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1、June 2023Building value by decarbonizing the built environmentUncovering how decarbonization can create unprecedented valueMcKinsey Sustainability McKinsey Sustainability is the firms client-service platform with the goal of helping all industry sectors transform to get to net zero by 2050 and to cu
2、t carbon emissions by half by 2030.McKinsey Sustainability seeks to be the preeminent impact partner and adviser for our clients,from the board room to the engine room,on sustainability,climate resilience,energy transition,and environmental,social,and governance(ESG).We leverage thought leadership,i
3、nnovative tools and solutions,top experts,and a vibrant ecosystem of industry associations and knowledge partnerships to lead a wave of innovation and economic growth that safeguards our planet and advances sustainability.Cover image Borchee/Getty Images.All interior photography Getty Images.Content
4、s3Executive summary10Decarbonizing the built environment:A global challenge 13Finding the solutions that work 19Two case studies in decarbonization 37Business opportunities with a potential to generate significant value 51Where to go from here1Building value by decarbonizing the built environment2Bu
5、ilding value by decarbonizing the built environmentExecutive summaryDecarbonizing the built environment is possible and has the potential to generate significant valuebut the industry must come together to scale solutions.The built-environment ecosystem consists of real estate and infrastructure and
6、 touches all aspects of human life,from homes and offices to factories and highways.It is also responsible for about of a quarter of the worlds greenhouse-gas(GHG)emissions.To help industry players make progress toward decarbonization,this report assesses the most effective solutions available today
7、.Our analysis shows that many levers not only have proven abatement potential but are also already cost-effective.In other words,companies across the built-environment ecosystem could derive value immediately from these lower-emitting technologies and solutions.Further decarbonization levers would b
8、e cost-effective by 2030 if they are industrialized that is,produced and implemented at scale with a focus on quality,cost,and time to market.Because todays value chains are often fragmented and localized,industrialization poses its own challenge.However,those that act now will likely be able to tak
9、e advantage of powerful new business opportunities as global decarbonization gains traction.This report identifies 17 such opportunities that could prove particularly attractive for industry players.Together,the 22 levers we highlight can potentially reduce overall emissions from the built environme
10、nt by up to 75 percent if implemented at scale in the next five to ten years.In these efforts,all companies in the ecosystem can have significant roles to play.By creating partnerships and focusing their efforts and investments,ecosystem players can find mutually beneficial ways forward while buildi
11、ng a net-zero world.About the analysisTo find the most effective solutions to reduce emissions,we analyzed more than 1,000 levers for their abatement potential,cost-effectiveness,and scalability.Out of these,we selected the most promising levers for more rigorous examination.This involved comparing
12、their impact and technical applicability across six asset archetypes:single-and multifamily dwellings,commercial low-and high-rise buildings,industrial buildings,and infrastructure.These archetypes represent about three-quarters of the built environment.For each archetype,the net cost of applicable
13、levers was compared with the cost of traditional practices.Levers were considered both as they exist today and if they were to be applied at scale.Last,each lever was assessed across four geographies and two climate zones to determine if regionally specific factors,such as climate and regulatory dif
14、ferences,affected net cost.Notably,we did not consider changes in regulatory and policy frameworks when assessing costs and business opportunities for given levers.Although regulatory incentives could create tailwinds for adoption,this report does not take the impact of these factors into account to
15、 emphasize that significant progress can be made solely through actions by ecosystem players today.3Building value by decarbonizing the built environmentExhibit 1Share of all greenhouse-gas(GHG)emissions,%100%=54.4 GtCO2e1 Share of all CO2 emissions from fuel consumption,%100%=34.4 GtCO2e1 Total emi
16、ssions from nonbuilt environmentTotal emissions from built environmentNote:Our analysis was based on McKinsey research undertaken around decarbonization in construction and checked against the sources listed below.1Metric gigatons of CO2 equivalent.Source:“Emissions Database for Global Atmospheric R
17、esearch(EDGAR)v5.0(1970-2015),”European Commission,November 2019;“Fuel share of CO2 emissions from fuel combustion,2018,”IEA,October 26,2022;Key world statistics 2020,IEA,August 2020;OECD;Steel Construction EncyclopediaThe built environment contributes a signifcant share of the worlds emissions,part
18、icularly those related to fuel consumption.McKinsey&CompanyCO2 emissions from fuel consumption constitute90%of built-environment GHG emissions26743763A serious challengeBecause the built environment encompasses the whole planet,the movement toward its decarbonization needs to be global in scope.The
19、built environment accounts for 14.4 metric gigatons of CO2 equivalent(GtCO2e)of emissions around the world annually(Exhibit 1).Approximately 26 percent of all GHG emissions and 37 percent of combustion-related emissions come from the construction and operation of the built environment.Emissions come
20、 from all phases of the construction process,from carbon-intensive material production processes and suboptimal technology choices to inefficient building designs,construction practices,and energy use after projects are completed.These emissions can be grouped into operational emissions(related to o
21、perating and maintaining buildings and structures)and embodied emissions(related to producing and transporting building materials and constructing buildings and structures).Although many solutions already exist to abate both operational and embodied emissions,the clock is ticking on their implementa
22、tion.Operational emissions are constantly being released from already-built construction,and once embodied emissions are released,they can only be offset,not abated.Industrializing solutions that workAll areas of the built environment can benefit from decarbonization,and some have particularly power
23、ful abatement options.For example,on average,space heating and water heating emissions compose roughly three-quarters of operational emissions for residential buildings,making them an excellent target for decarbonization(Exhibit2).According to our analysis,a single leverheat 4Building value by decar
24、bonizing the built environmentpumpscan reduce these emissions by about 60 percent.This and many other effective levers are already cost-neutral relative to conventional solutions.Even more levers are expected to be cost-neutral or marginally more expensive by 2030 if they can be scaled.In this repor
25、t,we found that 22 levers had particularly strong potential due to their high abatement potential,cost-effectiveness,and applicability across archetypes and regions.These levers can reduce operational emissions by up to 90 percent and embodied emissions by up Exhibit 2Emissions breakdown,kg CO2 per
26、dwelling annuallyNote:Figures do not sum to 100%,because of rounding.Source:McKinsey Real Estate Climate Action PlatformMost operational emissions in multifamily homes are caused by water and space heating.McKinsey&CompanyAppliancesDriverEmissions,%CookingElectricityNatural gasOil and propaneLightin
27、gSpace coolingSpace heatingWater heatingTotal198441102,1781761,1661,0253222427701545Building value by decarbonizing the built environmentto 60percent for most of the built environment.1 However,a number of potentially effective levers face a central challenge:industrialization.No matter t
28、heir abatement potential,if decarbonization levers and solutions cannot be produced and implemented at scale,ecosystem players will not be able to realize their full impact.To industrialize decarbonization solutions,players will likely need to address challenges in the ecosystem that could deter the
29、ir widespread adoption.The built environment may span the globe,but it varies widely at a local level and throughout the value chain.Players are often regional,overlapping,and varied in their objectives and business models.In addition,the established industry practices that do exist can be difficult
30、 to change.Because many of the solutions are relatively new or unconventional for the industry,industry players may be unaware of the abatement benefits and economic potential of certain levers,and financial institutions and insurers can be hesitant to support their deployment.Industry players may a
31、lso face shortages of both labor and materials during the next five to ten years as value chains scale,though our analysis of the most impactful levers is not constrained by these potential shortages.Despite these challenges,there are many incentives to industrialize decarbonization levers.Industria
32、lization is likely to reduce input costs in several ways.For instance,by establishing procurement best practices,players can develop consistent supply chains and find efficiencies in transportation and in purchasing.An industrialized ecosystem can also enable technicians to gain skills and experienc
33、e to drive process efficiencies.Increasing the number of units produced can reduce capital expenditures per unit,and the stable customer demand created by a steadier,cost-effective supply of sustainable options can decrease risk and financing costs.How businesses can unlock value through decarboniza
34、tion opportunitiesEarly movers that are able to lead industrialization and commercial adoption of decarbonization solutions are likely to create and capture value from this transition.Among the hundreds of possible business opportunities in decarbonizing the built environment,we have highlighted 17
35、that could deliver significant value for ecosystem players(Exhibit 3).Industry incumbents and disruptors could act upon these opportunities to accelerate adoption,application,and scaling of levers before 2030.The value-generating potential of these levers extends across the entire built-environment
36、ecosystem,from real estate owners and developers to investors,construction companies,material manufacturers,and design and engineering firms.Capturing these opportunities could require industry players to assess their existing capabilities,design future potential operating models,and build green bus
37、inesses to develop new capabilities.For instance,engineering,procurement,and Twenty-two levers can reduce operational emissions by up to 90percent and embodied emissions by up to 60percent for the built environment.1 This emissions-reduction potential could be even greater if supported by policy dri
38、vers such as green premiums,incentives,or changes to existing certification practices.To fully reach net-zero emissions for the built environment,other solutions and technologies will likely be needed beyond 2030.6Building value by decarbonizing the built environmentExhibit 3McKinsey&Company1Carbon
39、capture,utilization,and storage.2Design and engineering.3Engineering,procurement,and construction.As is,this exhibit exceeds max height allowed on dotcom.Can we omit some/all of the explanatory phrases to reduce the text wrapping and thereby shorten the exhibit?Web NZBECExhibit of Solution(product o
40、r service)made bywantwhich depends onSolution providerSolution enablerAn ecosystem to decarbonize the built environment will ofer a wide variety of solutions.McKinsey&CompanyLow-carbon cement and concreteGreen steelLow-carbon insulationLow-cost engineered woodLow-cost,high-efciency heat pumpsEnergy
41、upgrade solutions and installation servicesGreen and cost-efective solution designsOn-site equipment charging servicesOf-site modular construction solutions to minimize wasteValidation of green assets and projectsCertifed green materials and solutionsGreen-solution professionalsEnergy optimization u
42、pgradesTransition fnancingGreen insuranceTransforming existing real estate and infrastructure to be more sustainableEnd users(developers and investors for infrastructure and real estate)Cement and concrete producersSteel producers that deploy alternative energy,scrap metal,and CCUS1Insulation manufa
43、cturersthat industrialize low-carbon insulation Engineered-wood providers that scale production Heat pumps and component manufacturersConsolidated services,which design and install energy optimization servicesD&E2 frms,which create green-solution portfoliosLogistics frms,which lease charging infrast
44、ructure and equipmentD&E2 and modular construction frmsAudit,consulting,and engineering frms,which measure and track emissionsCertifcation service providers which validate emissions abatementTraining and vocational institutes which upskill green professionals and techFinancing entities which provide
45、 upfront capital expenditures for upgradesFinancers and investor,which deploy new fnancing structures for solutionsInsurers,which create foward-leaning underwriting for use of green solutionsInvestors,which design funding for green assetsEPC3 frms,which design solutions;waste management,which collec
46、ts and provides materialsCertifcation service providers that validate low-carbon insulationCertifcation service providers that validate use casesIndustrialize production of green materialsIndustrialize production of energy-efcient building techDeliver efcient energy and electrifcation upgradesDesign
47、 and engineer green and cost-efective structuresElectrify on-site constructionMinimize waste and maximize speed with of-site buildsValidate and certify low-carbon actions and solutionsFinance the green transitionEPC3 frms that design solutions7Building value by decarbonizing the built environmentcon
48、struction(EPC)firms have an opportunity to design,develop,and implement carbon capture,utilization,and storage(CCUS)solutions for cement plants and high-emitting industrial clusters.And real estate developers,investors,and financiers can generate value by turning existing assets into green assets an
49、d setting specifications for green solutions and materials to drive offtake.For many of these opportunities,players should consider acting together to realize maximum value.Collaboration across the value chain will likely be critical for success,even among competitors.For example,multiple real estat
50、e companies could collectively commit to procuring and installing low-carbon building materials,technologies,and services,thereby creating demand,increasing cost competitiveness through scale,and enabling investments thanks to reduced commercial risk.In addition to horizontal collaboration,players i
51、n the built-environment ecosystem will likely need to create partnerships vertically throughout the value chain.Both new and incumbent manufacturers of materials and technologies(such as low-carbon insulation and engineered wood)can adopt best practices regarding process decarbonization and commerci
52、alization.They can also proactively approach and educate real estate developers to create demand.To support these decarbonization efforts,investors and financiers could identify high-potential suppliers and partner with forward-leaning real estate players to develop and provide competitive financing
53、 solutions.The need to decarbonize the built environment is urgent,and significant progress can be made with technologies,materials,and solutions that are available today and are proved to have strong decarbonization potential.If ecosystem players can move quickly to assess which green businesses to
54、 build or fund,which business models could help create scale,and which partnerships would be beneficial,they are likely to capture economic benefits from opportunities that are executable in the near term.8Building value by decarbonizing the built environment9Building value by decarbonizing the buil
55、t environmentAs one of the worlds largest economic ecosystems,the built environment is also one of the worlds highest emitters,releasing more greenhouse gases(GHGs)than either the transportation or industrial sectors.In total,the built environment is responsible for approximately 26 percent of all G
56、HG emissions and approximately 37 percent of global CO2 equivalent(COe)emissions from fuel combustion(Exhibit 1).Given the volume of the built environments emissions,it is crucial to decarbonize this industry to achieve global sustainability goals.In absolute terms,the built environment contributes
57、up to 14.4 metric gigatons(Gt)of CO2e to the atmosphere annually.Assuming limited changes to how building stock is managed,operated,and constructed,this number could rise by 10 to 15percent in total by 2030.The typical 30-to 130-year lifetime of a building means that of the building stock expected t
58、o exist in 2050,80 percent has already been built,1 which points to two imperatives.First,decisions made today will have consequences for decades to come.Therefore,it is critical to design and build energy-efficient buildings to avoid increasing stock that will require energy upgrades in the future
59、and to use low-emissions materials to avoid up-front embodied emissions that can never be recovered.1“Call for action:Seizing the decarbonization opportunity in construction,”McKinsey,July 14,2021.Second,it is important to improve the energy efficiency of most existing buildings(see sidebar,“Buildin
60、gs and energy demand”).Both imperatives can be addressed by identifying green products and materials that lower or eliminate emissions footprints and by retrofitting energy-efficient solutions that reduce operational emissions.Given the scale of the economic transition required to decarbonize,compan
61、ies that lead Decarbonizing the built environment:A global challenge Accelerating decarbonization in the built environment is essential for a sustainable future,but industry challenges need to be addressed for solutions to scale.Buildings and energy demandIn a decarbonized world,power grids will hav
62、e the burden of serving the needs of the built envi-ronment as well as fully electric automotive fleets.This will require enormous increases in renewable capacity,energy storage,and transmission and distribution infrastructure.This poses a challenge for the built-environment ecosystem.To eliminate e
63、missions for a given building,electrifying assets such as gas furnaces is an excellent option.However,as adoption of electric assets grows,electric grids will be put under increasing stress.Therefore,companies in the built-environment ecosystem have a strong incentive to not only increase project el
64、ectrification but also reduce energy consumption.Both of these goals can be achieved by upgrading inefficient processes and technology to options that are more energy efficient.10Building value by decarbonizing the built environmentin sustainability are likely to succeed.Capital markets are expectin
65、g companies to take prompt action on decarbonization,and players in the built environment are increasingly setting aggressive targets.There is also significant pressure to decarbonize because of factors such as regulatory requirements,employee needs,and customer demands for environmentally sustainab
66、le solutions.Despite these strong incentives,progress in decarbonizing the built environment has been limited for a variety of reasons.The built environment is complex and fragmented,with different players and business models at every step in the value chain.It is also highly local,with varying stan
67、dards,building codes,and decision makersoften with partially conflicting objectives.2 We define“industrialize”as“to produce and implement a lever at scale with a focus on quality,cost,and time to market.”Arrangements are typically project-based,with temporary,nonstandardized agreements.Companies als
68、o often operate on small margins and have a limited ability to take risks by investing in new businesses and solutions.And though many levers to decarbonize the built environment are proved,there is a lack of transparency and knowledge about which of these levers are cost-effective today or could be
69、 if industrialized.2 In light of this urgency and these challenges,finding solutions that meet both abatement and cost requirements is imperative.Many of these solutions and technologies already exist and can drive significant improvements at low(or even negative)net costs.Exhibit 1Web NZBECExhibit
70、of Share of all greenhouse-gas(GHG)emissions,%100%=54.4 GtCO2e1 Share of all CO2 emissions from fuel consumption,%100%=34.4 GtCO2e1 Total emissions from nonbuilt environmentTotal emissions from built environmentNote:Our analysis was based on McKinsey research undertaken around decarbonization in con
71、struction and checked against the sources listed below.1Metric gigatons of CO2 equivalent.Source:“Emissions Database for Global Atmospheric Research(EDGAR)v5.0(1970-2015),”European Commission,November 2019;“Fuel share of CO2 emissions from fuel combustion,2018,”IEA,October 26,2022;Key world statisti
72、cs 2020,IEA,August 2020;OECD;Steel Construction EncyclopediaThe built environment contributes a signifcant share of the worlds emissions,particularly those related to fuel consumption.McKinsey&CompanyCO2 emissions from fuel consumption constitute90%of built-environment GHG emissions2674376311Buildin
73、g value by decarbonizing the built environment12Building value by decarbonizing the built environmentAchieving net-zero emissions for the built environment is a bold endeavor and will require significant investment.While a sizable challenge,there are many pathways with proven technologies and soluti
74、ons that can get the industry there.A number of these are already cost-effective today.Emissions baseline and initial lever poolTo assess how effective levers were at abating emissions,we compared them to a global emissions baseline.Of the approximately 14.4 Gt of global emissions contributed by the
75、 built environment,approximately two-thirds are operational(related to the daily operations of a building,such as electricity consumption)and one-third are embodied(related to the materials used to build the structure)(Exhibit 2).Roughly three-quarters of operational emissions are attributable solel
76、y to residential buildings,while the remaining quarter comes from commercial buildings.Infrastructure contributes little to no operational emissions once constructed.By contrast,embodied emissions are shared roughly equally between residential buildings,commercial buildings,and infrastructure.Our go
77、al was to identify the levers that could best accelerate near-term decarbonization in the built environment,accounting for their abatement potential,cost-effectiveness,and potential to be industrialized.For our analysis,we focused on proven levers with demonstrated use cases,known or tested abatemen
78、t potential,and the potential to be applied at scale.There may be other disruptive solutions with greater abatement potential in development that will be available in the near future.At the time of this reports publication,however,these solutions either did not have established and industry-accepted
79、 use cases or had not demonstrated potential to be applied at scale.Therefore,we did not consider them in our analysis.In any case,similarly to the levers we touch on,these solutions would also benefit from investments and resources in the near term to have the potential to scale.Identifying carbon-
80、and cost-effective leversThrough academic research and input from McKinsey experts and industry leaders,we identified and mapped more than 1,000 decarbonization levers applicable to the built environment.These levers were compared with emissions baselines and systematically analyzed across three mai
81、n attributes:abatement potential,net cost change today,and net cost change by 2030.Abatement potential is defined as the potential reduction in emissions for each lever relative Finding the solutions that workOur analysis shows there are many levers available to decarbonize the built environment in
82、a cost-effective manner and meet global emissions targets.13Building value by decarbonizing the built environmentto the corresponding emissions baseline.For example,using biomass as an alternative fuel can reduce overall emissions3 during cement production by up to 40 percent,as compared with an emi
83、ssions baseline of using a conventional fuel such as coal or petroleum coke.Net cost change today indicates the estimated cost increase or decrease associated with applying a given lever relative to the cost of the existing or conventional practice that the lever is intended to replace.The net cost
84、comparison considers both capital and operations and maintenance(O&M)costs,including savings from reduced energy consumption.3 Considering net emissions potentially created from the use of biomass.Net cost change based on expected costs in 2030 estimates the cost in 2030 if the lever is produced and
85、 installed at scale.Industrialization will reduce input costs through implementing procurement best practices,enabling technicians to gain experience and drive process efficiencies,reducing the capital expenditures per unit by increasing the number of units produced,and decreasing the risk and finan
86、cing cost because of stable customer demand.Using these criteria,we narrowed down the list of levers for analysis to around 150 based on impact potential and technological and commercial feasibility.These levers were then classified into Exhibit 2Web NZBECExhibit of 1Metric gigatons of CO2 equivalen
87、t.Source:“Emissions Database for Global Atmospheric Research(EDGAR)v5.0(1970-2015),”European Commission,November 2019;“Fuel share of CO2 emissions from fuel combustion,2018,”IEA,October 26,2022;Key world statistics 2020,IEA,August 2020;OECD;Steel Construction EncyclopediaResidential buildings,commer
88、cial buildings,and infrastructure each contribute to the built environments emissions.McKinsey&CompanyShare of total carbon emissions by type,%100%=14.4 GtCO2e1 Operational emissions breakdown,GtCO2e1 Embodied emissions breakdown,GtCO2e1 Embodied emissionsOperational emissionsCommercial buildingsRes
89、idential buildings33677.02.69.64.8Infrastructure1.81.51.5Commercial buildingsResidential buildings14Building value by decarbonizing the built environmentfour main categories based on their net cost of application:Cost-effective today.These levers are technically and commercially viable and are cost-
90、neutral or cost-positive today relative to conventional solutions.Assessed on a net cost basis(capital and O&M),these levers are either equal to or less expensive than existing practices.Any up-front additional costs can be recuperated through subsequent savings on O&M,including efficiency savings a
91、nd utility costs.Many of the operational levers are compared based on total costs as well as on their potential return(such as lower energy costs due to increased energy efficiency).Levers in this category are therefore assessed to be ROI positive.Cost-effective by 2030 or earlier,if industrialized.
92、These levers are currently technically proved but more expensive than conventional alternatives today.If industrialized,these levers are expected to be commercially viable.Industrialization results in increased scale and process efficiencies,which in turn results in lower unit costs.Therefore,the ne
93、t expected cost of applying these levers in 2030 could be lower than the expected cost of conventional practices in 2030.Marginally more expensive by 2030,if industrialized.In this category,levers are technically proved to have a significant impact on emissions but would still be marginally more exp
94、ensive after industrialization than conventional alternatives.In this case,we define“marginally more expensive”as a net cost increase of up to 5 percent for the given lever based on expected costs by 2030.Significantly more expensive by 2030 or not technically viable.These levers are either expected
95、 to be significantly more expensive than conventional practices in 2030,even if industrialized,or are not expected to be viable for industrialization by 2030 without a significant technological breakthrough.Here,we considered a net cost increase of more than 5 percent for the given lever based on ex
96、pected costs in 2030.To be conservative,the net cost analysis does not consider incentives,carbon price changes,or green premiums.We use todays average prices for conventional solutions or commodities,such as steel and cement,and do not factor in significant or unexpected price changes by 2030.If ju
97、risdiction-specific incentives and green premiums are applied,it is possible that several of the marginally or significantly more expensive levers will also be cost-effective by 2030.Sorting levers for embodied and abated emissionsOnce effective levers were identified,they were sorted for ease of an
98、alysis and clarity of purpose in the overall construction process.For embodied emissions,the top levers were categorized into four groups aligned with different phases of the construction process.This allowed for them to be applied sequentially and considered in conjunction with one another,capturin
99、g the overall abatement potential of the entire process.Design optimization levers are applied at the design stage,prior to on-site construction.As the first levers,these have the most cascading effects and can be used to reduce the archetypes overall emissions baseline while reducing costs and sche
100、dule extensions.These levers enable simplification of building design due to standardization and efficiency improvements.As a result,smaller quantities of materials are needed,and overall embodied emissions are reduced,both through incorporating green components or processes and through efficiencies
101、 resulting from using fewer materials and resources.Design decisions can also affect operational efficiencies of archetypes and can help lower operational emissions.15Building value by decarbonizing the built environment Material substitution levers are applied at the preconstruction stage.These lev
102、ers reduce emissions by replacing traditional materials used in manufacturing or end-products with low-carbon alternatives.By choosing materials that emit less during production or are more locally available,embodied emissions can be avoided.For instance,reducing or replacing clinkers in cement with
103、 low-carbon alternatives,often referred to as supplementary cementitious materials(SCMs),has potential to abate emissions.On-site improvement levers are applied once construction has begun and can reduce emissions stemming from the construction process.For instance,fuel or materials used in the cons
104、truction process can be substituted with alternative fuels or clean power sources,enabling a reduction in the emissions footprint at this stage.Process decarbonization levers broaden to encompass the entire construction value chain.They are applied at the material-manufacturing stage and address rem
105、aining emissions from conventional materials with larger emissions footprints.Steel and cement,for example,have conventional manufacturing processes that are highly emissive due to the use of fuels such as coal,petroleum coke,and natural gas.Replacing these with proven renewable and low-carbon fuels
106、 such as hydrogen and biomass will enable a significantly lower emissions footprint during manufacturing.Top operational levers were similarly categorized into four groups:Space heating and cooling levers are ways to more efficiently heat or cool a space with fewer emissions,with the heater either w
107、ithin the space or external to it.Water heating levers use low-carbon methods to heat water for residential buildings.Cooking levers enable users to shift from traditional gas cooking appliances to more efficient cooking methods.Appliances and lighting levers include using more-energy-efficient home
108、 appliances and light sources.Unlike embodied levers,which are typically applied sequentially,operational levers can be applied simultaneously,in some cases to capture additional abatement from synergies between levers.For example,installing energy efficiency measures first can reduce the overall re
109、quired heat pump capacity and cost.If strategically implemented,the economics of each lever can be improved in this manner.Applying levers to global archetypesFinally,to pressure test the levers with the highest impact and demonstrate their applicability,abatement efficacy,and cost-efficiency,we app
110、lied them to six common archetypes that we believe represent about three-quarters of the built environment ecosystem:single-and multifamily dwellings,commercial low-and high-rise buildings,industrial buildings(such as manufacturing plants),and infrastructure builds(such as roads and highways).For em
111、bodied emissions,the top levers were categorized into four groups aligned with different phases of the construction process.16Building value by decarbonizing the built environmentThese chosen archetypes were modeled to span four regions(China,Europe,India,and North America)and three climate zones(co
112、ld,warm,and temperate)to capture variations in building codes and standards and in construction and operational practices.4 For each archetype,we identified the embodied and operational abatement levers that were most impactful and relevant to the archetype.4 These regional variations are not the fo
113、cus of this report,although for some levers,we do address their impact.From our initial pool,we identified 22 levers that could have a particularly strong impact on decarbonization due to their high abatement potential,cost-effectiveness,and applicability across archetypes and regions.To illustrate
114、how we determined which levers were most effective and to offer some examples of selected levers,we provide two case studies in the next chapter.17Building value by decarbonizing the built environment18Building value by decarbonizing the built environmentMultifamily dwellings are common throughout t
115、he world and have material compositions that are close to single-family dwellings and commercial buildings.Therefore,the majority of the top operational-and embodied-emission abatement levers applied to this archetype are also applicable to other archetypes.As for large infrastructure projects and u
116、pgrades,they are similarly relevant around the world and will be increasingly important sites of investment and development as populations grow.These two archetypes represent common use cases across the built environment,and,barring regional and jurisdictional differences,results for these can be re
117、asonably scaled and applied across the broader ecosystem.Archetype 1:Multifamily dwelling in North America in a cold climateA multifamily dwelling refers to a residential building that houses multiple families,such as an apartment complex.An example of this archetype might be a 5,500-square-meter,fi
118、ve-story building in a cold climate in North America.On average,such a building has an embodied emissions baseline of about 4,000 metric tons,estimated from a material composition and weight baseline of about 13,000 metric tons.Though the cost and abatement potential for specific levers are based on
119、 a North American structure,the results and levers we recommend are reasonably applicable to other geographies and climates,with some region-specific nuances.Top levers to abate embodied emissionsFor multifamily residential dwellings,most embodied emissionsabout 2,000 metric tons or 50 percentare dr
120、iven by concrete,followed by steel,with about 900 metric tons or 22 percent(Exhibit 3).Of the 1,000 levers assessed,we determined that approximately 50 were relevant to this archetype.Out of these,the top nine alone can abate roughly 81 percent of embodied emissions relative to the current baseline(
121、Exhibit 4).Top embodied levers for this archetype were classified into the four categoriesdesign optimization,on-site improvements,material substitution,and process decarbonizationand applied sequentially.Design optimization leversIn the design phase,one lever stood out as particularly effective in
122、decreasing embodied emissions:Increase adoption of design for manufacturing and assembly(DFMA)and off-site construction.This lever explores the manufacturing,planning,design,fabrication,and assembly of building elements at an off-site location,such as a factory or plant.Two case studies in decarboni
123、zationOf our six archetype analyses,two illustrative case studiesa multifamily dwelling in North America and a large infrastructure project in Europewere chosen to provide a detailed view of our approach and demonstrate the range of applicability of decarbonization levers to both buildings and infra
124、structure.19Building value by decarbonizing the built environmentThis enables the speeding up of on-site construction through standardized design.As a result,lower net waste is generated.This has an abatement potential of up to 40 percent of the emissions released during on-site construction due to
125、reduced waste from saving up to 30 percent of construction material as well as fewer truckloads needed to transport building materials to the construction site.Applying this lever for this archetype is expected to save up to 5 Off-site processes(prefab,automated production to create precision pieces
126、)can also help bring down costs of airtight envelope solutions that seal places where heating or cooling may leak from a building.These solutions can retroactively improve energy efficiency of existing structures but are currently expensive.2 percent of total material costs in 2023,making it cost-ef
127、fective today.5 Off-site construction is already widely used in both Europe and Asia but struggles to gain a foothold in North America because of a variety of potential factors,such as increased desire for customization in structures and a reluctance to use a single supplier to provide for all build
128、ing needs.Exhibit 3Drivers of emissions breakdown,metric tonsSource:Tsz Kuen Ma and Qingshi Tu,“Bill of materials(BoM)and archetype information for buildings in Canada,”UBC Research Data;July 25,2021;McKinsey analysisConcrete and steel are the main drivers of embodied emissions for multifamily resid
129、ential dwellings.McKinsey&CompanySteelConstruction processGypsumOpenings(windowsand doors)OtherRoofng andinsulationTiling orfooringTotal58634564,72Concrete2,07820Building value by decarbonizing the built environmentMaterial substitution leversCompanies can make effective material substitu
130、tions by replacing cement with SCMs,scaling up use of low-carbon insulation,and augmenting concrete and steel use with engineered wood.Replace cement with fly ash.SCMs are used to substitute portland cement in concrete or clinker in cement to make concrete mixtures more economical,reduce permeabilit
131、y,increase strength,and reduce embodied emissions.Examples of SCMs include fly ash,ground-granulated blast-furnace slag(GGBFS),calcined clay,and recycled concrete.For instance,fly ash can be used to substitute up to 30 percent of ordinary portland cement(OPC)in concrete manufacturing.This has an aba
132、tement potential of up to 30 percent of overall emissions associated with concrete and is also cost-effective.For a multifamily dwelling,the cost of replacing Exhibit 4ScenarioLeverEstimated abatement potential as share of baseline emissions40%30%90%90%90%50%20%45%5%Increase use of DFMA1
133、and ofsite constructionReplace cement with GGBFS2Electrify on-site heavy equipment and small generatorsof heavy-equipment and small-generator emissionsof steel emissions by using scrap and switching to renewable energyReplace cement with fy ashof equipment and transport emissionsof concrete emission
134、s for fy ashof concrete emissions for GGBFSDesign optimizationof concrete emissionsof concrete emissionsof emissions for insulationUse biomass as alternative fuelCarbon capture in cement productionElectrify production of recycled construction steelScale up use of low-carbon insulationCost efective t
135、odayCost efective by 2030 or earlier,if industrializedMarginally more expensive by 2030,if industrializedSignifcantly more expensive by 2030,if industrializedTotal embodied emissions abated,%Total 1Design for manufacturing and assembly.2Ground-granulated blast-furnace slag.3Assuming 25%max addressab
136、le baseline by 2030.4Direct reduced ironelectric arc furnace.5Actual GGBFS is 16%but is listed as less the reduction already achieved by fy ash.Source:“Emissions Database for Global Atmospheric Research(EDGAR)v5.0(1970-2015),”European Commission,November 2019;“Fuel share of CO2 emissions from fuel c
137、ombustion,2018,”IEA,October 26,2022;Key world statistics 2020,IEA,August 2020;OECD;Steel Construction Encyclopedia;Tsz Kuen Ma and Qingshi Tu,“Bill of materials(BoM)and archetype information for buildings in Canada,”UBC Research Data;July 25,2021;McKinsey analysisNine levers can abate most embodied
138、emissions for multifamily residential buildings.McKinsey&CompanyMaterial substitutionOn-site improvementsProcess decarbonization40%30of concrete and steel emissionsAugment concrete and steel use with engineered wood50%6of steel emissions by switch to DRI-EAF4Electrify production of recycled construc
139、tion steel21Building value by decarbonizing the built environmentcement with SCMs is expected to remain consistent with the cost of OPC in most locations,making this lever cost-effective today.By contrast,contractors intending to use fly ash must be careful because it retains moisture longer than OP
140、C and therefore takes longer to dry.Expenditures on equipment and energy used to dry the material(as opposed to drying naturally)could negatively affect cost-savings and abatement potential.Replace cement with GGBFS.GGBFS,another SCM,is a by-product in ironmaking and can be used to substitute up to
141、50 percent of OPC cement in concrete or clinker in cement manufacturing.While using GGBFS has an abatement potential of up to 50 percent of overall emissions associated with concrete,its application is expected to increase costs by up to 3 percent of total material costs by 2030.6 Because both fly a
142、sh and GGBFS are by-products of using coal,the supply of these materials will likely dwindle as coal is phased out.Therefore,other SCMs,such as calcined clay-blended cement and fine-limestone filler,will have an increasingly large role to play in producing green cement.There are other innovative sol
143、utions in the market to produce low-carbon concrete:one example is replacing carbon-intensive cement with lower-carbon industrial waste or other materials;another is CO2 mineralization to abate approximately 70 to 100 percent of emissions associated with concrete production.Although these solutions
144、are not yet commercially mature,they are likely to be widely available by 2030.Scale the use of low-carbon insulation.Insulations are used in both home and commercial applications and can be made from conventional materials(such as stone mineral wool,glass mineral wool,or polystyrene),bio-based sour
145、ces(such as wood fibers,hemp fibers,or cotton fibers),or recycled paper products(such as newspaper or cardboard).Conventional insulation typically has energy-6 The cost of GGBFS and fly ash is highly dependent on regional availability.Where both materials are plentiful,they are often similar in pric
146、e.As use of coal continues to dwindle in steel manufacturing and power plants,both materials will likely become difficult to source.However,there is a large quantity of fly ash that is already produced and stored,which should keep prices lower for longer.intensive manufacturing processes that can re
147、sult in a relatively high emissions footprint depending on the technology used.First,low-carbon conventional insulation can be developed by using an increased proportion of recycled materials in its composition as well as by improving manufacturing processes through electrification,renewable energy,
148、process improvements,and so on to lower fossil-fuel and energy use.This can abate emissions associated with the production of conventional insulation by up to 90 percent and can be relatively cost-neutral.Second,using recycled paperbased insulation(such as blown-in cellulose)has the potential to aba
149、te emissions associated with the production process by up to 90 percent.Applying this lever for this archetype is expected to be cost comparable to conventional insulation,making it cost-effective today.And third,using natural-fiber insulation can also abate emissions associated with the production
150、process by up to 90 percent,though the cost of materials is likely too high today for this to be feasibly scaled in the near future.If industrialized,however,natural-fiber insulation could present a financially attractive opportunity,reducing overall costs to be comparable to the costs of convention
151、al insulation,making it cost-effective by 2030.While reducing embodied emissions for insulation is important,it is only one aspect of how insulation affects the environment.Most insulation,regardless of what material is used,can reduce the operational emissions of a building by reducing energy use f
152、or heating and cooling.Therefore,it is critical to consider the full life cycle of emissions for insulation materials when making choices about their design,material,and production to avoid suboptimal outcomes such as shorter life cycles and inadequate thermal performance,among other potential negat
153、ive effects.Augment concrete and steel use with engineered wood.Though most of the concrete used in foundations and infrastructure cannot be 22Building value by decarbonizing the built environmentreplaced,there are proven designs for residential and commercial buildings that enable replacing a signi
154、ficant portion of concrete and steel in construction with engineered wood.An example of engineered wood that can be used is cross-laminated timber(CLT),which is a large-scale,prefabricated,solid-engineered wood panel that is both lightweight and strong.Another example of engineered wood is glue-lami
155、nated timber(glulam),which consists of layers of dimensional lumber bound together with durable,moisture-resistant structural adhesives.These and other products,such as laminated veneer lumber(LVL)and mass ply panel(MPP),have many different applications in the engineered-wood space.Innovations in ma
156、terial use and production continue to progress,and new products are made available each year.Each of these can be evaluated for their sustainable sourcing strategy,performance attributes,and waste created during production.By reducing the use of concrete and steel and substituting it with engineered
157、 wood in this archetype,it is possible to abate the embodied emissions associated with these materials.Given the existing emissions baseline for steel and concrete,use of engineered wood has an abatement potential of up to 40 percent but is currently limited by resource availability.Applying this le
158、ver for this archetype is expected to increase costs by up to 1 percent of total material costs by 2030,making it marginally more expensive by 2030,if industrialized.On-site improvement levers Once construction moves on-site,multifamily dwellings can substantially decarbonize with the following leve
159、r:Electrify on-site heavy equipment and small generators.Using electric construction equipment instead of internal-combustion-engine(ICE)equipment has an abatement potential of up to 90 percent for heavy-equipment emissions,assuming the use of renewable electric sources.7 Waste that is derived from
160、organic plant or animal sources.The abatement this lever achieves is a result of reducing fossil-fuel usage.Applying this lever for this archetype is expected to be cost-neutral by 2030that is,not contributing any material cost.As such,this lever could be cost-effective by 2030,if industrialized.Pri
161、mary process decarbonization levers Among the process decarbonization levers that were successfully applied to this archetype,three stood out:utilizing biomass7 as alternative fuel;upgrading and electrifying production of recycled construction steel;and carbon capture,utilization,and storage(CCUS)in
162、 cement production.Utilize biomass as alternative fuel.Replacing coal used in cement production with biomass as the primary fuel can enable abatement of up to 20percent of emissions during cement production.Applying this lever for this archetype is expected to increase costs by up to 1 percent of to
163、tal material costs by 2030,making it marginally more expensive by 2030,if industrialized.Biomass is already widely used in many parts of the world but has struggled to gain a foothold in North America.Easy access to relatively inexpensive natural gas likely limits the appetite to fully explore bioma
164、ss as an alternative fuel source in this geography.Upgrade and electrify production of recycled construction steel.The original method of modern steel production is to use blast furnaces,which heat purified coal,limestone,and iron ore.The mixture is then injected with oxygen to diminish the carbon c
165、ontent and remove impurities before finished steel is produced.Arc furnaces,on the other hand,produce steel using mainly recycled steel and electricity.Switching to an arc furnace has an abatement potential of up to 50 percent of overall steel emissions for blast furnacebasic oxygen furnace(BF-BOF)p
166、roducers.Additional actions,such as primarily using scrap steel and switching to a renewable energy source to operate the arc furnace can reduce emissions by an additional 45 percent,for a total of 95 percent reduced emissions.Applying this lever for this archetype is expected 23Building value by de
167、carbonizing the built environmentto be cost-neutral by 2030 for BF-BOF producers,with increased efficiencies from the furnace offsetting higher costs in energy.For producers already using direct reduced ironelectric arc furnace(DRI-EAF)technology,using scrap steel as the primary input and switching
168、to a renewable energy source has an abatement potential of up to 45 percent of overall steel emissions.Applying this lever for this archetype is expected to increase costs by up to 3 percent of total material costs by 2030 for DRI-EAF producers.As such,this could be marginally more expensive by 2030
169、,if industrialized.Capture carbon in cement production.This lever relies on capturing and absorbing the CO2 created in the cement production process using a chemical solvent,which is typically amine-based,such as compounds of ethanolamine.Other technologies include solid ab-or adsorption,membrane ab
170、-or adsorption,and oxyfuel combustion.If optimally implemented,carbon capture has an abatement potential of up to 90 percent8 of emissions associated with cement production.However,applying this lever for this archetype is expected to increase costs by up to 15 percent of total material costs by 203
171、0,making it significantly more expensive by 2030.Based on our analysis,using the levers that are either cost-effective today or expected to be cost-effective by 2030 could abate nearly one-third of 8 Referring to a baseline of all direct emissions(Scope 1)in cement production,such as those that aris
172、e from chemical reactions as well as fuel combustion.9 Although we do not explore the embodied emissions associated with the production of heat pumps,it is important to discuss the use of refrigerants.Natural refrigerants(CO2,ammonium,and ammonia)and hydrofluoroolefins(HFO)are associated with greatl
173、y reduced emissions,compared with hydrofluorocarbons,the most used type of refrigerant,and should be used whenever safe design allows.Proper installation and observation of operational best practices should also help prevent leakage of refrigerants and unintended emissions.In addition,existent heat
174、pumps containing more emissive refrigerants could be retrofitted or replaced with less emissive refrigerants.embodied emissions for the multifamily residential archetype(Exhibit 5).Top levers to abate operational emissionsTotal operational emissions for an average multifamily residential building in
175、 North America are approximately 2.2 metric tons of CO2 annually,with most emissions being driven by space heating(approximately 1.1 metric tons or 50 percent)and water heating(approximately 0.5 metric tons or 22percent)(Exhibit 6).Of the 1,000 levers assessed,11 levers were found to be most relevan
176、t in this specific case(Exhibit 7).Applying these levers to the multifamily residential archetype,we see that the top 11 levers can enable abatement of up to 90 percent of operational emissions relative to its current baseline,given 100percent renewable electricity from off-and on-site sources.Nine
177、of these levers are explored below.Top operational levers for this archetype were categorized into four groups:space heating and cooling,water heating,cooking,and appliances and lighting.Space heating and cooling levers In the space heating and cooling category,technologies such as heat pumps,9 smar
178、t thermostats,and high-efficiency insulation can effectively decrease operational emissions.We expand on five of these levers below:Using the levers that are expected to be cost-effective by 2030 could abate nearly one-third of embodied emissions for this archetype.24Building value by decarbonizing
179、the built environmentUse heat pumps for heating.As previously mentioned,heat pumps use refrigerant and electricity to transfer heat from outdoor air or the ground to the inside of a building,even in colder temperatures.10 According to prior research by McKinsey,todays models are 2.2 to 4.5 times mor
180、e efficient than gas furnaces.11 Applying this lever to this archetype has the potential to abate up to 60percent of emissions associated with space heating.This lever is ROI positive today.10“Building decarbonization:How electric heat pumps could help reduce emissions today and going forward,”McKin
181、sey,July 25,2022.11 Tom Hellstern,Kimberly Henderson,Sean Kane,and Matt Rogers,“Innovating to net zero:An executives guide to climate technology,”McKinsey,October 28,2021.Use heat pumps for cooling.Heat pumps can similarly be used for cooling purposes.They are built with reversing valves which makes
182、 it possible to change the direction of heat transfer.Applying this lever to this archetype has the potential to abate up to 10 percent of emissions associated with space cooling.This lever is ROI positive today.Use smart thermostats.Smart thermostats are part of a buildings energy-management system
183、.Using heat pumps in combination with smart thermostats can help lower GHG emissions Exhibit 5Embodied carbon abatement potential(at scale),metric tons of CO2eEmbodied emissions for multifamily residential dwellings could be reduced by roughly 30 percent just by using levers that are cost-efective.M
184、cKinsey&CompanyCost-efectivetodayCost-efectiveby 2030,ifindustrializedMarginallymore expensiveby 2030,ifindustrializedSignifcantlymore expensiveby 2030RemainingemissionsStarting emissions4,18420%78531%73%81%Note:Figures do not sum to 100%,because of rounding.CO2 equivalent.Source:“Fuel share of CO2
185、emissions from fuel combustion,2018,”IEA,October 26,2022;Key world statistics 2020,IEA,August 2020;OECD;Steel Construction Encyclopedia;“Emissions Database for Global Atmospheric Research(EDGAR)v5.0(1970-2015),”European Commission,November 2019;Tsz Kuen Ma and Qingshi Tu,“Bill of materials(BoM)and a
186、rchetype information for buildings in Canada,”UBC Research Data;July 25,2021;McKinsey analysis25Building value by decarbonizing the built environmentsignificantly,saving on heating and cooling costs.Applying this lever to this archetype has the potential to abate up to 10 percent of overall space he
187、ating and cooling emissions.This lever is ROI positive today.Improve buildings with high-efficiency insulation.High-efficiency insulation,regardless of the type of material used(conventional or natural-fiber),can improve building energy efficiency.Operational emissions abated over the lifetime of th
188、is archetype through the use of high-efficiency Exhibit 6Emissions breakdown,kg CO2 per dwelling annuallyNote:Figures do not sum to 100%,because of rounding.Source:McKinsey Real Estate Climate Action PlatformMost operational emissions in multifamily homes are caused by water and space heating.McKins
189、ey&CompanyAppliancesDriverEmissions,%CookingElectricityNatural gasOil and propaneLightingSpace coolingSpace heatingWater heatingTotal198441102,1781761,1661,02532224277015426Building value by decarbonizing the built environmentinsulation can often outweigh the emissions footprint associate
190、d with the production of conventional insulation.Lowering a buildings embodied emissions with low-carbon,high-efficiency insulation also increases operational effectiveness through reduced use of energy and a lower emissions footprint.Some types of conventional insulation materials also tend to have
191、 better thermal performance relative to natural-fiber insulation.Applying this lever to this archetype has the potential to abate up to 30percent of remaining space heating emissions.This lever is ROI positive today.Install new district heating facilities.District systems reduce greenhouse emissions
192、 by heating multiple buildings with hot water from a central plant.Applying this lever to this archetype can abate up to 100 percent of remaining space heating emissions.However,given the realities of current urban planning in North America,it is unlikely this efficiency can be captured.For countrie
193、s in the Middle East and for Singapore,however,this is a lever that can be considered.Exhibit 7ScenarioLeverEstimated abatement potential as share of baseline emissions160%10%30%60%30%20%40%100%2Use induction cookingHeat water using heat pumpsof water heating emissionsof space heating emissionsUse h
194、eat pumps for coolingof space heating emissionsof space cooling emissionsof cooking emissions Space heatingof appliance emissionsof concrete and steel emissionsof space heating and cooling emissionsUse high efciency appliancesUse high-efciency heat pumps for cold climate Install new district heating
195、 facilitiesImprove buildings with high-efciency insulationROI positive today and by 2030Marginally more expensive by 2030,if industrializedSignifcantly more expensive by 2030,if industrialized1Assuming 2019 US grid.Heat pumps,water heaters,induction cooking,high-efciency appliances,and LED and smart
196、 lights would abate 100%if the US grid became 100%renewable-based.Abatement potentials assume no interaction with other levers.Applying a combination of levers in parallel or in sequence will afect the abatement calculations.2Assumes 100%clean steam generation at high capital expenses.Abatement pote
197、ntial may vary based on regional fuel mix of steam generation heat.Source:McKinsey Real Estate Climate Action PlatformEleven levers have the potential to abate 90 percent of total operational emissions in multifamily homes.McKinsey&CompanyWater heatingCookingAppliances and lightingUse heat pumps for
198、 heating10%Utilize smart thermostatsof space heating and cooling emissions90%of lighting emissionsUse LED and smart lights20%of appliance emissionsUse refrigerators with ENERGY STAR ratings27Building value by decarbonizing the built environmentWater heating leversEmissions from water heating can be
199、most effectively abated by using alternative heating technologies,particularly heat pumps:Heat water using heat pumps.Heat pumps can be used to heat water,either as a stand-alone water heating system or as a combination water heating and space conditioning system.Applying this lever to this archetyp
200、e has the potential to abate up to 60 percent of overall water heating emissions(with an annual baseline of 0.5 metric tons of CO2e).These are the emissions that arise from using traditional water heating methods.This lever is ROI positive today.Cooking leversFor cooking,replacing gas stoves with in
201、duction cooktops can reduce a sizeable proportion of emissions:Use induction cooking.This is a method of cooking that uses a copper coil underneath the cooking surface to generate electromagnetic energy.Thus,instead of burning methane gas and emitting GHGs such as CO2,induction stoves run on electri
202、city,which can be generated from clean,emission-free sources.Applying this lever to this archetype has the potential to abate up to 30 percent of overall cooking emissions.This lever is ROI positive today.12 ENERGY STAR is a program run by the US Environmental Protection Agency and US Department of
203、Energy to promote energy efficiency.It is used in the United States,Canada,Japan,Taiwan,and Switzerland.Other geographies may have similar regionally-specific programs.For more,see Energystar.gov.Appliances and lighting levers Many types of readily available technology can significantly reduce emiss
204、ions in this category.Below,we explore two such levers:Use LED and smart lights.Replacing traditional light bulbs with more-efficient LEDs plus smart capability has significant potential to reduce emissions.In a given application,LEDs normally use less power compared to traditional light sources suc
205、h as halogen and fluorescent.Because the overall kilowatt-per-hour consumption is less,this helps reduce overall CO2 emissions.Applying this lever to this archetype has an abatement potential of up to 90 percent of overall lighting emissions.This lever is ROI positive today.Use refrigerators with EN
206、ERGY STAR ratings.Replacing traditional refrigerators with ones that have earned the ENERGY STAR label has the potential to reduce CO2 emissions by more than four metric tons12 over the lifetime of the product.Applying this lever to this archetype has an abatement potential of up to 20 percent of ov
207、erall refrigeration emissions.This lever is ROI positive today.Using only the levers across the four categories that are ROI positive today and expected to be ROI positive by 2030 if industrialized,it is possible to Emissions from water heating can be most effectively abated by using alternative hea
208、ting technologies,particularly heat pumps.28Building value by decarbonizing the built environmentabate roughly 70 percent of operational emissions for the multifamily residential archetype(Exhibit8).Thus,multifamily residential buildings and other similar archetypes can get most of the way to net-ze
209、ro emissions while generating a positive ROI.Archetype 2:Large infrastructure project in Europe in a cold climateLarge infrastructure projects are typically related to infrastructure assets such as roads,bridges,or ports.For this analysis,we considered a road network project in Europe as our baselin
210、e.This infrastructure project was estimated to have an embodied emissions baseline of approximately 1.2million to 1.5 million metric tons,estimated from a material composition and weight baseline of about 7.0 million metric tons.Maintenance and repair of infrastructure typically constitutes a relati
211、vely small portion of overall emissions and is included in the baseline for this archetype.Though the cost and abatement potential for the levers applied are based on a European infrastructure project,the results are mostly valid for other regions,with some nuances.Therefore,the recommended levers a
212、re reasonably applicable for infrastructure archetypes in other geographies and climates.Exhibit 8Web NZBECExhibit of Operational(Scope 1)carbon abatement potential for an average multifamily dwelling,kg CO2 per yearFor multifamily dwellings,the expected abatement of operational emissions against to
213、days baseline is up to 97 percent across the four cost scenarios.McKinsey&CompanyROI positive today and by 2030,ifindustrialized Cost efectiveby 2030,ifindustrializedMarginallymore expensiveby 2030,ifindustrializedRemainingemissionsStarting emissions2.20.172%90%97%Note:Figures may not sum,because of
214、 rounding.Source:McKinsey Real Estate Climate Action Platform29Building value by decarbonizing the built environmentTo assess the composition of the archetype,we developed an emissions baseline rooted in the projects embodied emissions.Since operational emissions directly associated with this infras
215、tructure archetype would be low or negligible(other than the transportation-related emissions from vehicles using the roads),these were not considered for evaluating abatement potential.In addition,there are many potential levers for the transportation industry to use to decarbonize emissions relate
216、d to the use of infrastructure(such as transitioning fuel-operated fleets to electric vehicles EVs).However,because these emissions are not considered to be part the built environment,the corresponding decarbonization levers are not the focus of this report.Top levers to abate embodied emissionsThe
217、embodied emissions baseline for a large infrastructure project was estimated to be about 1.2 million to 1.5 million metric tons of CO2,with most emissions driven by steel(about 30 percent)and concrete(about 25 percent)(Exhibit 9).We assessed more than 70 levers and classified them into the same four
218、 categories as the previous archetype:design optimization,on-site improvements,material substitution,and process decarbonization(Exhibit 10).Applying these levers to the infrastructure archetype,we see that the top nine levers can enable abatement of up to 55 percent of embodied emissions relative t
219、o its current baseline.Design optimization levers For large infrastructure projects,value engineering can reduce demand for both concrete and steel in the following ways:Value engineering to decrease concrete demand.Concrete manufacturing is the second-largest contributor of embodied emissions for t
220、his archetype,contributing about 300,000 metric tons of CO2e to overall emissions during construction of a structure that weighs approximately seven million metric tons.Value engineering,such as better structural design,has been proved to Exhibit 9CO2 emissions breakdown by driver,%1Includes soil an
221、d fll,additional materials for risk mitigation,and other costs associated with construction.Source:“Emissions Database for Global Atmospheric Research(EDGAR)v5.0(1970-2015),”European Commission,November 2019;“Fuel share of CO2 emissions from fuel combustion,2018,”IEA,October 26,2022;Key world statis
222、tics 2020,IEA,August 2020;OECD;Steel Construction Encyclopedia;McKinsey analysisMost emissions in an average large infrastructure project are driven by materials and fuel;the rest come from construction and logistics.McKinsey&CompanySteelDieselConstruction wasteConstruction phase trafcAluminumAsphal
223、tConcreteOther5330Building value by decarbonizing the built environmentresult in significant concrete savings through lean construction.Lean construction refers to the process of designing production systems in a construction environment with the goal of decreasing material waste.It is es
224、timated that up to 5 percent of concrete can be saved through value engineering,specifically by single-shell tunnel construction methods,which effectively minimize the use of concrete.It is expected to reduce costs by up to 1 percent of total material costs,making this lever cost-effective today.Val
225、ue engineering to decrease steel demand.Steel manufacturing is the largest contributor of embodied emissions for this archetype,contributing approximately 30 percent of overall emissions Exhibit 101Assuming 25%max addressable baseline by 2030.2Direct-reduced iron electric-arc furnace.3Assuming 25%ma
226、x addressable baseline by 2030.Source:“Emissions Database for Global Atmospheric Research(EDGAR)v5.0(1970-2015),”European Commission,November 2019;“Fuel share of CO2 emissions from fuel combustion,2018,”IEA,October 26,2022;Key world statistics 2020,IEA,August 2020;OECD;Steel Construction Encyclopedi
227、a;McKinsey analysisScenarioLeverEstimated abatement potential as share of baseline emissions2%2%40%7%90%30%23%20%50%%Value engineering to decrease concrete demandUse renewable natural gas as fuel for heavy equipmentUse inert anode to reduce emissions from anode breakdown and switch to gre
228、en electricity in aluminum smelterof all heavy-equipment emissionsElectrify heavy equipmentof concrete emissions1of steel emissions by switch to DRI-EAF245%26of steel emissions by using scrap and switching to renewable energyValue engineering to decrease steel demandof all concrete emissionsof all s
229、teel emissionsof all aluminum emissions1Design optimizationof all heavy-equipment emissionsof concrete and steel emissionsof all asphalt emissionsUse biomass as alternative fuelCarbon capture in cement productionUpgrade and electrify production of recycled construction steelReplace aggregate in asph
230、alt with recycled concrete aggregate and replace bitumen in asphalt with lignin Cost efective todayCost efective by 2030 or earlier,if industrializedMarginally more expensive by 2030,if industrializedSignifcantly more expensive by 2030,if industrializedTotal embodied emissions abated,%Total More tha
231、n 50 percent of embodied emissions in an average large infrastructure project can be abated with nine levers.McKinsey&CompanyMaterial substitutionOn-site improvementsProcess decarbonization31Building value by decarbonizing the built environmentduring construction.Better structural design through lea
232、n construction can result in significant steel savings that can lower emissions.According to research published by McKinsey,13 prioritizing efficiency in construction materials and design is a no-regret move that would lower both material and construction costs.By implementing single-shell construct
233、ion methods,we estimate that 5 percent of steel can be saved.Similarly to value engineering to decrease concrete demand,this lever is expected to reduce material costs by up to 1 percent and is cost-effective today.Material substitution levers Infrastructure projects can be decarbonized by using les
234、s-emission-intensive materials,as in the following levers:Replace aggregate in asphalt with recycled concrete aggregate,and replace bitumen in asphalt with lignin.Asphalt production is a significant driver of embodied emissions,contributing 35,000 to 40,000 metric tons of overall emissions during co
235、nstruction of an average large infrastructure project.By recycling concrete and using the resulting aggregaterecycled concrete aggregate,or RCAin asphalt,producers can reduce their GHG emissions,among other environmental benefits.Replacing bitumen,the traditional binder in asphalt,with lignin can al
236、so lower GHG emissions.Lignin can be produced at much lower temperatures than bitumen,so much less energy is required in its manufacturing process.By applying this lever,it is possible to abate up to 40percent of overall emissions associated with asphalt production.Applying this lever for this arche
237、type is expected to save up to 1 percent of total material costs,making this lever cost-effective today.13 “Net-zero steel in building and construction:The way forward,”McKinsey,April 28,2022.On-site improvements levers Two levers for on-site improvements prove particularly effective for this archet
238、ype:Electrify heavy equipment.The use of electrified equipment will necessitate the additional installation of mobile-charging infrastructure,but with this lever,it is possible to abate up to 7percent of all heavy-equipment emissions.This lever is applicable to one-third of crawler cranes,1,000-metr
239、ic-ton cranes,piling rigs,and continuous flight auger(CFA)crawler-mounted rigs.Although leasing electrified heavy equipment from vendors can result in an increase of 10 percent in lease prices,the price of fuel consumption can decrease by up to 60 percent.Combined,these factors result in an expected
240、 reduction in material costs of up to 1 percent,making this lever cost-effective today.Use renewable natural gas as fuel for heavy equipment.Renewable natural gas(RNG),or biogas,is produced by anaerobically decomposing organic material.Leasing liquefied natural gas and RNG-capable equipment from ven
241、dors can lead to an estimated 20 percent increase in lease price and a 50 percent increase in fuel consumption price.At the same time,applying this lever can abate an additional 23 percent of all heavy-equipment emissions when it is applied with the previous lever,for a combined total of 30 percent
242、of heavy-equipment emissions.This lever is applicable to all equipment.Applying this lever for this archetype is expected to increase costs by up to 3 percent of total material costs by 2030.Thus,we categorize this lever as marginally more expensive by 2030,if industrialized.32Building value by deca
243、rbonizing the built environmentPrimary process decarbonization levers Among effective process decarbonization levers,one is uniquely applicable to this archetype:Use inert anodes to reduce emissions from anode breakdown and switch to green electricity in aluminum smelter.Aluminum production is a sig
244、nificant driver of embodied emissions,contributing roughly 5 percent of CO2 to overall emissions during infrastructure construction.The smelting of aluminum during production is a highly energy-intensive electrolytic process that relies on passing electric energy through an anode that is dipped into
245、 an iron vessel containing aluminum oxide.This releases molten aluminum that can be further processed.By replacing standard carbon anodes with inert,nonconsumable materials,such as ceramics or alloys,emissions from this smelting process can be reduced by preventing the formation of CO2 and only rele
246、asing pure oxygen as a by-product.Applying this lever to this archetype has an abatement potential of up to 30 percent of overall emissions associated with aluminum.However,it is also expected to increase costs by up to 0.5 percent of total material costs by 2030,making it marginally more expensive
247、by 2030,if industrialized.In addition,three other process decarbonization levers are as effective in the large infrastructure archetype as they are in the multifamily dwelling archetype:utilizing biomass as alternative fuel,upgrading and electrifying production of recycled construction steel,and usi
248、ng carbon capture in cement production.Using only the levers that are cost-effective today and expected to be cost-effective by 2030 if industrialized across the four categories,it is possible to abate roughly 10 percent of embodied emissions for this archetype(Exhibit 11).Overall takeawaysBy compar
249、ing these two archetypes,we can see a number of important findings.Both the multifamily dwelling archetype and the large infrastructure project archetype have significant embodied emissions,but the potential to abate embodied emissions varies between them.For the multifamily dwelling,it is possible
250、to abate about one-third of all embodied emissions by using levers that are cost-effective today and expected to be cost-effective by 2030.On the other hand,for the large infrastructure project,it is possible to abate approximately 10 percent of all embodied emissions by applying similar levers.This
251、 is primarily due to the different material makeup and scale of these archetypes:the infrastructure project has a greater composition of materials(such as cement and steel)that are much more challenging to abate,and it requires substantially larger and more emissive machinery during construction.Sti
252、ll,the levers outlined above represent a real opportunity to lower the overall embodied emissions of the built environment.Recall that embodied emissions represent close to one-third of all built-environment emissions.Given that infrastructure represents about one-third of all embodied emissions,wit
253、h the other two-thirds coming from residential and commercial buildings,this would indicate that(using a weighted average)it is possible to abate close to 10 percent of overall emissions associated with the built environment by applying embodied-emissions levers that are cost-effective today or expe
254、cted to be cost-effective by 2030.Both archetypes have significant embodied emissions,but the potential to abate embodied emissions varies between them.33Building value by decarbonizing the built environmentOperational emissions provide another informative point of comparison between these two arche
255、types.As noted above,large infrastructure projects are considered to not have operational emissions,whereas about two-thirds of the total emissions of the multifamily dwelling are operational.It is possible to abate roughly 70 percent of all operational emissions for the multifamily dwelling by usin
256、g levers that are ROI positive today and expected to be ROI positive by 2030.These figures can be extrapolated to other residential and commercial building archetypes.Considering that operational emissions represent about two-thirds of all built-environment emissions and that residential and commerc
257、ial buildings represent close to 90 percent of all those emissions,there is significant opportunity to abate close to 40 percent of overall emissions associated with the built environment by applying operational-emissions levers that are ROI positive today or expected to be ROI positive by 2030.Our
258、analysis draws attention to many of the most impactful levers to decarbonize the built environment.However,there are other mechanisms and solutions with potential to increase the impact of these levers but that are either cost-prohibitive or face barriers to industrialization.One such mechanism is c
259、ircularity in the materials value chainthat is,redesigning,reducing,and Exhibit 11Web NZBECExhibit of Embodied carbon abatement potential(at scale),metric tons of CO2eCO2 equivalent.Approximately 10 percent of emissions from large infrastructure projects can be abated with levers that are ROI positi
260、ve today or expected to be by 2030.McKinsey&CompanyCost efectivetodayCost efectiveby 2030,ifindustrializedMarginallymore expensiveby 2030,ifindustrializedSignifcantlymore expensiveby 2030RemainingemissionsStarting emissions1,200,0001,500,0006%540,000675,00010%44%55%34Building value by decarbonizing
261、the built environmentrepurposing structures and materials to increase decarbonization.Such circular technologies include alternative fuels,carbon curing,and more.If these technologies are scaled,they could help to decarbonize roughly 80 percent of cement and concrete emissions by 2050.14 Based on 14
262、 “The circular cement value chain:Sustainable and profitable,”McKinsey,March 6,2023.our estimates and expected carbon prices,each of these technologies is expected to be value-positive by 2050 but face challenges in scaling and industrializing in the near to medium term.35Building value by decarboni
263、zing the built environment36Building value by decarbonizing the built environmentThere are multiple pathways to cost-effective decarbonization for the built environment.The world could abate up to half of total emissions at no net cost and without any green premiums or other incentives.Many levers d
264、iscussed in the previous chapter,such as heat pumps and smart thermostats,are economically and technically viable today.However,some levers,such as utilizing biomass as an alternative fuel,need industrialization to achieve no net cost.By scaling levers that are not yet cost-effective through industr
265、ialization,an even larger share of total emissions could be abated in the following yearsup to 80 percent.The push for deep renovations of existing buildings in the European Union gives a sense of the size of the opportunities.The European Unions Fit for 55 targets for deep renovation encourage indi
266、viduals and organizations to improve heating and cooling efficiency,which could be done by updating windows and walls,roofs,and basement insulation,for instance.15 To reach these goals,the Buildings Performance Institute Europe(BPIE),a not-for-profit organization,estimates that the rate of renovatio
267、ns may need to increase 15 times the current average of 0.2 percent.16 This could increase 15 “Fit for 55:Council agrees on stricter rules for energy performance of buildings,”European Council,October 25,2022.16“Refurbishing Europe:Igniting opportunities in the built environment,”McKinsey,February 2
268、8,2023.the insulation service sector to about 1.5 million workers and to a total potential market size in the European Union of$175 billion by 2030.Accelerating adoption and removing current barriers to adoption can fuel hundreds of billions of dollars worth of business opportunities across the valu
269、e chain in producing,distributing,or building with these materials and technologies.Large-scale adoption of these levers would require unlocking structural,geographic,value chain,and skill barriers,as well as specific barriers such as investment flow and technology advancement.Creating a more collab
270、orative ecosystemFor most opportunities to be fully realized,collaboration among ecosystem players will likely be critical.First,established or existing players could expand their offerings to produce new materials,technologies,or services.We call such companies solution providers.Second,solution pr
271、oviders could benefit from real estate owners and investors,developers,construction companies,or other users committing to adopting their products and services at a significant scale.Third,financiers would likely have to invest in scaling production,deployment,and adoption,such as by financing asset
272、 owners to pay for retrofits and new technology.Together,this ecosystem can serve as the driving force to get new green materials,technologies,and services operational and cost-effective.Although creating this ecosystem may appear daunting,the demand,capital,and producers exist Business opportunitie
273、s with a potential to generate significant value Unlocking barriers and accelerating the adoption of abatement technology can potentially fuel hundreds of billions of dollars worth of business opportunities across the value chain.37Building value by decarbonizing the built environmenttoday.As we hav
274、e already discussed,many levers are cost-effective today or could be soon,making them ideal targets for launching and scaling.Ecosystem players have an opportunity to generate value and,at the same time,contribute to the net-zero transition.While some of these opportunities can be captured in isolat
275、ion,most are likely to require new ways of collaboration.Moreover,industrialization is not a zero-sum game;partnerships across the value chain,even among competitors,stand to benefit the entire ecosystem.To accelerate production of new technology and materials in todays fragmented ecosystem,partners
276、hips can enable scale to achieve financial viability and make unit costs commercially comparable to conventional solutions.Partners can also share the burden of testing and evaluating new solutions across peers while simultaneously reducing the individual risk for peers adopting industry-wide soluti
277、ons requiring significant investments.In these promising times,players have the opportunity to act to accelerate what is cost-effective now and industrialize what will be cost-effective by 2030.Out of all the business opportunities we have analyzed across every archetype,we focus on the largest 17 d
278、iscrete opportunities,each of which could have significant value potential(Exhibit 12).The business opportunities we examine are by no means exhaustive,but by focusing on these 17,ecosystem players would be likely to make the most impact on lowering emissions and decarbonizing the built environment.
279、17 Sebastian Reiter,“Transition to net zero:Cement,”McKinsey Quarterly,August 1,2022.18 “Decarbonizing cement:How EU cement-makers are reducing emissions while building business resilience,”S&P Global,October 27,2022.19 Concrete future:The GCCA 2050 cement and concrete industry roadmap for net zero
280、concrete,Global Cement and Concrete Association,October 12,2021.20“Decarbonizing cement,”October 27,2022.21“Biomass,”European Commission,accessed May 26,2023.22“Table 3.1.B.Net generation from renewable sources:Total(all sectors),2011 2021,”US Energy Information Administration,accessed May 26,2023.1
281、.Industrialize production of green materialsExisting production processes for construction materials,such as cement and steel,are highly emissive.Opportunities in this space include decarbonizing production processes for existing materials and increasing the production of new green-material alternat
282、ives,such as low-carbon insulation and engineered wood.Produce low-carbon cement with new or retrofitted cement plants There are several decarbonization business opportunities for cement manufacturers,the first of which has to do with the cement production process.Fossil-fuel combustion(primarily co
283、al)is used to fuel the precalciners and kilns in cement plants.This represents approximately 40 percent of cement production emissions.17 Fortunately,at no or little cost,biomass and waste can be substituted for coal to begin decarbonizing the cement production process.Some cement kilns already oper
284、ate using more than 90 percent alternative fuels.18 In the European Union,large cement manufacturers have committed to reducing their emissions per metric ton of cement by 20percent from a 2020 baseline through thermal-energy efficiency,fuel switching,and clinker substitution.19 According to S&P,thi
285、s can be done at a reasonable cost.20 As a result,there is an opportunity for large,comprehensive waste-management firms to collect and source biomass for cement production,particularly in certain regions.Biomass is the main source of renewable energy in the European Union21 but contributes less tha
286、n 5 percent of renewable energy in the United States.22 This less-mature biomass market and others like it are open to 38Building value by decarbonizing the built environmentExhibit 12McKinsey&Company1Carbon capture,utilization,and storage.2Design and engineering.3Engineering,procurement,and constru
287、ction.As is,this exhibit exceeds max height allowed on dotcom.Can we omit some/all of the explanatory phrases to reduce the text wrapping and thereby shorten the exhibit?Web NZBECExhibit of Solution(product or service)made bywantwhich depends onSolution providerSolution enablerAn ecosystem to decarb
288、onize the built environment will ofer a wide variety of solutions.McKinsey&CompanyLow-carbon cement and concreteGreen steelLow-carbon insulationLow-cost engineered woodLow-cost,high-efciency heat pumpsEnergy upgrade solutions and installation servicesGreen and cost-efective solution designsOn-site e
289、quipment charging servicesOf-site modular construction solutions to minimize wasteValidation of green assets and projectsCertifed green materials and solutionsGreen-solution professionalsEnergy optimization upgradesTransition fnancingGreen insuranceTransforming existing real estate and infrastructur
290、e to be more sustainableEnd users(developers and investors for infrastructure and real estate)Cement and concrete producersSteel producers that deploy alternative energy,scrap metal,and CCUS1Insulation manufacturersthat industrialize low-carbon insulation Engineered-wood providers that scale product
291、ion Heat pumps and component manufacturersConsolidated services,which design and install energy optimization servicesD&E2 frms,which create green-solution portfoliosLogistics frms,which lease charging infrastructure and equipmentD&E2 and modular construction frmsAudit,consulting,and engineering frms
292、,which measure and track emissionsCertifcation service providers which validate emissions abatementTraining and vocational institutes which upskill green professionals and techFinancing entities which provide upfront capital expenditures for upgradesFinancers and investor,which deploy new fnancing s
293、tructures for solutionsInsurers,which create foward-leaning underwriting for use of green solutionsInvestors,which design funding for green assetsEPC3 frms,which design solutions;waste management,which collects and provides materialsCertifcation service providers that validate low-carbon insulationC
294、ertifcation service providers that validate use casesIndustrialize production of green materialsIndustrialize production of energy-efcient building techDeliver efcient energy and electrifcation upgradesDesign and engineer green and cost-efective structuresElectrify on-site constructionMinimize waste
295、 and maximize speed with of-site buildsValidate and certify low-carbon actions and solutionsFinance the green transitionEPC3 frms that design solutions39Building value by decarbonizing the built environmentcement producers and waste management looking to form mutually beneficial offtake agreements.A
296、nother decarbonization opportunity comes from retrofitting cement production plants with CCUS and from upgrading older cement plants with the latest,most efficient capabilities.CCUS technologies are rapidly advancing across industries,and several pilot studies have proved the technical viability of
297、CCUS in cement plants.For example,the worlds first CO2-capture facility at a cement plant,Heidelbergs facility in Brevik,Norway,is projected to be fully operational in 2024.23 The average cement production plant in North America is approximately 50 percent older than that of AsiaPacific,24 meaning t
298、here are many opportunities in the region to retrofit or replace older plants with CCUS and the latest conventional and commercially proven technologies.These retrofits might involve replacing outdated wet-process kilns with dry-process kilns(including staged preheaters and precalciners)and efficien
299、t grinding equipment,which could greatly improve energy and thermal efficiencies.25 This would increase the cement produced per unit of energy,thereby reducing both emissions and the cost per unit of cement.As a result,such retrofitting could provide a cost-effective opportunity to decarbonize cemen
300、t production.Scale up low-carbon concrete productionBeyond technological advancements to improve the cement production process,cement producers can also reduce emissions by using more environmentally friendly SCMs such as fly ash and GGBFS to make concrete.Given that the availability of these two SC
301、Ms is likely to decline going forward in many regions,producers may need to increase their adoption of other techniques.One option is using calcined clay-blended cement,which is a cost-effective SCM that requires production scaling.23“Brevik CCSWorlds first CO2-capture facility at a cement plant,”He
302、idelberg Materials,accessed May 26,2023.24“Age profile of global production capacity for the cement sector(kilns),”International Energy Agency,updated October 26,2022.25 David Hodgson,Paul Hugues,and Tiffany Vass,“Cement,”International Energy Agency,September 2022.26 State of the art cement manufact
303、uring:Current technologies and their future development,European Cement Research Academy(ECRA),2022.Fine-limestone filler is another SCM option that has been extensively quarried,and therefore,supply is expected to be stable in several regions.Cement and concrete firms could set up or expand concret
304、e-mixing businesses that maximize the amount of low-carbon cement and clinkers that are allowed,cost-feasible,and technically sound.Modern grinding technologies allow much more precise separation of waste concrete components than in the past.This makes upcycling waste concrete as a filler or SCM a p
305、romising opportunity for concrete producers,given the scale of materials available.Cement manufacturers can also use upcycled concrete as clinker raw material.The European Union is expected to allow using recycled concrete as the main component in cement in 2023.26 Given the carbon tax on CO2 emissi
306、ons from cement,the European Union could be an attractive market for upcycled concrete waste in cement production.To accelerate the opportunity from waste concrete,waste management firms could play a role in the supply chain by sourcing and distributing clinker substitutes,such as fly ash and GGBFS,
307、from steel and coal-fired power plants and recycled concrete from demolition sites.In addition,suppliers could develop partnerships and offtake agreements with cement producers to guarantee material use.Concrete could be further decarbonized at no additional cost with carbon curing.In carbon curing,
308、CO2 is added before the concrete cures to reduce the amount of cement needed without compromising structural strength.The CO2 used in the process could even be captured from earlier phases of cement production with carbon capture technologies.These opportunities could help concrete producers meet in
309、creasing demand for low-carbon concrete from developers,real estate investors,construction companies,and builders seeking to reduce their carbon footprints.40Building value by decarbonizing the built environmentProduce green construction steelA number of levers exist for steel producers to lower the
310、ir emissions while making construction steel.First,steel producers can significantly reduce emissions by shifting to DRI-EAF steel production and using scrap feedstock,which has proved to be both technically and commercially viable.Second,existing DRI-EAF plants can be optimized using renewable ener
311、gy sources,such as green hydrogen,instead of natural gas.While the high cost of green hydrogen currently acts as a barrier,rising carbon costs and the anticipated decrease in green-hydrogen costs in the future would help facilitate the transition.Third,steel producers and smelters can look into inte
312、grating CCUS technology throughout their processes.For example,a carbon capture pilot for smelters is now connected to a steel plant in Mo i Rana,Norway.27 The opportunity for steel producers to retrofit construction steel plants to produce green steel could tactically be achieved through partnershi
313、ps between steel producers;alternative-fuel providers;and engineering,procurement,and construction(EPC)firms specializing in developing leading green technologies.These partnerships could be particularly beneficial for EPC firms,given that steel plants moving to low-emissions production could requir
314、e$164 billion dollars in annual capital spending by 2030.28 As an example of one type of partnership,cement and steel producers could partner across the value chain with alternative-fuel providers to set price and quantity offtake agreements to ensure continuous markets for each others products.This
315、 type of agreement is common in industries looking to decarbonize fuel usage.A number of companies in the space have already taken steps to form partnerships.Hygenco India has 27“Worlds first carbon capture pilot for smelters inaugurated at Elkem in Rana,Norway,”Aker Carbon Capture,January 20,2023.2
316、8 Steve Vercammen,“Transition to net zero:Steel,”McKinsey Quarterly,August 1,2022.29“Hygengo enters into green hydrogen agreement with Jindal Stainless,”Construction World,August 19,2022.30“Tata Chemicals Europe,Vertex sign low-carbon hydrogen offtake agreement,”Business Standard,January 26,2023.31“
317、Neste and DHL Express announce one of the largest ever sustainable aviation fuel deals,”Neste,March 21,2022.32“HyNet North West:Carbon capture and storage:A UK first at a cement plant,”Hanson,accessed May 26,2023;“Government sets out next steps for CCUS clusters,”Carbon Capture and Storage Assocatio
318、n,March 30,2023.33“Cluster policy,”European Commission,accessed May 26,2023.34“Decarbonization of Industrial Clusters initiative gains global momentum,”Accenture,January 19,2023.signed a green hydrogen offtake agreement with Jindal Stainless.The deal will see Hygenco build,own,and operate a multimeg
319、awatt green-hydrogen facility for 20 years,29 which will help Jindal Stainless reduce its carbon emissions by 2,700 metric tons annually.Vertex Hydrogen,a part of the Essar Group,has signed a“heads of terms”offtake agreement for more than 200 megawatts of low-carbon hydrogen with Tata Chemicals Euro
320、pe.30 And Neste has an offtake agreement to supply 320,000 metric tons of hydroprocessed esters and fatty acids(HEFA)biojet fuel to DHL over the next five years.31 Another tactic to increase the ease and efficiency of decarbonizing would be to develop hydrogen and CCUS hubs.Clustering steel,cement,a
321、nd other high-emitting industries into these hubs could unlock and accelerate the deployment of hydrogen and CCUS.It allows organizations to share specialized expertise,services,resources,suppliers,and infrastructure.It could also decrease the risks inherent in deploying and scaling these technologi
322、es and could spread high up-front capital expenditures across peers and other high-emitting industries.For example,HyNet North West UK,an industrial cluster project,includes Hanson Padeswood Cement Works as part of its hydrogen and carbon capture and storage cluster.32 Clustering industries is alrea
323、dy common practice.The European Union has 1,500 industrial clusters,accounting for almost a quarter of total EU employment.33 Since the founding of the 2021 World Economic Forum initiative Transitioning Industrial Clusters towards Net Zero,which seeks to help industries reduce emissions,17 industria
324、l clusters from around the globe have joined.34 Governments are taking steps to cluster industries further.For instance,the US Bipartisan Infrastructure Law set aside$7 billion for regional 41Building value by decarbonizing the built environmentclean-hydrogen hubs,including clustering industrial pro
325、duction.35 The European Commission approved 5.2 billion for the hydrogen Hy2Use project.36 It includes 35 projects at 29 firms to build infrastructure for producing,storing,and transporting hydrogen and developing hydrogen applications for high-emissive industries such as steel and cement.Scale manu
326、facturing of low-carbon insulation As producers of traditional construction materials start to decarbonize their processes,there are options for builders looking to immediately lower their emissionsin this case,using materials that are inherently less emissions-intensive.For example,using natural-fi
327、ber insulation or conventional low-carbon insulation,made using a greater proportion of recycled materials,can abate a significant portion of embodied carbon emissions associated with conventional insulation at a reduced cost.Insulation manufacturers could scale production of high-efficiency convent
328、ional insulations that use a greater proportion of recycled materials in their composition.They could also improve production measures,such as by optimizing equipment use,using renewable energy sources,and implementing process improvements.Together,these actions can help lower fossil-fuel and energy
329、 use and thereby reduce their emissions footprint.Natural-fiber insulation has the potential to abate almost all emissions associated with the production process.However,the limited supply of raw inputs and the high price for natural-fiber insulation compared to conventional insulation are significa
330、nt constraints that currently prevent widespread adoption.By establishing agreements with farmers and foresters to procure the required amounts of raw materials and by industrializing production processes to lower costs by 2030,producers could potentially increase their manufacturing capacity of nat
331、ural-fiber insulation offerings and become cost-competitive with traditional insulation producers.35“Regional clean hydrogen hubs,”Office of Clean Energy Demonstrations,accessed May 26,2023.36 Caterina Tani,“Commission approves 5.2B in state aid for hydrogen technologies,”Science|Business,September
332、22,2022.Scale manufacturing of low-cost engineered woodFor many applications,engineered wood is a viable alternative to concrete and steel.Thus,developers can choose to use engineered wood to reduce emissions from steel and concrete while benefiting from the natural carbon sequestration of trees.For
333、 manufacturers,there is significant opportunity in ramping up the production of engineered wood(such as CLT,LVL,and MPP)by automating finger joining,layup and gluing,pressing,and other production processes.Given that many regions have limits on deforestation and the supply of verified,sustainable timber is limited,producers who can secure robust offtake agreements with verified sustainable-lumber