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Climate change is a pressing issue all over the world. The United States (US) is addressing climate change issues by committing to an ambitious Nationally Determined Contribution (NDC) goal to reduce net greenhouse gas (GHG) emissions 50-52% below 2005 levels in 2030, as part of its long-term strategy to reach net zero emissions by 2050 (Kerry). To achieve this, the US must reduce GHG emissions in residential and commercial construction. Specifically, the US must finance green construction projects via blended financing, most importantly with the public sector, while also setting higher standards for private financing.
Context
Negative climate change impacts have reached global dimensions. The US alone has experienced never-before-seen wildfires, droughts, storms, and heatwaves. The time to act is now. In 2021, the US rejoined the Paris Agreement, a legally binding international treaty on climate change. The goal is for 196 parties to work collectively to limit global warming to 2C, preferably 1.5C. GHG emissions must peak before 2025 at the latest and decline by 43% by 2030 (The Paris).
To help reach this goal, the US submitted an ambitious yet achievable NDC to reduce net GHG emissions by 50-52% in 2030. To fulfill its commitment, the US government has passed the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA). They offer a wide array of incentives, such as grant funding and tax incentives for building efficiency and clean energy (Green Buildings). They also target the residential and commercial construction sector, the largest source of US GHG emissions.
The BIL and IRA increase public funding for residential and commercial construction; however, this is not enough. The increase for sustainable projects increases the amount of blended financing green construction. However, private construction projects typically are held to less stringent standards and regulations (Lamelza). Green and sustainable practices are often not enforced. To mitigate this, a law must be implemented that requires all privately funded construction projects to acquire LEED (Leadership in Energy and Environmental Design) certificates. LEED certificates are a globally recognized green building rating system that provides a framework for healthy and efficient green buildings (U. S. Green Building Council).
Impacts of Residential and Commercial Construction on United States Emissions
According to the Environmental Protection Agency (EPA), the residential and commercial sector is the fourth largest source of GHG emissions, accounting for 13%. Electric power and indirect emissions from electricity end use are included in other sectors. If they were included in the residential and commercial sector it becomes the largest source, accounting for 31% of GHG emissions. This is largely because buildings use 75% of the electricity generated in the US for HVAC, lighting, and related needs (Sources of). Action must be taken to lower the emissions coming from residential and commercial construction to achieve US GHG emissions goals.
US Residential and Commercial Construction Spending
According to Statista, in 2022 alone, $1.43T of US construction was funded privately, while only $363.3B was funded publicly (“U.S. Private”). In other words, roughly 20% was funded by the public sector. As mentioned earlier, public investors, such as state and local governments, are held to a much higher standard than private investors. They must negotiate different layers of approval and follow stricter protocols. Private investors, such as real estate developers, are not held to the same standards. Often, these investors want to build as fast as possible, and for as little money as possible, which means they avoid any add-ons such as sustainable and green building features. The current 20% of public commercial and residential construction spending must be increased. With more public investments there would be more green and sustainable buildings built, and if there were more blended financing opportunities from the public sector, private investors would be held to higher public standards and build greener.
With the BIL and IRA, the US is on the right path to increase public funding. The BIL was signed into law in November of 2021. According to the United States Green Building Council (USGBC), the package offers $550B in spending to modernize infrastructure, with some clean energy provisions. It contains an estimated $80B in climate-related spending (USGBC Guide). Some top, specific provisions relating to green building in the package include $5B for airport terminal modernization, $500M in grants for green school facilities upgrades, $225M for implementation of model building energy codes, and $250M for federal building energy efficiency improvements (Bipartisan). The IRA was signed into law in August of 2022. Its $370 billion investment in climate mitigation constitutes the largest climate investment in history. The act funds tax incentives, rebates, and grants. Examples of green building opportunities offered by the IRA include the Clean Electricity Investment Tax Credit, New Energy Efficient Homes Credit, and Tax Deduction for Energy Efficient Commercial Building (“Buildings”). Together, the IRA and BIL establish a variety of tax incentives and grant funding for green building projects, public and private. With $80 billion from the BIL and $370 billion from the IRA, the 20% public investment nearly doubles to 36%. It is important to keep in mind that the increase in public construction investment increases private funding.
LEED Certifications
With the increase in public funding in commercial and residential construction, it is necessary to understand that private funding would also increase due to more opportunities for blended financing and a more competitive market overall. Private investors, participating in blended financing with the help of public funds, could be held to higher green building standards. Private investors who do not participate in blended financing would still avoid such standards. To mitigate this, private investors must be required to acquire LEED certifications for their buildings.
LEED was founded in 1994 by the USGBC. The certificate provides a structure for owners and teams to follow when building efficient green buildings. First, a team must choose a rating system, such as the LEED Building Design and Construction rating system, or LEED for Interior Design and Construction. Within the rating system, the team complies with Minimum Program Requirements. The USGBC, which distributes LEED certifications, offers relevant resources (What is). According to the Department of Energy, LEED-certified buildings generated 34% lower CO2 emissions, 25% less energy use, and 11% less water use than regular, non-certified buildings. LEED-certified buildings generate many related economic benefits. For example, LEED buildings have 20% lower maintenance costs and a 10% or more increase in asset value (Press).
If all new construction is LEED certified and reduces CO2 emissions by 34%, US GHG emissions will decrease by 10%. Additionally, LEED certification provides an instrument for ensuring BIL and IRA sustainability-complaint funding. There is a strong link between IRA funding and LEED certification. The Department of Housing and Urban Development’s (HUD) new Green and Resilient Retrofit Program (GRRP) provides $1 billion in grants and loans to sustainable construction projects, designated that half of this grant funding is designated for buildings that satisfy LEED requirements, such as LEED Zero (IRA Update). Overall, requiring Leed certification could increase the amount of blended financing and ensure that investors take advantage of all available resources for green and sustainable construction.
Implementation
The potential described above depends on effective BIL and IRA implementation. The US government must educate and inform all investors, owners, architects, contractors, retailers, and citizens about the funding opportunities. The EPA already has an entire website dedicated to this titled Green Infrastructure Funding Opportunities, which provides viewers with a list of all green governmental construction opportunities, descriptions, and apply by dates (“Green Infrastructure”). This website is a great tool. However, to increase effectiveness, it should be sent out to all projects during their pre-construction phase to guarantee that projects take advantage of all opportunities possible. To ensure private investor accountability, an executive order must require all private investors to acquire a LEED certification. However, 2030 is approaching quickly. This order must be signed into law as soon as possible, to give private investors time to acquire LEED certifications and for the US to reap at least some benefits of it by 2030.
Timeline
In November 2024, the US faces presidential and congressional elections. Regardless of which candidates are elected, it is important that they do not dismiss the importance of the year 2030. As mentioned previously, after the November elections, the president must sign an executive order requiring all private investors to acquire a LEED certification. This must be done no later than by the end of 2025. By the end of 2026, all private construction projects still in the pre-construction phase should be required to acquire LEED certification before entering the construction phase. This should be supplemented by providing all projects with a comprehensive list of available funding opportunities, similar to the EPA’s Green Infrastructure Funding Opportunities website. According to Statista, In 2022, the average build time for a privately owned residential building with two or more units was 17 months (“Time of U.S.”). Taking these 17 months into consideration, if all privately financed construction projects acquired LEED certification by the end of 2026, we would begin to see environmental benefits at the latest halfway through 2027. This would provide the US with two and a half years to significantly slash GHG emissions from newly constructed buildings, drastically increasing the chance of reaching the 2030 emissions goals.
Sources
Bipartisan Infrastructure Bill Passed With Green Building Provisions. U.S. Green Building Council. 19 Nov. 2021, www.usgbc.org/articles/bipartisan-infrastructure-bill-passed-green-building-provisions.
“Buildings and the IRA: The New Incentives for Going Green.” U.S. Green Building Council, 22 Mar. 2023, www.usgbc.org/sites/default/files/2024-04/USGBC-IRA-Green-Buildings.pdf. Accessed 12 May 2024.
Green Buildings and the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL) | U.S. Green Building Council. 27 Mar. 2024, www.usgbc.org/resources/green-buildings-and-inflation-reduction-act-ira-and-bipartisan-infrastructure-law-bil#.
“Green Infrastructure Funding Opportunities | US EPA.” US EPA, 28 May 2024, www.epa.gov/green-infrastructure/green-infrastructure-funding-opportunities.
IRA Update: Funding for LEED Affordable Housing | U.S. Green Building Council. 25 July 2023, www.usgbc.org/articles/ira-update-funding-leed-affordable-housing.
Kerry, John, et al. “The Long-Term Strategy of the United States.” The Long-Term Strategy of the United States, 2021, www.whitehouse.gov/wp-content/uploads/2021/10/US-Long-Term-Strategy.pdf.
Lamelza, Jim. “Private vs Public Construction: Risks and Rewards.” DataBid, 28 Sept. 2023, blog.databid.com/blog/private-vs-public-construction-risks-and-rewards#:~:text=While%20private%20projects%20offer%20more,bureaucratic%20complexities%20and%20public%20scrutiny.
Nadeem, Muhammad. Strategies for Implementing Effective Sustainable Construction Practices Written by Muhammad Nadeem. 17 Sept. 2023, www.linkedin.com/pulse/strategies-implementing-effective-sustainable-practices-nadeem
“The Paris Agreement.” United Nations Framework Convention on Climate Change, unfccc.int/process-and-meetings/the-paris-agreement. Accessed 12 May 2024.
Press: Benefits of Green Building | U.S. Green Building Council. www.usgbc.org/press/benefits-of-green-building.
“Sources of Greenhouse Gas Emissions | US EPA.” US EPA, 11 Apr. 2024, www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions.
“Time of U.S. Residential Building Construction 1971-2022 | Statista.” Statista, 6 Aug. 2023, www.statista.com/statistics/909951/us-construction-of-residential-buildings-average-time.
“U.S. Private And Public Construction 1993-2022 | Statista.” Statista, 2 June 2023, www.statista.com/statistics/226355/us-public-and-private-sector-construction.
“USGBC Guide to the Infrastructure Investment and Jobs Act.” U. S. Green Building Council, 27 Mar. 2024, www.usgbc.org/sites/default/files/2022-03/Infrastructure-Investment-Jobs-Act-Highlight-Slides_FINAL3.pdf. Accessed 12 May 2024.
“What is LEED Certification?” U. S. Green Building Council, 2022, support.usgbc.org/hc/en-us/articles/4404406912403-What-is-LEED-certification#:~:text=LEED%20(Leadership%20in%20Energy%20and,and%20cost%2Dsaving%20green%20buildings.Accessed 12 May 2024.
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