives play out across the entire region, with its differing climates, code and construction practices? How can we minimise transitional risk for all the stakeholders across sectors, from retail portfolio owners to residential? How do we mobilise all the actors to successfully scale-up these initiatives? And what role can the circular economy play in this transition?

We sit down with Arup’s Carbon and Climate Change Director Paula Kirk, Europe Digital Property and Smart Cities lead Léan Doody and Energy, Cities and Climate Change Director Ben Smith for their take on what this could mean for building retrofits, and ideas about how to get started.

Can you give us a high-level summary of the European Green Deal (EGD)?

Paula Kirk: We have minimal time to meet our commitments to the Paris agreement and transition to a lower-carbon economy. The next ten years are vital and the EGD is the European Union's response to this need. By focusing on transport, buildings, and energy, the EGD is setting out a process to help everybody work together and try and move in the same direction. It is still in the early stages, and over the next few months we will see more decisions made and information shared about how this will play out. 

Ben Smith: The term 'Green Deal' has been widely used around the world, not just by the European Union, and what makes it different from previous climate strategies is a focus on benefits for jobs. There's a strong emphasis on transition and “leaving no one behind” or investing in the people whose industries potentially must go through a significant shift. It’s partly making sure that they've got the skills that they need to be able to survive in a different kind of economy. 

While there have been a lot of conversations around guidance and future regulations for buildings, we don’t often think about the fact that roughly 80 percent of existing building stock will still be present in the year 2050, just 30 years from now. What does that mean for the challenges in implementing something like the EGD?

Paula Kirk: It's been categorized as 'hard-to-do' up until now primarily because of the fragmented ownership of existing buildings. For the existing building stock, it's not a simple case of doing it through design standards or planning processes, as with new builds. There have been some successful retrofit programs, in New York and Berlin notably, where city governments have made grant funding available, but that's been very difficult to scale up. Potentially what the EGD will do is create a framework so there's a better understanding of what works. Hopefully it will also bring about the market shift necessary for all the different individuals involved. It is, as Ben mentioned, transition both in terms of putting in place an even playing field for all the building owners so that they have help to make these changes, and in terms of helping to create a European-wide market for those changes to happen. 

Léan Doody: I think, as Paula is suggesting, that we need to differentiate between the different sectors.

In the commercial real estate and retail sectors the institutional investors are driving a lot of change to de-risk portfolios around climate risk. They are being pushed by their own investors to look for more sustainable investment opportunities and will therefore be pushing on funds to green their portfolios. Landlords are also being pushed for more sustainable buildings by occupants. So, there are a lot of market forces pushing to make buildings more sustainable.

On the residential front, as Paula mentioned, there have been retrofit schemes in various places around the world, but the challenge is to scale that up using sustainable finance models and a combination of finance and regulation to push homeowners to retrofit their homes. Efforts to date have focused on trying to get the supply chain ready so they can do this kind of retrofit with the new materials and the new technologies. But now the EGD will be focused on trying to scale that because we need to decarbonise our homes on a massive scale - and it also needs to happen in a fair way, so quite a challenge.

Ben Smith: Léan is right, it’s important to acknowledge past efforts to drive retrofit at scale. There’s been lots of investment into this area over many years, but when you think Europe-wide, we're dealing with different climates across the region, different construction practices, different regulations. A technical solution that is right in one building type or sector in one region, may not be the right solution elsewhere. Broadly speaking though, we do understand the technical solutions, I don’t think that’s the most pressing challenge. It’s more about appetite and about mobilizing around practical challenges like decanting people out of their homes to complete retrofits. 

If you consider all the different types, sizes and ages of homes across Europe there will be different retrofit needs - from changing your heating system, installing solar panels, or fitting internal installation or external installation. My sense is that if you offered people in a typical street the grant money and the team to deliver the works – there would still be a hesitation. We need to make it simpler, more attractive and more urgent.  

It sounds like there’s some resistance to implementing these retrofit changes, both in terms of figuring out the logistics and then understanding the transitional risks associated?

Paula Kirk: Where Arup can help is to identify a baseline for the current state of play. We're doing this for some commercial clients – helping them to assess whether their current portfolio of assets is fit for purpose today and in the future, given the climate changes that are likely to occur.

The transitional risks are interesting because we’re trying to respond to change in a world of uncertainty. There is no guarantee how changes are likely to happen, be they policy or regulation changes, technological changes, or even, for some of the commercial and non-residential market, changes on the reputational side. People need to be asking themselves what happens if they haven't made changes and business is impacted.

Retail clients who haven't adapted air conditioning systems are a very simple example, considering the hotter days we are experiencing. Systems aren't designed to deal with that level of heat and so the systems malfunctioned. For some businesses that has a much higher impact than others; in retail it’s a problem, in hospitals and schools it will have a much bigger impact, but for people in their homes it might just be a level of discomfort that they can live with for three days a year.

How do we adapt the current building stock to deal with some of these potential future changes that are driven by climate? When we talk about transitional risk, it's about helping clients understand the risk of inaction, but also the risk of investing in the wrong technology for their scale or type of building. 

Ben Smith: I hope there is not resistance to change, but there are certainly challenges. The electricity grid – and energy supply generally – is changing. So, the way you design and service buildings needs to reflect these changes. If we shift to 100% wind with some baseload from elsewhere then we can design and retrofit all electric heating systems. The building level solutions will be different if we shift to hydrogen - that’s what Arup is looking at through the Hy4Heat project. And if we are getting in to homes to deliver retrofit programmes at scale then we should also consider measures to adapt to climate impacts – planting trees, de-paving front gardens and so on. If we know the main barrier is getting in in the first place, we should be thinking – how much can we get done at once?

There are clearly many areas of uncertainty in this conversation – from technology to policy questions. One that seems to be front and centre now is circular economy – what role does it have to play in the EGD conversation, especially in terms of areas where it’s maybe not as prevalent, like existing building retrofits for example?

Léan Doody: I spoke at a client event recently where the global VP of workplace for LinkedIn was discussing the work they're trying to do to decarbonise the construction process of their new buildings, as well as thinking about circular economy in terms of fit-out. I think that's something that we will see a lot more of. Both efforts will require more digitisation to understand and record the types of materials being used and lots of details about specifications. 

Paula Kirk: What I find interesting about those comments from LinkedIn was that they were almost a throwaway comment –they were obviously thinking about circular economy and they wouldn't ever specify anything that isn't circular. It’s about knowledge and a shift in mindset; understanding this is not necessarily always an additional cost and it's not going to reduce performance. 

Ben Smith: You can imagine as well in the retrofit context, whether it's residential or elsewhere, that every time you do a retrofit there will be lots of materials coming out of the buildings, whether that's boilers, window frames, radiators, lighting products, furniture. We need to consider how this stuff feeds into a circular economy. I know some of this – basic recycling – has happened forever, but what does it look like in this generation. How can we be more purposeful about recording what's coming out and starting to really incorporate some circular principles?

Are there any other areas of uncertainty that are particularly relevant to the implementation of the EGD?

Paula Kirk: One interesting question I received recently was: "What's the big thing that is really important, but we haven’t realised yet?" For example, decades ago everyone thought smoking was OK and it took a while for public opinion to switch over and realise how bad it is for your health. Eventually there were bans and restrictions and a huge push to stop people smoking.

Right now, everyone is very aware of carbon – we’re only waking up to the carbon crisis and climate agenda now even though experts knew years ago that we were in trouble. To me, in 20-years-time the thing we will look back on and realise we really missed the boat, missed the tipping point, will be consumption-based emissions. As individuals we need a more tangible understanding of how much carbon is embedded within the materials we use and products we buy; recently this has started to click for people when they talk about 'fast fashion'.

We talk about industries and sectors being responsible for emissions, but all those industries and sectors are made up of individuals and all decisions are made by individuals within those sectors. So, when we talk about needing to bring about change, there is immense power at the individual level to influence the systematic change and the institutional change that is necessary.