How low-carbon building materials are shaping real estate projects
Some of the sexiest climate technology buzzwords these days include “electrification”, “virtual power plants”, and “renewable bio-fuels”. Not to mentioned anything with “AI” slapped on it. One industry with less mainstream climate buzz is real estate, but decarbonizing real estate is really important for climate change.
No matter how you slice the pie, real estate always falls somewhere between 30% and 40% of the world’s climate changing emissions. That’s more than both transportation and agriculture. This fact alone makes real estate interesting to anyone who cares about mitigating climate change, and super interesting to entrepreneurs hoping to capitalize on associated industry transformation.
Real estate emissions can be broken into two broad categories:
1. Building operations
2. Building materials (i.e., embodied carbon)
Building operations make up about 2/3 of real estate emissions and encompasses things like the electricity and natural gas you use in your home, office, school, grocery store, bowling alley, etc.
Building materials are responsible for 1/3 of emissions. This includes the entire lifecycle of the cement, steel, wood, drywall, insulation, etc. that goes into these structures. Emissions from the sourcing, production, transportation, installation, and decomposition of these materials can also be called “embodied carbon”.
On the building operations side, we’ve made huge strides. For a long time now, it’s made financial sense to develop appliances, lighting, insulation, and HVAC systems that are more efficient. For example, JLL uses energy storage, smart sensors, and AI-powered systems to optimize energy use in their buildings. According to a study by McKinsey & Company, energy consumption per unit of floor space has declined by 11% for residential and 21% for commercial buildings since 1980.
However, our building materials have stayed pretty much the same for the last 50+ years. This means that as a proportion of overall real estate emissions, embodied carbon has been increasing (and is projected to increase as our buildings continue to get more even more efficient).
The significance of embodied carbon in real estate has started to catch the attention of both end users and regulators, creating a few carrots and sticks to incentivize real estate businesses to reduce emissions…
Carrots: According to a study by Fortune Builders, sustainable homes are now selling for 9% more than their conventional counterparts. A new report by Southby’s International Realty confirms growing demand for sustainable luxury housing.
Sticks: Meanwhile, regulation in progressive places like California and Vancouver is starting to mandate that builders meet certain requirements. California’s CALGreen building code requires larger projects to record their embodied carbon starting July 1st (next week), setting an example that other States are likely to follow.
Our society tends to fixate on one issue at a time. For the past decade or so, it’s been things like electric vehicles, solar panels, and heat pumps. As these become more established, it’s likely that building materials will come into focus next.
At a high level, there are 6 ways to reduce embodied carbon in building materials:
1. Use less materials
2. Use recycled materials
3. Use low carbon or carbon storing materials
4. Create less material waste
5. Minimize transportation distances
6. Extend useful life of materials
Most of these pathways are driven by materials selection. In fact, materials selection accounts for 50–85% of the embodied carbon in any given real estate project.
Entrepreneurs are already developing low carbon alternatives to building materials to take advantage of this opportunity. Some of these alternatives are technologically feasible and financially comparable to conventional materials right now, while others are a bit more of a moon shot with a huge potential impact.
I’m a firm believer that climate-benefiting changes must be financially sound. Developers are only going to swap out materials if they have comparable costs and/or if they can charge a premium for the final product.
Fortunately, we’re already seeing material alternatives that don’t break the bank. According to case studies conducted by RMI, embodied carbon of a real estate project can be reduced by 19–46% at cost premiums of less than 1%.
Let’s go through some of the highest impact materials and discuss some examples of materials that are available and cost competitive today…
Concrete (typically 40% of embodied carbon)
- Optimized concrete mix
- By minimizing the use of cement in concrete, builders can save up to 33% of typically emissions while saving money at the same time.
- Many concrete companies have already made strides to implement this tactic into their projects. - Supplementary cement material
- Cement can be swapped out for slag, fly ash, calcinated clay or other cementitious materials which have lower embodied carbon, cutting up to 60% of concrete emissions. Slag and fly ash are byproducts of coal power plants, so can be found for cheaper than Portland limestone cement.
- McHUGH Concrete is already implementing these alternative materials into their concrete. - Injecting CO2 into concrete
- Methods are being develop to inject CO2 from the air into concrete, strengthening it while reducing the need for limestone cement. The processes used today reduce the CO2 emitted by around 5%, but more effective methodologies are being developed. For now this costs 5–10% more than regular concrete, but the cost is expected to decline.
- CarbonCure has been working on this concept since 2011 and has some products on the market today.
Steel (typically 20% of embodied carbon)
- Recycled steel
- Recycled steel is already used, especially for lower-quality products like rebar. These options can have up to 80% less embodied carbon, and typically come with comparable or lower costs (recycled steel requires less energy to smelt than virgin steel).
- Nucor is a leader in recycled steel rebar products. - Electric arc furnaces
- Steel can be smelted in a traditional coal / coke smelting process or in an electric arc furnace. These electric arc furnaces are typically cleaner, especially when powered by renewables. This can reduce embodied carbon by up to 75% at little or no additional cost.
- Boston Metal and SSAB are two of the biggest players in the steel industry focusing on making green metals using renewable energy - Mass timber instead of structural steel
- A newer trend is using mass timber in place of steel to actually store carbon in our buildings. “Mass timber, made from compressed layers of wood, can be used to construct columns, beams and slats, among other components.” It has about a 15% cost increase over traditional steel structures, but can decrease embodied carbon by 120% (over 100% means the material goes beyond emissions reduction and locks away carbon for many years).
- There are many players emerging in this market already: StructureCraft, Stora Enso, Timberlab, SmartLam, Nordic Strcutures
Insulation (typically 20% of embodied carbon)
- Bio-based based insulation
- Coming in at a little higher cost (for now) at a ~30% premium is organic insultation. Using products made from sheep’s wool, cellulose fiber, and hemp can achieve an emissions reduction of 100% or more by locking away carbon for many years.
- Grown Bio, GreenFiber, and RockWool have already begun to commercialize this material concept.
Finish materials (typically 15% of embodied carbon)
- Drywall alternatives
- Bamboo, compressed board, and other low-carbon alternatives can be used to achieve up to 100% emissions reduction at comparable costs.
- Here are the leaders: USG, American Gypsum, Lamboo, Miller, BEHR. - Flooring alternatives
- Linoleum, cork, and compressed board can be used in place of traditional flooring like carpet and tile. This can result in up to 50% less embodied carbon at prices sometimes even lower than conventional materials.
- Check out some examples here: Tarkett, Forbo, Green Building Supply, Wicanders, iCork, Roseburg. - Exterior siding alternatives
- Wood, bamboo, and bio-composite siding (sometimes made with algae and other organic matter) can be used instead of brick or stucco to reduce emissions by up to 100%. Some options demand a slight cost premium, but in some cases they can be cheaper (such as using engineered wood instead of brick).
- ACRE, NPSP, Innodeen, Chelsea and Tando all offer low-carbon siding products.
Building materials have been nearly the same for the last 50 years. As sustainability becomes more top of mind and various incentives come into play, the real estate industry is primed for a materials revolution. The players mentioned in these examples are in great position to take advantage of the associated business opportunity.
It will be interesting to see which of these materials has staying power and which are beaten by even better alternatives (either lower emissions or lower cost). So, keep your eye on the real estate industry — I have a feeling it will be in a lot more headlines in the coming years.
