Analysis of Climate Change and Its Consequences, and the Benefits of Using Green Buildings - Essay Example

?CHAPTER TWO: CLIMATE CHANGE and GREEN BULDINGS Man everywhere is a disturbing agent. Wherever he plants his foot, the harmonies of nature are turnedto discord G. P. Marsh1 This drastic statement was made in, as far back as 1864, and the prophecy has turned true today. Human activities are largely accountable for global warming, which in turn, have given rise to a series of efforts directed towards sustainable living – real estate being the recent addition to the list. 2.1 Climate Change and Real Estate 2.1.1 Climate Change As the concerns regarding global warming and the repercussions of the same on the quality of life increase, debates surrounding the use and efficiency of green buildings as a positive step towards environmental protection, have gained momentum. Global warming is not merely an environmental issue but has several far-reaching economic repercussions as well. Accordingly, a new revolution in the real-estate market is observed, where efforts are on to build a low-carbon society, which has now become highly popular among the public and a top international priority. Although, cynicism regarding the viability of such a project i.e. economic benefits of green buildings, exist there are equally enthusiastic reports by researchers regarding its positive influences on reducing the carbon footprint. In recent years, amid growing concern that the impact of climate change is becoming more severe, there are indications that we are moving towards solutions to the problem. For example, when it comes to global warming issues, it is said that anthropogenic emissions of greenhouse gases, including carbon dioxide, are more than double the amount absorbable by nature, such as by forests and oceans. In order to prevent any further increase in greenhouse gases in the atmosphere, it will be necessary to cut these emissions by at least 50%. Regarding the issue of biodiversity as a serious environmental problem along with climate change, at the 9th Conference of the Parties to the Convention on Biological Diversity held in May 2008, The Economics of Ecosystems and Biodiversity(TEEB) study was announced. The TEEB study showed not only serious economic losses brought on by the progressive loss of biodiversity and ecological destruction, but also by the impact of deforestation in poor countries causing various natural disasters, such as floods. These are examples of the various repercussions of global warming whereby human actions have triggered a series of natural disasters leading to a vicious cycle of worsening poverty, food crisis, and shortage of pure drinking water in several developing countries where the actions of people in developed countries cause a negative impact on the water, food, and fish in developing countries. Another aspect of the study involved the use of market mechanisms as an advanced approach to biodiversity conservation (TEEB, 2008). Also, at the 10th Conference of Parties to the Convention on Biological Diversity held in Nagoya, Japan in November 2010, the Economics of Ecosystems and Biodiversity’s Final Report was published. It was reported that various species are rapidly becoming extinct the speed of extinction of species is climbing as a result of the effect of climate change on ecosystems, and if appropriate measures are not taken, global losses in annual Natural Capital may rise to as much as 4.5 trillion dollars (TEEB, 2010). According to the EDMC Handbook of Energy & Economic Statistics in Japan 2009, the total amount of CO2 Emissions doubled globally from 1971 to 2007, with an increase of 98% across the world. This study focused on developed and developing countries (BRICs) that regularly emit substantial amounts of CO2, and also tracked these emissions on an annual basis. Increased industrialization, spurred by more construction, manufacturing, transportation, and travel, is reflected in the raised CO2 emissions from all the countries in the study. The developed countries (BRICs), however, showed an even higher increase, as a result of foreign companies expanding their businesses to countries such as China. Having more factories Globalization and industrialization have opened new avenues leading to a rise in employment rates create more jobs, which increases overall wages, and an equal rise in standard of living thus, translating into an increased spending power and the ability to buy and operate vehicles, travel, etc. These changes “on the ground” are reflected in the data on the graph below. In the CO2 Emission Per Capita graph below, we can see that Japan showed a 63% increase in CO2 emissions from 1971 to 2007, and the per capita increase in CO2 emissions was 35% for that same period. In the US, however, the overall emissions for the USA increased 34%, but the per capita output decreased by 8%. Even the decrease in the per capita emissions for the US is encouraging, citizens in the US still produce the highest amount of CO2 of any country in the world, at the rate of 19.2 tons of CO2 per person, in 2007, which is the most recent date in the study. Despite such drastic fall in the per capita income in the U.S., the country still continues to produce the highest amount of CO2 in the world, at the rate of 19.2 tons per person, as per a study conducted in the year 2007. When comparing the data of the two graphs below, the “CO2 Emissions per million tons” graph shows us a general overview of the emissions of each country annually, but it is difficult to interpret the data, as the populations of the countries listed vary significantly. In the “CO2 Emission per capita” graph, we can see a clearer picture of how each individual citizen’s daily choices, and perhaps the effect of utilizing green technology, impact their overall CO2 output for the year. By analyzing this data, we can draw some conclusions about the need for reducing CO2 in developed countries in many ways, including promoting the use of green buildings in new construction, and installing high efficiency HVAC systems or other building equipment into older buildings. 2.1.2 Carbon Risk In April 2010, Tokyo's Metropolitan "Ordinance on Environmental Preservation" was revised. An emissions trading scheme, imposing a duty to reduce total CO2 emissions in Tokyo, was introduced for large-scale establishments who used more than the equivalent of 1500 kiloliters of crude oil in fuel, heat and electricity usage charges for the previous fiscal year. In the same month, the country's "Law Concerning the Rational Use of Energy" was revised and the unit subject to regulation changed from the place of business to the business operator. In other words, the responsibility for energy usage was placed onto the companies themselves, as opposed to their place of business. For companies with offices in Tokyo, rather than the duty to trying to reduce energy consumption by 1 percent per year imposed by as stipulated by the energy laws, it was the Tokyo Prefectural Ordinance which set penalties for failing to reduce CO2 emissions by 6 to 8 percent over 5 years that had a large impact (Environmental Business, 2010). What Tokyo was aiming for was, and is, to balance keeping energy usage to a minimum with an affluent and comfortable urban lifestyle and to quickly become a low-carbon city among major cities in the world. In addition, this Prefectural Ordinance is also the driving force behind the climate change countermeasures of other national and local government bodies in Japan. Tokyo has set a target of reducing greenhouse gas emissions by 25 percent in 2020, compared to emissions recorded in 2000. To achieve this goal by simply requesting that companies make an effort to reduce energy usage, without financial ramifications if they didn’t, was difficult; therefore, in 2010, revisions imposed a duty to cut total emissions. The breakdown of cuts allocates about 30 percent to the transport sector, 24 percent to the residential sector and 44 percent to the business / industry sector. In the business / industry sector, 1400 places of business were subject to the obligation to reduce total emissions and about 1100 of these establishments operated from office buildings, so it is said that this is theworld’s first ordinance requiring office buildings to reduce total emissions.(Kitahara, 2010). 2.1.3 The current state of real estate in Japan Between 1990 and 2009, CO2 emissions rose by 8.6 percent in the commercial sector, which includes office buildings, and by 4.2 percent in the residential sector (Greenhouse Gas Inventory Office of Japan, 2010). Although people recognize that it is necessary to reduce the amount of CO2 emission to stop global warming,we don’t make enough effort to reduce it. In other words, can only say that, with regard to responding to global environmental problems, the gap between “the ideal” and “the present” state of real estate is large. That is to say, such a discrepancy needs to be covered by regulations or strengthening of taxation. This means that real estate currently holds a big "environmental risk", such as Tokyo's Metropolitan "Ordinance on Environmental Preservation" or a carbon tax. 2.2 Definition of Green Buildings In addition to "Green Building", there are many other names for environmentally friendly buildings, such as Sustainable Building, High Performance Building, and Green Architecture. In America, they are known as "Green Buildings", while in the UK, they are commonly referred to as "Sustainable Buildings".In Japan, they are referred to as Kankyofukakachifudosanin Japanese, which means buildings with environmental values. Just as there are various ways to refer to green buildings, there is no standard definition of green buildings. The US Environmental Protection Agency defines Green Building as: "the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle from siting to design, construction, operation, maintenance, renovation and deconstruction"(US Environmental Protection Agency). Green buildings entails the use of energy efficient / eco-friendly materials such as low energy consuming equipments, use of natural ventilations systems, solar powered heating systems, etc., use of recycled materials for construction; designing focused on maximum utilization of natural sources of energy such as day-lighting; efficient use of natural resources such as water for landscaping; reducing use of toxic materials in building construction; and adopting cost-effective and environmentally friendly technologies. 2.3Economic Efficiency of Green Buildings As for green technology, Japan is at a very high level, and a lot of green technology is being implemented in real estate. However, compared to the specifications satisfying the minimum standards for development and construction, it feels expensive, and as it is a primary factor in putting pressure on earnings for the present, the tendency is to avoid it. For the same environmental problems, even if you introduce laws, etc., requiring compliance, as is the case with soil contamination and asbestos, if the other areas are not green the investment cost will exceed the break-even price; this is thought to be one reason why green technology has been avoided. So, does green technology that transcends statues and regulations really exceed the investment break-even price? For example, even if it satisfies those current statutes and regulations, green buildings can be thought to carry the "environmental risk" of having to comply with future regulations and strengthened taxation. On the other hand, it is thought that green buildings reduce such "environmental risk", and possess a multitude of individual factors which lead to a rise in economic value, such as cutting utility costs and improving productivity, reducing the burden of depreciation, and improving image. Economic benefits of green buildings: Green buildings are known to have a competitive edge over its conventional counterparts, owing to its ability to attract high profile customers; leading to high market valuation of green buildings and an increase in the total capital value of green real estate. Green buildings also offer an edge in terms of marketing it as a brand, and helps in targeting the niche environmentally conscious consumer segment (Shiers, 20002; Holmes and Hudson, 20013; Jones Lang LaSalle, 20064; Reed and Wilkinson, 20065). Furthermore energy efficient buildings have greater and better environmental quality resulting in positive health benefits; and higher savings due to its low operational costs (Roper and Beard, 20066). It is also argued that green buildings do not run the risk of price volatility often observed in the real estate market, thus translating into low capitalization; better discount rates; and higher saleability and hence higher economic gains (Cannon and Vyas, 20087). 2.4 Current Status of the World 2.4.1 Vancouver Valuation Summit The Vancouver Valuation Summit was held in Vancouver, Canada, in March 2007. Gathering together real-estate appraisers primarily from North America, it was an attempt to gain a consensus among them, regarding the value of sustainability, and agreement was reached in the form of the Vancouver Valuation Accord. The value for sustainability is based on the recognition that, although the market will create value based on the importance of reducing energy expenses and other “green issues”, this process will take time, and the impact of climate change is creating an imminent need to set global standards regarding sustainable building. The sustainability movement, which sets the benchmark for evaluation, such as the Vancouver Valuation Accord, and builds educational and communication platforms, is progressive. 2.4.2 Appraisal Institute In June 2008, in Texas, sponsored by the Appraisal Institute, the first seminar on Green Building appraisal and evaluation, "An Introduction to Valuing Green Buildings" was held (New England Real Estate Journal, 2008). Today several seminars focusing on green buildings can be taken on-line. In these seminars, market perception situation and the economic benefits and risks for LEED certified buildings is explained. In addition, the application of the appraisal methods Cost Approach, Income Capitalization and Sales Comparison, and asset price adjustments are explained. 2.4.3 United Nations Environment Program Finance Initiative The concept of Responsible Property Investment (RPI) was presented at the United Nations Environment Program Finance Initiative. UNEP FI is advocating an investment code of conduct known as the "Principles for Responsible Investment (PRI)." Consideration of "Environmental, Social, Corporate Governance is demanded when making the decision to invest, so pension funds and financial institutions around the world have signed. RPI evolved from the principals of PRI. When building a real estate portfolio, the investment approach is also aimed at realizing a gain in economic returns, while taking into account environmental and social aspects. In December 2006 at UNEP FI, the Property Working Group was officially inaugurated and these proposals for the popularization of RPI and advanced case studies were introduced, and activities producing tools aimed at investors were expanded. Read More