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1、Sustainable Construction in Emerging MarketsOCTOBER 2023Building GreenReportAbout IFCIFCa member of the World Bank Groupis the largest global development institution focused on the private sector in emerging markets.We work in more than 100 countries,using our capital,expertise,and influence to crea
2、te markets and opportunities in developing countries.In fiscal year 2023,IFC committed a record$43.7 billion to private companies and financial institutions in developing countries,leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with
3、 the impacts of global compounding crises.For more information,visit www.ifc.org.Building GreenSustainable Construction in Emerging MarketsPage 2BUILDING GREENACKNOWLEDGEMENTS This report was prepared under the guidance of Susan Lund,Vice President of Economics at IFC.Denis Medvedev(Director,CERDR,I
4、FC),Roumeen Islam(Senior Economic Advisor to the CEO,IFCMD,IFC),Vivek Pathak(Director,CBDDR,IFC),and Jamie Fergusson(Director,CBDDR,IFC)provided research leadership.Lucio Castro(Senior Economist,CERER,IFC)was the lead author managing the team.Working team members include Imtiaz Ul Haq(Economist,CERE
5、R,IFC),Juliana Somerville(Consultant,CERER,IFC),Gabriel Michelena(Consultant,CERER,IFC),Samuel Asuquo Edet(Economist,CERER,IFC),Edgar Salgado(Economist,CERER,IFC),Maty Konte(Senior Economist,CERER,IFC),and Ariana Tamara Volk(Associate Economist,CERER,IFC).Li Tu(Senior Investment Officer,CMGMF,IFC),J
6、ohn Anagnostou(Senior Industry Specialist,CMGMF,IFC),Marek Stec(Senior Industry Specialist,CMGMF,IFC),and Jinhuan(Ursula)Sun,(Associate Investment Officer,CMGMF,IFC)co-authored Chapter 3,while Imtiaz Ul Haq and Juliana Somerville co-authored Chapter 4.Dominique van der Mensbrugghe(Director and Resea
7、rch Professor,Purdue University)and Maksym Chepeliev(Senior Research Economist,Purdue University)developed the model and produced the projections presented in this report,jointly with Lucio Castro and Gabriel Michelena.R.Balaji(Chief Industry Specialist,CMGMF,IFC),John Anagnostou and Marek Stec prov
8、ided invaluable expertise and support on construction materials,and Hania Dawood(Practice Manager,SCCFE,World Bank),Corinne Figueredo(Senior Operations Officer,CBDSB,IFC),Prashant Kapoor(Chief Industry Specialist,CBDSB,IFC),Ommid Saberi(Senior Industry Specialist,CBDSB,IFC),Sandeep Singh(Operations
9、Officer,CBDSB,IFC),Naz Beykan(Consultant,CBDGB,IFC),and Smita Chandra Thomas(Consultant,CBDGB,IFC)on green buildings.Jean Pierre Lacombe(Director,CGRDR,IFC),Veronica Navas(Senior Economist,CGRDR,IFC),and Julio Flores Salvatierra(Senior Economist,CGRDR,IFC)provided detailed comments on the prospects
10、for steel decarbonization in emerging markets.We also thank Kruskaia Sierra-Escalante(Senior Manager,CBFNP,IFC)and Elizabeth T.Burden(Operations Officer,CBFNP,IFC)for their invaluable help with the concessional and blended finance data,and Diep Nguyen-Van Houtte(Senior Manager,CBDSB)for her comments
11、 on the report.Peter Gumbel and William Shaw were the editors and Irina Sarchenko(Communications Officer,CCOCO,IFC)served as the graphics editor.Brian Beary(Communications Officer,CCOCO,IFC)and Chris Vellacott(Senior Communications Officer,CCOCO,IFC)played an invaluable role in editorial production.
12、Nadya Saber(Senior Communications Officer,CCOIC,IFC),Monica de Leon(Communications Officer,CCOIC,IFC),and Nicolas Douillet(Senior Communications Officer,CCOIC,IFC)led the dissemination efforts.Adama Badji(Executive Assistant,CERDR,IFC),Irina Tolstaia(Program Assistant,CERDR,IFC),and Gleice Zanettin(
13、Program Assistant,CERDR,IFC)provided administrative support.We thank the peer reviewers Tom Farole(Lead Economist,SCADR,IBRD),Stephan Hallegatte(Senior Climate Change Adviser,GGSVP,IBRD),Seema Jayachandran(Professor of Economics and Public Affairs,Princeton University)and Juan Pablo Rud(Professor of
14、 Economics,Royal Holloway,University of London)for their insightful comments.We especially thank the Facility for Investment Climate Advisory Services(FIAS)for the financial support provided for the report.FIAS supports World Bank Group projects that foster open,productive,and competitive markets an
15、d unlock sustainable private investment in business sectors that contribute to growth and poverty reduction.Supported by nearly 20 development partner countries and donor institutions,co-financed by the World Bank Group,and managed and implemented by IFC,FIAS is one of the oldest and largest multi-d
16、onor trust funds in the World Bank Group.For more information,see the FIAS website at www.thefias.info.Page 3 CONTENTSForeword6Main Findings 8Executive Summary 10CHAPTER 1:Prospects for Reducing Carbon Emissions from Construction 271.1.Summary.281.2.Construction value chains are a major contributor
17、to global CO2 emissions,particularly from emerging markets.281.3.Emissions from construction are set to rise and are off track to meet construction climate commitments.361.4.A combination of available and emerging technologies and policy actions can reverse the growth in construction value chain emi
18、ssions.421.5.$1.5 trillion in investment in emerging markets is needed to achieve the emissions-reduction goal in construction.471.6.Decarbonizing construction value chains entails short-term trade-offs for long-term benefits.50CHAPTER 2:Building Green in Emerging Markets 552.1.Summary.562.2.The env
19、ironmental and financial advantages of green buildings.562.3.Decarbonizing buildings in the next decade.60CHAPTER 3:Technological Solutions for Decarbonizing Construction Materials 713.1.Summary.723.2.Reducing emissions from the production of construction materials is challenging.723.3.The construct
20、ion materials industry is well-positioned to decarbonize.723.4.More needs to be done to decarbonize construction materials.763.5.Opportunities and challenges for investments in green cement and steel.85CHAPTER 4:Financing the Green Construction Transition in Emerging Markets 874.1.Summary.884.2.Emer
21、ging markets are not mobilizing enough green private finance to decarbonize their construction value chains.884.3.Market failures largely explain the paucity of green finance for construction in emerging markets.894.4.Concerted action by private investors and policymakers will be required to overcom
22、e market failures and reduce emissions from construction value chains.93CHAPTER 5:Ways Forward111Annexes117Annex 1:The General EquilibriumCircular Economy(CGE-CE)Model.118Annex 2:Supplementary Tables and Figures.122Annex 3:Methodology for Green Building Finance and Policy Tools .130References 137Pag
23、e 4BUILDING GREENEXHIBITSEXHIBIT 1 29Construction Generates About 40 Percent of Global Carbon EmissionsEXHIBIT 2 30Cement and Steel Account for About 50 Percent of Carbon Emissions from Construction MaterialsEXHIBIT 3 32Cement Is the Most Carbon-Intensive Activity Globally EXHIBIT 4 33Construction-R
24、elated Emissions in Emerging Markets,2022 EXHIBIT 5 34Emerging Markets Account for About 90 and 70 Percent of Global Cement and Steel Production EXHIBIT 6 35Construction Materials Production Is More Carbon Intensive in Emerging Markets Than in High-Income CountriesEXHIBIT 7 37Dissemination of Green
25、Building Measures by the Private Sector Has Been Limited Outside High-Income Countries and Large Emerging MarketsEXHIBIT 8 39Global Construction Emissions Are Projected to Grow EXHIBIT 9 40South Asia Will Be Driving the Increase in Construction Emissions in Emerging MarketsEXHIBIT 10 43Global Constr
26、uction Emissions Could Decline by 13 Percent Below the 2022 Level by 2035 with Decisive Action in Construction Value ChainsEXHIBIT 11 46Emerging Markets Will Account for Most of the Expected Reduction in Construction-Related EmissionsEXHIBIT 12 48Investment Needs for Building Green Will Amount to$1.
27、5 Trillion in Emerging Markets in the Next DecadeEXHIBIT 13 49Investment in Building Green Would Be Largest in Residential HousingEXHIBIT 14 59Upfront Capital Costs and Payback Periods of Green Buildings Vary WidelyEXHIBIT 15 60Green Buildings Can Have Lower Operating Costs and Higher Asset ValueEXH
28、IBIT 16 65Expected Costs and Abatement Potential of Decarbonization Options in ConstructionEXHIBIT 17 67District Cooling Systems Can Reduce Energy Consumption up to 40 PercentEXHIBIT 18 77Abatement Potential and Economic Costs of Technological SolutionsEXHIBIT 19 82Use of Alternative Fuels for Cemen
29、t Production is Limited in Low-Income RegionsEXHIBIT 20 91Global Private Green Debt Finance to Build Green Increased Twentyfold,and About 70 Percent Flowed into Green BondsEXHIBIT 21 92Emerging Markets Issued Only 10 Percent of Global Domestic and Foreign Private Green Debt Finance for Construction
30、DecarbonizationEXHIBIT 22 93Latin America and the Caribbean Accounts for More Than 50 Percent of Private Green Debt Issuance for Construction Decarbonization in Emerging Markets Outside ChinaEXHIBIT 23 94Emerging Markets Are Increasingly Using Sustainability-Linked Instruments for Green Construction
31、 FinancingEXHIBIT 24 97Sustainability-Linked Finance Can Help Decarbonize Hard-to-Abate Construction MaterialsEXHIBIT 25 100Fundraising by Green REITs Increased More Than Fortyfold in the Last Four YearsEXHIBIT 26 104Carbon Taxes Have Been Introduced in Only a Few Emerging MarketsEXHIBIT 27 105Regio
32、nal,National,and Subnational Emissions Trading System(ETS)Initiatives ImplementedEXHIBIT 28 109Latin America and the Caribbean and Sub-Saharan Africa Receive About Half of Concessional and Blended Finance EXHIBIT 29 110Multilateral Development Banks Raised About$16 Billion in Bonds Supporting Buildi
33、ng Green in Emerging Markets in 20172022Page 5 ABBREVIATIONS AND ACRONYMS BF-BOBlast Furnace Basic Oxygen FurnaceCCUSCarbon Capture,Utilization,and StorageCDMClean Development MechanismCERCertified Emission ReductionCGE-CE Computable General Equilibrium Circular Economy modelCO2 kg eqKilograms of ca
34、rbon dioxide equivalentDFIs Development Finance InstitutionsEAFElectric Arc FurnaceEBRDEuropean Bank for Reconstruction and DevelopmentEDGEExcellence in Design for Greater EfficienciesEFEnvironmental FinanceEFTAEuropean Free Trade AssociationENVISAGEEnvironmental Impact and Sustainable Applied Gener
35、al Equilibrium modelESGEnvironmental,Social,and GovernanceETSEmissions Trading SystemEUEuropean UnionGCCAGlobal Cement and Concrete AssociationGDPGross Domestic ProductGHGGreenhouse GasGTAPGlobal Trade Analysis ProjectIBRDInternational Bank for Reconstruction and DevelopmentIDAInternational Developm
36、ent AssociationIEAInternational Energy AgencyIEA PAMSIEA Policy and Measures databaseIFCInternational Finance CorporationIMFInternational Monetary FundIMF WEOIMF World Economic OutlookKPIsKey Performance IndicatorsMAGCMarket Accelerator for Green ConstructionMDBsMultilateral Development BanksMtCO2 e
37、qMetric tons of carbon dioxide equivalentNDCsNationally Determined ContributionsOECDOrganization for Economic Co-operation and DevelopmentPM25Particulate Matter PollutionR&DResearch and DevelopmentREITsReal Estate Investment TrustsUNFCCCUnited Nations Framework Convention on Climate ChangePage 6BUIL
38、DING GREENConstruction value chains,including the construction and operation of buildings as well as production of materials such as steel and cement,account for approximately 40 percent of energy and industrial-related CO2 emissions globally Two-thirds of this can be attributed to emerging markets,
39、and this contribution will grow substantially as growing populations,urbanization,and rising incomes drive demand for better housing and commercial buildings How developing countries meet their rising building needs will be pivotal to the worlds climate future.The good news is that the projected emi
40、ssions growth in construction value chains can be reduced significantly with the application of existing technologies,new financing instruments,and the implementation of appropriate policies.Even as emerging economies meet the rising demand for residential and commercial buildings,it is possible to
41、reduce total emissions from the sector below todays level by 2035.To avoid perpetuating the status quo,decisive action is needed by policymakers,developers,construction material producers,financiers,and international development institutions.IFC is launching this report to guide international effort
42、s to decarbonize construction value chains.Building Green:Sustainable Construction in Emerging Markets was prepared through close collaboration between IFC economists,investment officers,and building and construction sector specialists.The report provides a comprehensive analysis of the challenges o
43、f reducing carbon emissions from construction value chains in developing countries,but also the considerable opportunities that will come from mobilizing the estimated$1.5 trillion of investment required for this transition.ForewordPage 7ForewordThe report also offers important recommendations on fi
44、nancial instruments,technical assistance,standards,technologies,and capacity building to channel more financing into green buildings and materials and address the market failures hampering further progress on building green.IFCs own green buildings program and sustainability-linked finance facilitie
45、s offer proven models on how such initiatives can be accomplished at scale.Realizing the potential outlined in this report will require coordinated efforts by stakeholders across regions and industries.IFC is committed to working with policymakers,businesses,and investors on seizing the climate oppo
46、rtunity in building green and turning todays challenges into opportunities for a greener,more resilient world.Susan M.LundVice President,Economics and Private Sector Development,IFC Page 8BUILDING GREENGlobal climate goals will not be achieved without a substantial reduction in emissions from the co
47、nstruction sector This poses a particular challenge to emerging markets:their economic development depends significantly on construction activity,but they already generate about two-thirds of global construction-related emissions This report analyzes the investments and policy actions neededand the
48、economic trade-offs they implyto reduce carbon emissions in construction value chains in emerging markets,including the construction and operation of buildings and the production of construction materials such as cement and steel.It explores the costs and availability of technological solutions that
49、 could help reduce emissions,and it considers potential sources for financing these solutions as well as the policy interventions needed to channel private investment into mitigation and adaptation efforts in emerging markets.The report examines the alternative policy options and available and novel
50、 technologies for building green in emerging markets,considering each regions income level,technological and policy readiness,and dependence on fossil fuels.Key findings and messages include:Construction value chains today account for about 40 percent of energy and industrial-related CO2 emissions g
51、lobally,according to this reports estimates.Without additional mitigation and adaptation efforts,emissions are likely to increase by about 13 percent by 2035,this report estimates,which would equal the total construction-related emissions of the United States in 2022.The share of construction-relate
52、d emissions generated in emerging and developing economies,currently two-thirds of the global total,is also likely to rise by 2035.This is because these markets have the largest stock of brown buildings(not adapted for energy or emissions reduction),use relatively more carbon-intensive construction
53、methods and materials,and their investment in construction is likely to grow faster than in high-income economies.Technologies that already exist can significantly reduce constructions environmental footprint with moderate economic costs.For buildings operation,these technologies include electrifica
54、tion of buildings with non-fossil fuels,and use of specific materials to reduce energy consumption,like reflective painting for rooftops and film coating for windows,among others.For new buildings,energy-efficient and resilient designs and systems,renewable energies,and district cooling and heating
55、systems,are some of the possible mitigation and adaptation options.For construction materials,especially cement and steel,improving energy-efficiency,and switching to low-emission processes,raw materials,and fuels,can also reduce emissions now.In the future,potentially deploying nascent technologies
56、 such as carbon capture and storage and green hydrogen,among others,can all serve to reduce emissions,but these levers are only expected to become commercially available without fiscal support by 2035 and beyond.For all emerging markets,incorporating resilience into new green buildings will be param
57、ount in the next decade,especially in countries affected by frequent hazardous climate events.Climate change-induced disasters are already causing significant damage to people and assets around the world.Between 2008 and 2018,on average 24 million people per year were internally displaced because of
58、 climate disasters,of which 85 percent involved storms and floods.Investments in electrification of brown buildings with cleaner energy,energy-efficient new buildings,and low-emission materials,and the adoption of adequate policy frameworks could reduce global construction value chain emissions by 2
59、035 to about 23 percent below the level they are projected to reach without any mitigation effortsand 13 percent below todays levelsthis report estimates.Emerging markets would account for about 55 percent of this projected reduction in construction emissions.The decline in global construction emiss
60、ions would also entail a drop in total global emissionsincluding construction and other economic activitiesof about 20 percent in comparison to a scenario without any mitigation Main FindingsPage 9Main Findingsinvestments and measures.These results emphasize the importance of starting to decarbonize
61、 hard-to-abate activities now,such as building operations and materials,to meet the climate goals set in the Paris Agreement.With proper policies and regulations in place,adopting these commercially available technologies in construction value chains would generate new private investments of$1.5 tri
62、llion in greener buildings and materials in emerging markets over the next decade,according to this reports estimates.Private investors have yet to take advantage of this opportunity.Global private debt financing for decarbonizing construction using green financial instruments reached a record high
63、in 2021 of about$230 billion,but emerging markets only issued about 10 percent of that total,this report estimates.This report examines two possible pathways for reducing carbon emissions in construction value chains in the next decade in emerging markets.One pathway involves accelerating the attain
64、ment of the net zero emissions target set by the Paris Agreement by 2050 by boosting investments in green buildings and materials through widespread carbon pricing and fiscal support measures.This pathway would more than double investments in green construction by 2035 globally but would entail sign
65、ificant short-to-mid-term output losses due to early retirement of productive assets and other transition-related costs.Another pathway would achieve a similar reduction in construction emissions but at lower costs by supporting the adoption of low-hanging fruit technologies,like the electrification
66、 of buildings with cleaner energy mixes and energy-efficient buildings and materials,among others.Based on these estimates,the report stresses the need for a flexible strategy for decarbonizing construction value chains geared toward minimizing economic costs for emerging markets by deploying the mo
67、st efficient sequencing of adaptation and mitigation policies and technologies,adapted to each countrys conditions,and from a long-term perspective.Policymakers can support the green construction transition and crowd in private financing by creating an adequate business and regulatory environment.It
68、 is critical to address the market failures which limit green construction in emerging markets through green building codes and standards,greening government buildings and public procurement,and in the mid-term,wider adoption of carbon pricing and fiscal support measures.The pace of adoption of thes
69、e technologies and measures will depend on each countrys income level,access to finance,technological and policy readiness,and dependence on fossil fuels.Countries with sufficient fiscal space may be able to move faster in deploying relatively costly policies,like carbon pricing,stricter environment
70、al regulations,retrofitting brown plants and buildings,and providing fiscal incentives to novel green technologies non-economically viable today.In other countries,early action could be taken by seizing low hanging fruit,including the adoption of commercially available technologies for electrificati
71、on of buildings with cleaner energies and energy-efficient buildings and materials.Low-income economies can begin their journey in the green construction transition with technical and financial support from the international community.Decarbonizing construction value chains in emerging markets will
72、entail relatively small short-term negative costs for long-term benefits.Construction-specific measures and the cost of incentives to adopt commercially available technologies geared towards fostering energy-efficient buildings and materials powered with cleaner energies would reduce global GDP grow
73、th by 0.03 percentage points per year between 2022 and 2035,this report estimates.Most of this output loss will occur in countries with the largest construction sectors today,mostly high-income and some upper-middle economies.The majority of middle-income countries would be able to meet their rapidl
74、y growing construction needs with lower economic costs.Output losses among low-income countries would be smaller still.These reductions pale in comparison with the loss in human welfare over the next decades if insufficient efforts are made to address climate change.Page 10BUILDING GREENConstruction
75、 value chains in emerging markets are a major contributor to global CO2 emissions,and the problem is set to get worse by 2035.Construction value chains account for about 40 percent of energy and industrial-related CO2 emissions globally.1,2 These value chains comprise the construction and operation
76、of buildings and the production of materials.This report estimates that operation of buildings explains about 20 percent of global carbon emissions,followed by the supply of materials(19 percent),and construction services(0.3 percent)(Exhibit A).About 85 percent of total construction emissions globa
77、lly come from the use of fossil fuels in buildings and materials plants while the remaining 15 percent comes from process or industrial emissions related to the production of construction materials.31 This report includes only scope 1,2,and 3 CO2 emissions resulting from energy combustion and econom
78、ic activity in agriculture,manufacturing,and services.Emissions of other greenhouse gases(e.g.,methane)and other CO2 emissions(e.g.,from changes in land use)are not considered due to data limitations.Emissions are calculated based on the location where they were produced,not where they are consumed.
79、Industrial or process emissions are the by-product of processes that convert raw materials to chemical,mineral or metal products such as cement and steel,among others.2 This estimate roughly aligns with recent calculations from IEA(2021)and UNEP(2021)in which construction accounts for 36 percent of
80、global final energy consumption and 37 percent of energy related CO2 emissions.3 IFC calculations based on Global Trade Analysis Project data.4 “Brown”refers to conventional buildings and materials in which no energy or emission-reduction measures or technologies have been adopted.Emerging markets g
81、enerate two-thirds of construction-related global emissions,with about three-fifths of these emissions from China,because of their dominant share both of“brown”buildings and the global production of materials,their use of more carbon-intensive construction methods and materials than in high-income c
82、ountries,and their rapid growth in income per capita,which increases construction demand.4 Without additional mitigation efforts,global construction-related emissions would increase by about 13 percent between 2022 and 2035,according to this reports estimates.This 13 percent increase relative to tod
83、ays levels,driven by increasing emissions from emerging markets would be equivalent to the total emissions from the construction value chain in the United States in 2022.Global climate goals are unlikely to be achieved without a reduction in emissions from the construction and operation of buildings
84、.Thus,an important challenge facing the global community is how to ensure the integration into construction value Executive SummaryPage 11Executive Summarychains of commercially available green technologies that could substantially reduce carbon emissions in the next decade.Some promising technologi
85、es with high abatement potential,like green hydrogen and carbon storage,among others,are likely to only become commercially available without fiscal support by 2035 and beyond.Deploying already available technologies will therefore be a priority in emerging markets in the next decade.The level of ec
86、onomic and policy effort required to reduce emissions from construction value chains will necessarily vary across regions in the next decade.Countries with greater fiscal and financial resources EXHIBIT AConstruction Generates About 40 Percent of Global Carbon EmissionsNotes:This report includes onl
87、y scope 1,2 and 3 CO2 emissions coming from energy combustion and economic activity in agriculture,manufacturing,and services.Emissions from other greenhouse gases(e.g.methane)and other CO2 emissions(e.g.,from changes in land use)are not considered due to data limitations.Scope 1 emissions are direc
88、t emissions from owned or controlled sources.Scope 2 emissions are indirect emissions from the generation of purchased electricity,steam,heating,and cooling consumed by the firm.Scope 3 emissions are all indirect emissions(not included in scope 2)that occur in the firms value chain.Other emerging ma
89、rkets category includes Sub-Saharan Africa.Figures in the text might not be identical due to rounding.Source:IFC calculations based on data from the Global Trade Analysis Project(2022).Total:38 billion CO2 tons Total:15 billion CO2 tons Global construction value chain emissions by regionGlobal CO2 e
90、missions by category0.3%Rest of global CO2 emissions60.6%Building operations20.4%Production of construction materials18.7%China40%High income31%Other emerging markets 29%Building constructionPage 12BUILDING GREENmay be better positioned to deploy more rapidly relatively costly policiescarbon pricing
91、,tighter environmental regulations,and fiscal supportand new technologies with significant abatement potential but high economic costs today.Middle-income countries,in turn,can accelerate the pace of adoption of green construction codes,standards,and readily available technologies and practices.Low-
92、income economies can begin their green construction transition with financial and technical support from the international community.This summary of the report provides,first,an overview of technologies that are either being deployed or are anticipated in the near future.Increased resources will be
93、needed to support the green construction transition,and the report provides rough estimates of the magnitude of the private investment required.Governments will also be required to mitigate the market failures prevailing in construction value chains and green financial markets by establishing an app
94、ropriate policy framework,under which companies in construction value chains can adopt emerging and commercially available technologies.The final section of this summary discusses policies that could encourage companies to undertake more green construction and private investors to commit more resour
95、ces to these activities.Construction and operations of buildings and other structures.The menu of available options to decarbonize buildings ranges from measures with high abatement and adaptation potential but prohibitive economic costs today to measures with more moderate emission-reduction potent
96、ial but lower costs.Emerging BOX ASome Examples of the Climate and Business Benefits of Green BuildingsEnergy savings.The Menarco Tower office in Manila,the Philippines,achieved 41 percent energy savings through variable speed drives in the air handling units,a higher-efficiency cooling system and a
97、ppliances,energy-saving lighting in corridors,common and external areas,and occupancy sensors in bathrooms along with other passive measures.Lower carbon emissions.In Gujarat,India,a district cooling system has been installed in the Gujarat Finance Tec-City,a joint-venture financial center.The syste
98、m distributes thermal energy in the form of chilled water from a central source to multiple buildings through a network of underground pipes for use in space cooling.The system aims to reduce power demand and make air conditioning more energy efficient,reducing CO2 emissions.Financial benefits.Resid
99、ential green developers like Signature Global(India)and Capital House(Vietnam),have reported faster sales resulting in stronger cash flows for them.In South Africa,International Housing Solutions reports that its low-income renters save an entire months rent each year from lower utility bills,and it
100、s green homes occupancy rates are higher than for similar conventional homes that it owns.Lower operating costs and higher occupancy thus make green buildings a more profitable asset.Page 13Executive Summarycountries will have to choose among these alternatives depending on country conditions,availa
101、ble financing and policy and regulatory frameworks in place in the next decade.Deep retrofitting brown buildings and materials plants through replacing inefficient energy and thermal electrical and mechanical systems or reconstructing building envelopes,among other measures,can significantly reduce
102、buildings emissions.Due to its high costs today,however,this option is likely to be affordable only for few countries with the fiscal and policy space required to start deep retrofitting or implementing early retirement of stranded brown buildings and plants now.Electrification,or replacing fossil f
103、uels for cooking,water heating and cooling with electric systems powered with renewable energies,is an attractive complement to deep retrofitting because of its relatively low costs and the expected greening of electricity generation over the coming decade.However,electrification alone cannot achiev
104、e the needed reductions in emissions given the economic unfeasibility of completely removing fossil fuels from the energy mix in most countries in the next decade.Economies for which complete retrofitting is likely to remain out of reach in the near future,including middle-income countries undergoin
105、g rapid population and economic growth,can invest in electrification as well as construction of new green buildings and material plants to respond to their swelling housing needs in the years to come.And for all emerging markets,incorporating resilience into green construction will be critical in th
106、e next decade,especially in countries affected by catastrophic climate events.Green buildings,buildings with energy-efficient designs,cleaner energy-mixes,and low-emission materials,offer multiple opportunities to significantly reduce carbon emissions in construction value chains while offering a bu
107、siness opportunity for private investors.Passive measures related to the design of green buildings achieve energy savings through the buildings orientation to the sun,external shading,and reduced window size.Such measures are particularly effective in managing heat gain or loss during the day as wel
108、l as reducing construction costs.Active measures in green buildings related to more efficient electrical and mechanical systems also lower energy consumption.For instance,ceiling fans,thermostatic valves,and heat valves can achieve high levels of energy efficiency.The use of eco-friendly refrigerant
109、s also enables emissions savings.Incremental costs,payback periods and emission reduction potential of green buildings relative to conventional alternatives are contingent on climate zones,country conditions and types of buildings.Box A provides some examples of the climate and financial benefits of
110、 green buildings and systems.One important aspect of green building measures,like renewable energy technologies,passive cooling and heating systems,water recycling,or rainwater collection solutions,is that they improve resilience of buildings to hazardous events.Resilience needs to be integrated int
111、o construction of new green buildings to ensure longer life cycles and avoid unnecessary land carbon emissions related to the reconstruction process.Countries with sufficient fiscal space can also employ fiscal incentives to integrate resilience into retrofitted buildings.Page 14BUILDING GREENWith s
112、upportive policies,the use of specific materials,such as reflective painting for rooftops and film coating for windows,can enhance thermal efficiency in existing as well as new buildings with relatively moderate costs.In specific large projects,like renovation of urban areas or construction of unive
113、rsity or medical campuses,district cooling technologies can reduce energy consumption by setting a centralized cooling system for an interconnected group of new or completely renovated buildings and structures.Greater reliance on digital technology could also contribute to reducing construction emis
114、sions.Using smart internet-connected devices to enhance the energy efficiency of large appliances,like air conditioners,refrigerators,washing machines,and cookstoves,can significantly reduce emissions from buildings operations.Increasing the use of this technology may require regulatory measures,and
115、 in some cases,depending on country conditions,policy incentives.3D-printed construction can reduce waste(and thus lessen embodied carbon)and construction time,improve energy efficiency,and lower labor costs but can only be applied today in relatively small housing and commercial projects.Across all
116、 project stages,digitalization could increase materials efficiency by integrating life-cycle emissions in the construction process,using,for instance,3D building information modeling,enhancing collaboration through management apps on mobile devices,and monitoring sites with drones for scanning.Impro
117、ving the use of space and infrastructure through flexible design and undertaking climate-smart building that emphasizes the importance of resilience would extend lifetimes of new buildings.This would reduce the demand for cement and steel,as well as construction-related CO2 emissions.Deep retrofitti
118、ng old buildings to be more carbon efficient can achieve similar or higher energy savings than construction of new green buildings,but its high cost makes it unlikely to be a priority in most emerging countries in the next decade.Many other approaches exist to reduce the carbon footprint of building
119、 construction and operation.For example,increasing reliance on renewable energies and district systems for heating and cooling could significantly reduce emissions from buildings operation.Local emissions from construction sites could be addressed using electric vehicles and biomass-powered machiner
120、y.Some of these options may only be feasible in middle-or high-income countries,but the international community can contribute to gradually disseminating and supporting them in low-income economies.Construction MaterialsCement and steel are the two major materials used in construction,and for both,t
121、echnological solutions to reduce their emissions intensity are already available or being developed.By 2035 and beyond,novel technologies with high abatement potential but non-commercially available today,such as carbon capture and storage and green hydrogen,are likely to still need significant fisc
122、al support,even in advanced economies.Deep retrofitting or early retirement of existing brown plants will also remain out of reach for most emerging economies in the next decade.Over the next 10 years,the priority should therefore be promoting commercially available abatement and adaptation levers,p
123、articularly in emerging markets undergoing rapid economic and population growth.Page 15Executive SummaryPiloting some of these technologies and measures,with the support of the international community,could also contribute to reducing emissions in cement and steel production.For example,replacing ca
124、rbon-intensive clinker,cements main input,with alternative natural materials and industrial by-products can significantly reduce process emissions.Using alternative fuel sources such as biomass,waste,and industrial residues,combined with wind and solar renewable energies,among others,rather than coa
125、l can reduce emissions from production of cement by 20 percent.Taking energy and resource efficiency measures can save up to 30 percent in electricity plant needs.Adaptive and self-learning technologies can also optimize fuel management and material blending.These options can have relatively short p
126、ayback periods with adequate financing and regulatory frameworks.By 2035 and beyond,green hydrogen is expected to offer a promising(but not now commercially viable)solution for decarbonization in the cement BOX BSome examples of the use of already available and novel decarbonization technologies in
127、cement and steel plantsBiomass and recycled materials.Sococim,a subsidiary of French cement maker Vicat S.A,will replace part of its clinker lines in its Senegal plant with more fuel-efficient facilities,utilizing up to 70 percent alternative fuels(biomass and recycled tires).The project will reduce
128、 greenhouse emissions by 312,000 tons of CO2 equivalent per year by 2030,enabling it to produce one of the lowest-emission cements in the world.IFC is supporting the project with its first green loan for materials in Africa.Recycled scrap.Rider Steel,a rolling mill operator,is investing in a greenfi
129、eld manufacturing plant in the Kumasi area in Ghana.The new plant will save 332,000 tons of carbon dioxide annually by entirely using steel scrap as input(283,200 tons per year).The plant also operates an energy-efficient induction furnace with a significantly lower carbon intensity than existing bl
130、ast furnaces.IFC supported the project through a$12 million loan in 2020.Green hydrogen.In 2021,Compaa Siderrgica Huachipato launched in Chile a pilot of a green hydrogen mill that is expected to be completed by 2023.CEMEX is already implementing hydrogen technology at its San Pedro de Macoris cemen
131、t plant in the Dominican Republic.Carbon capture and storage.Anhui Conch Cement developed in 2017 a cement with carbon capture plant in Wuhu,China.In India,Dalmia Cement Limited and Carbon Clean Solutions are developing the largest cement plant with carbon capture in the global cement industry.The p
132、lant is expected to capture 500,000 tons of CO2 per year.Page 16BUILDING GREENindustry.5 Carbon capture,utilization,and storagewhich captures CO2 from industrial emissions and either recycles it for further industrial use or stores it safely undergroundis another technological innovation that could
133、potentially almost halve CO2 emissions but also will also require subsidies and tax incentives,at least before 2035,and possibly beyond.In the steel industry,injecting pure oxygen into blast furnaces can lower emissions by 1520 percent,by reducing the use of coal as a reductant agent for iron oxide.
134、When sourced from renewable resources,biomass can also substitute for coal,while increasing the share of high-quality scrap in electric arc furnace steelmaking can lower the use of carbon-intensive iron.Green hydrogen could improve the performance of conventional blast furnaces and produce direct re
135、duced iron to be further processed into steel.As with cement,green hydrogen and carbon capture technologies,among others,combined with renewable electricity generation,hold the promise of carbon-neutral steelmaking in the longer term but they will not be economically viable without fiscal support by
136、 2035 and beyond.Box B summarizes the experiences of companies which are implementing some of these existing and novel decarbonization technologies in cement and steel plants in emerging markets.5 Green hydrogen is hydrogen produced by splitting water into hydrogen and oxygen using renewable electri
137、city.Hydrogen gas is extracted from water by a technique known as electrolysis,which involves running a high electric current through water to separate hydrogen and oxygen atoms.The electrolysis process is expensive because it involves high energy expenditure.6 Global dynamic computable general equi
138、librium models provide an indication of some plausible paths of economic growth and carbon emissions under alternative policy scenarios rather than precise numerical estimates.These models,however,allow us to examine the effects of these policies on the global economy taking into the account the int
139、eractions between countries,economic sectors and economic agents based on a consistent and analytical robust theoretical framework and detailed input-output,balance of payments and fiscal accounts data.See Box 2 and Annex 1 for a detailed explanation of model and simulations presented in this report
140、.Deploying these technologies could reverse projected emissions growth from construction value chains,requiring$3.5 trillion in global investment between 2022 and 2035.Integrating readily available technologies,like electrification of brown buildings with cleaner energies and energy-efficient buildi
141、ngs and materials,among other technologies,into construction value chains combined with compliance with the NDC targets could reduce construction-related emissions to well below todays levels.Results from the computable general equilibriumcircular economy dynamic model6 employed in the report sugges
142、t that,taken together,these measures(the“energy efficiency scenario”in Exhibit B)would reduce global construction-related emissions in 2035 to about 13 percent below the level in 2022,or about 23 percent below the level that would be reached in 2035 in the absence of additional mitigation efforts(th
143、e“no mitigation”scenario in Exhibit B).The 13 percent reduction relative to todays levels is equivalent to the total emissions from the construction sector in the United States in 2022.Emerging markets would account for more than half of this reduction in emissions.On average,global construction-rel
144、ated emissions decline by about 2 percentage points per year in the energy efficiency scenario relative to the no mitigation scenario.Of this,1.4 percentage points Page 17Executive SummaryEXHIBIT BGlobal Construction Emissions Could Decline by 13 Percent Below the 2022 Level by 2035 with Decisive Ac
145、tion in Construction Value ChainsNotes:The exhibit shows the results of the simulations for the no mitigation,Nationally Determined Contributions(NDCs),energy-efficiency and net zero-aligned scenarios described in Box 2 and Annex 1.Castro et.al mimeo simulates alternative scenarios.The NDC scenario
146、simulates the effects of complying with the NDCs emission-reduction targets set in the Paris Agreement.The energy-efficiency scenario simulates the effects of sector-specific measures geared towards cleaning the energy mix and improving the energy efficiency of buildings and materials plus complianc
147、e with the NDCs.The net zero-aligned scenario simulates the impacts of widespread carbon pricing on brown buildings and materials and subsidies to green alternatives plus compliance with the NDCs.The drop in emissions in the net zero-aligned scenario is similar to the decline in emissions in the ene
148、rgy efficiency scenario and it is therefore not shown here.Figures in the text might not be identical due to rounding.Source:IFC calculations based on data from the Global Trade Analysis Project(2022)and Global Climate Change Alliance(2021).No mitigationEnergy Efciency(including NDCs)Nationally Dete
149、rmined Contributions(NDCs)12,00013,00014,00015,00016,00017,00018,00020222025202820312034Millions of CO2 equivalent tons+12.8%-12.8%-3.6%Page 18BUILDING GREENcome from reductions in energy intensity of buildings and materials,while 0.6 percentage points come from a decline in carbon intensity.Constru
150、ction demand would only experience a minor drop of 0.04 percentage points per year.7 The simulations also suggest that the drop in construction emissions achieved through the electrification of brown buildings with renewable 7 IFC calculations based on Global Trade Analysis Project(2022).Energy inte
151、nsity refers to the unit of energy used per unit of construction output and carbon intensity refers to the unit of CO2 metric ton per unit of energy consumed in construction.Castro et.al,mimeo present a detailed decomposition of these carbon and energy intensity and total demand effects.The 2 percen
152、t average yearly drop in emissions refers to the 23 percent decline in construction-related emissions in the energy-efficiency scenario relative to the no mitigation scenario between 2022 and 2035.8 IFC calculations based on Global Trade Analysis Project(2022).energies and energy efficient buildings
153、 and materials(the energy efficiency scenario in Exhibit B)would result in a decline in total global emissions,including construction and all other sectors,of about 19.8 percent by 2035,compared with the no mitigation scenario.8 These results emphasize the need to pave the way now for decarbonizing
154、hard-to-abate activities,such as construction and operation of buildings and materials,in the next decades to meet EXHIBIT CInvestment Needs for Building Green Will Amount to$1.5 Trillion in Emerging Markets in the Next DecadeNotes:Investment needs are calculated as the difference between investment
155、s in electrification of brown buildings with renewable energies and new buildings and materials powered with low-emission energies in the no mitigation scenario and the energy efficiency scenario.See Box 2 for an explanation of the model and scenarios.Figures in the text might not be identical due t
156、o rounding.Source:IFC calculations based on data from Global Trade Analysis Project,Global Climate Change Alliance,International Energy Agency and other sources.Total$3.50 trillionHigh Income$2.01 trillionChina$1.33 trillionOther Emerging Markets$0.16 trillionPage 19Executive Summarythe climate goal
157、s set in the Paris Agreement.The results of the model also suggest that the global cumulative investment needed from 2022 to 2035 to achieve this reduction in construction emissions in the energy efficiency scenario could amount to$3.5 trillion.9 The investment needs in emerging markets would amount
158、 to almost$1.5 trillion,of which$1.3 trillion would be from China.(Exhibit C).Most of the$1.5 trillion investment needs in emerging 9 Investment refers to gross fixed capital investment in the Global Trade Analysis Project database.See Annex 1.markets would be channeled to electrification of brown b
159、uildings,new energy efficient buildings,and materials powered with cleaner energies.Around 75 percent of investment would be funneled into cleaning the energy mix and improving the energy-efficiency of buildings.Increased supply of less carbon-intensive cement,steel,and other materials would absorb
160、about 20 percent of the required investment.The remaining 5 percent would finance built environment-related services on and off construction EXHIBIT DA Third of the Investment Needs in Emerging Economies Outside China Would Be in Latin America and the Caribbean and South AsiaNotes:The exhibit shows
161、the results of the simulations of the cumulative investment needs for the energy efficiency scenario described in Box 2 and Annex 1 relative to the no mitigation scenario.Figures in the text might not be identical due to rounding.Source:IFC calculations based on Global Trade Analysis Project(2022).S
162、ub-Saharan Africa$12.4 billion East Asia Pacific$12.9 billion South Asia$25.4 billion Latin America&the Caribbean$76.7 billion Middle East&North Africa$14.9 billion Europe&Central Asia$17.6 billion Total$160 billion Page 20BUILDING GREENsites.10 These financing needs would require a marked rise in d
163、omestic and international green private debt finance for decarbonizing the construction value chain in emerging markets,which amounted to about$23 billion in 2021.Of the additional$160 billion in green construction investment in emerging markets other than China between 2022 and 2035,Latin America a
164、nd the Caribbean,South Asia and Europe and Central Asia would account for about$77 billion,$25 billion,and$18 billion.In the Middle East and North Africa and East Asia and the Pacific,the investment would amount to about$15 billion and$13 billion.Green building investment would amount to$12 billion
165、in Sub-Saharan Africa(Exhibit D).About 86 percent of the investment would be directed to residential buildings(a half of that in Latin America and the Caribbean),especially in single-family detached housing.The results of the model employed in this report also suggest that an alternative scenario ge
166、ared towards accelerating the pace to achieve net zero-construction by 2050 by boosting the stock of green buildings and materials through widespread carbon pricing and fiscal support measures(the net zero-aligned scenario described in the notes of Exhibit B)would attain a similar drop in constructi
167、on emissions by 2035 as the energy-efficiency scenario but with markedly higher investment needs.Bringing down construction emissions by about 23 percent with this policy mix would require investments in new green buildings and materials amounting to$6 trillion globally,almost twice the investments
168、needed in the energy efficiency scenario,but also would come at a much higher 10 IFC calculations based on Global Trade Analysis Project(2021);and GCCA(2021).cost in foregone output as the construction value chain undergoes a more rapid transition to net zero emissions.Decarbonizing construction val
169、ue chains entails short-term trade-offs for long-term benefits.Combining compliance with NDCs with construction value chain-specific mitigation and adaptation measures and readily available technologies geared towards cleaning the energy mix and improving the energy efficiency of buildings and mater
170、ials would likely have only a limited impact on economic growth rates by 2035.The model employed in this report suggests that compliance with the NDCs(without measures specific to the construction sector)would reduce global construction emissions by 3.6 percent and total global emissions,including c
171、onstruction and the rest of the economic activities,by 13.04 percent for a decline in yearly global GDP growth of 0.02 percentage points by 2035.Pursuing construction-specific mitigation policies to promote cleaning the energy mix and improving the energy-efficiency of buildings and materials in add
172、ition to compliance with NDCs(the energy efficiency scenario in Exhibit B)would reduce global construction emissions by 13 percent and total global emissions,including construction and all other economic activities,by 19.8 percent relative to the no mitigation scenario for a decline in yearly global
173、 GDP growth of 0.03 percentage points.However,this short-term loss would be more than compensated by long-term gains in reduced damages from climate change to infrastructure,growth,and human welfare.Page 21Executive SummaryAn alternative policy mix of applying carbon taxes to brown buildings and mat
174、erials,subsidizing green alternatives,and complying with NDC targets(the“net zero-aligned”scenario described in Exhibit B)would achieve a similar reduction in global emissions as the energy efficiency scenario.It would also contribute to putting construction more rapidly on the path to net zero by 2
175、050 by boosting the stock of greener buildings and materials in construction value chains.The net zero-aligned scenario would bring down global carbon emissions,however,at significantly higher costs than the energy efficiency scenario.The 19.8 percent reduction in global total emissions,including co
176、nstruction and the rest of the economic activities,in this scenario would entail a drop of 0.4 percentage points in average yearly growth globally by 2035,more than 10 times the output losses of the energy efficiency scenario.This larger output loss in the net zero-aligned scenario relative to the e
177、nergy efficiency scenario is explained by the crucial importance of construction value chains in global investment.11 As most buildings and materials are brown today,12 imposing taxes on conventional construction would cause a marked drop in total construction investment that is unlikely to be offse
178、t in the next decade by the expansion of green alternatives,even with fiscal support measures,at least until technologies with the highest abatement potential become commercially available by 2035 and beyond.11 Construction accounts for about half of total fixed capital investment globally(IFC calcu
179、lations based on Global Trade Analysis Project,2022).12 Only about 7 percent of the stock of buildings is green today globally,according to IFC calculations based on the Global Trade Analysis Project.13 See,for instance,Markandya et al.(2018).These results suggest that relatively few countries with
180、available fiscal space may be in a position to offset the decline in private investment in conventional construction due to carbon taxes on brown buildings and materials through increased public investment and fiscal support measures.For other emerging markets,promoting the adoption of low hanging f
181、ruit technologies,like the electrification of buildings with cleaner energies and energy-efficiency,would be a more pragmatic and feasible pathway to reducing emissions in construction value chains in the next decade,until horizon technologies,like carbon capture and storage and green hydrogen,becom
182、e widely available at scale.By 2050,the cost in terms of foregone output stemming from the emissions reduction scenarios in this report is likely to be more than offset by reduced damages to infrastructure,productivity,and growth from global temperature increases.Recent simulations using similar mod
183、els to the model employed in this report,for instance,suggest that the economic benefits of reducing the growth in global temperatures by 2050,particularly related to lower mortality and morbidity rates,would exceed by 1.4 to 2.5 times the output costs of reducing carbon emissions in this decade.13E
184、merging markets receive only a small share of domestic and foreign green finance for decarbonizing construction.Several financial tools are,or can be,used to channel Page 22BUILDING GREENdomestic and foreign private funds to greening construction value chains.These include:Sustainability-linked debt
185、 can mobilize private 14 Sustainability-linked finance includes loans and bonds in which compliance with a set of pre-determined sustainability targets triggers reductions in financing costs.investment for decarbonizing hard-to-abate construction materials by aligning financial incentives between in
186、vestors and material producers to reduce emissions;14EXHIBIT EGlobal Domestic and Foreign Private Green Debt Finance for Construction Decarbonization Increased Twentyfold in the Last Five YearsNotes:Calculations only consider green,sustainability,sustainability-linked,and transition bonds and loans
187、with green buildings in the use of proceeds or issued by construction material sectors and used for decarbonization.Other includes transition bonds and sustainability loans.See Annex 3 for more details on the methodology.Figures in the text might not be identical due to rounding.Source:IFC calculati
188、ons based on data from Environmental Finance and Bloomberg(2022).70%313%93%192%221%Green loansSustainability-linked loansGreen bondsSustainability bondsSustainability-linked bondsOtherCompound Annual Growth Rate0500200202021$billionsPage 23Executive Summary Green mortgages can
189、drive consumer demand for investments in net-zero buildings;Performance contracts and leasing can offer off-balance sheet financing from local energy providers for energy-efficiency investments in buildings and materials that can be repaid through energy savings over time;Green funds and real estate
190、 investment trusts can inject equity finance in new or retrofitted green buildings and materials;Venture capital funds can finance or co-finance game-changing decarbonization construction EXHIBIT FOnly 10 Percent of Global Domestic and Foreign Private Green Debt Finance for Construction Decarbonizat
191、ion Was Issued in Emerging MarketsNotes:Calculations only consider green,sustainability,sustainability-linked,and transition bonds and loans with“green buildings”in the use of proceeds or issued by construction material sectors and used for decarbonization.Volumes shown by income and region are base
192、d on the location of headquarters and/or country of risk(determined by the firms geographical exposure to operations)of the issuing entity.Compound annual growth rates are calculated using the first year of issuance as base year:2018 for Sub-Saharan Africa and other emerging markets,and 2017 for hig
193、h income countries.See Annex 3 for more details on the methodology.Figures in the text might not be identical due to rounding.Source:IFC calculations based on data from Environmental Finance and Bloomberg(2022).$billions0500200202021High incomeOther emerging marketsSub-Saharan
194、AfricaChina109%138%146%86%Compound Annual Growth RatePage 24BUILDING GREENtechnologies;and,Carbon transition bonds and carbon retirement portfolios can contribute to decarbonizing or decommissioning brown construction assets.Of these green financial instruments,green bonds have attracted most of the
195、 domestic and foreign private financing for green construction between 2017 and 2021,although sustainability-linked debt instruments experienced the highest growth rates(Exhibit E).15,16 Equity instruments are less commonly used for such financing,though Real Estate Investment Trusts have the potent
196、ial to scale financing of green building construction and operations.The volume of other innovative green finance tools,such as transition bonds or carbon retirement portfolios,is quite small and almost non-existent in emerging markets.Emerging markets issued only 10 percent of total domestic and fo
197、reign private green debt finance for construction decarbonization in 2021(Exhibit F).Of that share,China accounts for 6 percent of the global total and the rest of the emerging economies for the remaining 4 percent.Private green debt financing for construction is also heavily skewed toward green bui
198、ldings,with decarbonization of construction materials attracting only 9 percent of the issuance globally.Concerted action by private investors and policymakers will be required to reduce emissions from construction value chains.15 IFC(2020)provides a broader analysis of the green bond market.16 Calc
199、ulations only consider green,sustainability,sustainability-linked,and transition bonds and loans with“green buildings”in the use of proceeds or issued by construction material companies and used for decarbonization.See Annex 3 for more details on the methodology.The low level of investment for green
200、 construction largely stems from market failures that make green buildings more expensive than they should be,since in the absence of carbon pricing the social benefit from building green is not reflected in their market price.Other market failures,such as the limited information on default rates an
201、d monetary benefits of green building investments,coupled with high screening and monitoring costs of emission-reduction targets,further restrict finance for green construction.These failures compound with other market failures,the decentralized structure of construction value chains,and fragmented
202、regulations and policies at the national and sub-national level.Depending on country conditions and fiscal and policy resources,policymakers can take action to mitigate the market failures in construction value chains and remove the bottlenecks to private investment.Measures can include the followin
203、g:Improving the efficiency,transparency,and depth of local financial markets through improved macroeconomic management and prudential regulations is paramount to expanding funding for building green;Electrification,or replacing fossil fuels for cooling,heating and cooking with cleaner energies,can c
204、ontribute to reducing emissions from building operations;Green building codes and standards and other regulations can contribute to enticing private finance into green construction;Page 25Executive Summary Governments should take the lead on construction decarbonization through greening public build
205、ings and public procurement,as well as encouraging the adoption of carbon transition bonds and carbon retirement portfolios for decarbonizing and decommissioning brown plants;Carbon pricing can help internalize emissions externalities by providing an economic incentive to emitters to either green th
206、eir production and lower their emissions or continue emitting and pay the price for their emissions.It can also encourage consumers to switch from brown to green construction products;Compulsory or voluntary carbon markets can unlock domestic and foreign private sector investment in construction dec
207、arbonization;Green banks can play a role in mobilizing finance for small-scale green building projects that may not otherwise be widely available in the market;and,Subsidies(e.g.,grants,below-market-rate loans,and direct transfers)and tax incentives(e.g.,tax breaks)can contribute to financing techno
208、logies for construction decarbonization and incentivize the decarbonization or decommissioning of brown materials plants.However,more empirical evidence is needed on the effectiveness and efficiency of such tools.Many emerging markets also lack the fiscal resources and policy readiness to manage eff
209、iciently these measures,in particular in low-income countries.17 IFC(2021).Development finance institutions have critical roles to play in construction value chain decarbonization.Development finance institutions can play an important role in promoting financing toward construction value chains deca
210、rbonization in emerging markets.They can help to mobilize significant volumes of domestic and international private and public funds through investing in green bonds and loans and other financial instruments,support innovative green financial instruments for decarbonizing brown buildings,provide tec
211、hnical assistance for the adoption of green codes,regulations,and standards,serve as an anchor investor,provide concessional and blended financing,and operationalize various supranational climate funds.Concessional finance deployed by development finance institutions can provide financial products t
212、o de-risk private investments through subordinated loans,equity,and guarantees.Blended finance utilizes limited pools of concessional funds to mobilize larger sums of private sector financing toward development goals,often with climate-related objectives;thereby it can provide more impact per dollar
213、 than pure grants while reducing potential misallocation of capital.17 Concessional and blended finance for building green will need to be scaled up in the poorest countries.How this report is structuredEmerging markets encompass a heterogeneous group of countries.Their capabilities for adopting and
214、 implementing mitigation and abatement policies in Page 26BUILDING GREENconstruction,therefore,vary widely.These countries also differ in their reliance on fossil fuels for driving economic growth and diverge in the carbon intensity of the production of materials and the construction and operation o
215、f buildings.The report focuses on the prospects for reducing emissions in construction in emerging markets in the next decade,a period where some of the technologies with the largest abatement potential are unlikely to become commercially available without supportive policies.This approach also emph
216、asizes the most plausible path for adopting carbon pricing programs in emerging markets over the next 10 years based on the existing NDCs,rather than simulating the hypothetical carbon prices required to limit emissions below the levels established in the Paris Agreement by 2050.Other recent reports
217、 analyze the impacts of global warming and abatement policies on economic growth in the next decades by 2050 and beyond.18 This report is organized as follows.The first chapter details the size,source,and prospects for reducing carbon emissions from construction value chains.The second chapter consi
218、ders technological improvements that would reduce carbon emissions from the construction and operation of buildings,while the third chapter addresses technologies to reduce emissions from the production of building materials.The fourth chapter outlines the finance now available for green constructio
219、n,the measures required to improve incentives for green construction,and measures to channel the increased domestic and foreign private financing to emerging markets to achieve a significant reduction in carbon emissions from construction 18 See,for instance,IMF(2022),Chapter 3;and Acemoglu et.al.(2
220、012).IEA(2020)explores the effects of investments and policies promoting energy efficiency on global warming by 2050.value chains.The last chapter summarizes the main recommendations for policymakers,private investors,and other stakeholders for making a reality of the opportunity for building green
221、in emerging markets in the next decade.CHAPTER 1:Prospects for Reducing Carbon Emissions from Construction Page 28BUILDING GREEN1.1.SummaryEmerging markets generate about 70 percent of construction-related emissions globally and that share is projected to increase by 2035.Technologies are available
222、or emerging that can reduce emissions across construction value chains,both from the operation of buildings and from the production of construction materials.The speed of the green construction transition will depend on each countrys income level,technological and policy readiness,available fiscal a
223、nd financial resources,and dependance on fossil fuels.This chapter examines scenarios for construction-related emissions reduction in emerging markets and the amount of investment that these efforts would require.It also estimates the implications for economic growth in emerging markets over the nex
224、t decade and beyond.1.2.Construction value chains are a major contributor to global CO2 emissions,particularly from emerging markets.Construction value chainsthat comprise construction and operation of buildings and production of construction materialsaccount for about 40 percent of CO2 emissions gl
225、obally(Exhibit 1).19,20 Box 1 describes what is meant by a construction value chain in this 19 This report includes only scope 1,2 and 3 CO2 emissions coming from energy combustion and economic activity in agriculture,manufacturing,and services.Emissions from other greenhouse gases(e.g.methane)and o
226、ther CO2 emissions(e.g.,from changes in land use)are not considered due to data limitations.Scope 1 emissions are direct emissions from owned or controlled sources.Scope 2 emissions are indirect emissions from the generation of purchased electricity,steam,heating,and cooling consumed by the firm.Sco
227、pe 3 emissions are all indirect emissions(not included in scope 2)that occur in the firms value chain.20 This estimate roughly aligns with recent calculations from IEA(2021)and UN(2021)in which construction accounts for 36 percent of global final energy consumption and 37 percent of energy-related C
228、O2 emissions.21 IFC staff calculations based on Global Trade Analysis Project data.22 IEA(2021).23 Brown buildings refer to buildings not designed or adapted for energy or emissions reduction.report.The operation of buildings is highly energy-and resource-intensive,generating about 20 percent of glo
229、bal emissions.The supply of materials accounts for about 19 percent of global emissions,mainly from the fossil fuel-powered and energy-intensive processes used to produce these materials.The construction process itself accounts for only 0.3 percent of global emissions,as it relies heavily on relativ
230、ely less carbon-and resource-intensive activities like off-site and on-site construction services.About 85 percent of total construction emissions globally come from the use of fossil fuels in buildings and materials plants while the remaining 15 percent comes from process or industrial emissions re
231、lated to the production of cement,steel,and other construction materials.21The contribution of the operation of buildings to global emissions accrues over the buildings lifetime from the use of energy-intensive and fossil fuel-powered systems,like cooling,heating,and lighting,and large appliances,li
232、ke refrigerators and cookstoves.Inefficient envelope insulation and design features(e.g.,building placement and exposure to sunlight,window size and rooftops heat absorption,and air circulation)in conventional buildings further increases heating,cooling,and lighting systems energy loads.22 Retrofitt
233、ing is extremely expensive today;brown buildings23 account for most of the stock of buildings Page 29Chapter 1:Prospects for Reducing Carbon Emissions from Construction EXHIBIT 1Construction Generates About 40 Percent of Global Carbon EmissionsNotes:This report includes only scope 1,2 and 3 CO2 emis
234、sions coming from energy combustion and economic activity in agriculture,manufacturing,and services.Emissions from other greenhouse gases(e.g.methane)and other CO2 emissions(e.g.,from changes in land use)are not considered due to data limitations.Scope 1 emissions are direct emissions from owned or
235、controlled sources.Scope 2 emissions are indirect emissions from the generation of purchased electricity,steam,heating,and cooling consumed by the firm.Scope 3 emissions are all indirect emissions(not included in scope 2)that occur in the firms value chain.Other emerging markets category includes Su
236、b-Saharan Africa.Figures in the text might not be identical due to rounding.Source:IFC calculations based on data from the Global Trade Analysis Project(2022).Total:38 billion CO2 tons Total:15 billion CO2 tons Global construction value chain emissions by regionGlobal CO2 emissions by category0.3%Re
237、st of global CO2 emissions60.6%Building operations20.4%Production of construction materials18.7%China40%High income31%Other emerging markets 29%Building constructionPage 30BUILDING GREENglobally,even in high-income economies.24 Given the average lifetime of a building is about 50 years,the stock of
238、brown buildings will keep the contribution of building operations to global carbon emissions high and it will increase as new brown buildings are built in the absence of additional mitigation and adaptation efforts.25 About 56 percent of the global emissions from buildings operation originates in em
239、erging markets.This sizable contribution is explained by the prevalence of brown buildings and appliances in emerging markets relative to high-income countries.China 24 See Sections 2.2.and 3.3 on the current landscape and prospects for retrofitting buildings.25 IEA(2020).26 IFC staff calculations b
240、ased on Global Trade Analysis Project.27 WBCSD/ARUP(2021)Exhibit 1 measures emissions from manufacturing construction materials in the base year 2022 rather than emissions resulting from the materials production over the buildings lifespan.28 Material Economics(2018).accounts for about 45 percent of
241、 those emissions,while other emerging countries,particularly in Europe and Central Asia,Middle East and North Africa,and South Asia,explain the rest with about 55 percent of global buildings operation-related emissions.26Materials and construction today generate only 22 percent of the emissions of a
242、 typical building during its average 50-year lifespan.27 Most of these embodied carbon emissions are associated with production materials,with around half of these emissions generated by cement and steel.28 Embodied carbon refers to the carbon emissions associated with the EXHIBIT 2Cement and Steel
243、Account for About 50 Percent of Carbon Emissions from Construction MaterialsNotes:About 50 percent of demand for steel comes from construction(World Steel Association,2020).About 99 percent of cement production goes to construction(GCCA,2020).Figures in the text might not be identical due to roundin
244、g.Source:IFC staff calculations based on Global Trade Analysis Project and GCCA.Other services 41%Other mater-ials 7%Cement and products 43%Metals 10%Total:6.7 billion CO2 tons Page 31Chapter 1:Prospects for Reducing Carbon Emissions from Construction Material and Construction Phase3-5 yearsOperatio
245、ns Phase50 yearsEnd of LifeDemolitionGovernment regulationsArchitects,engineers,consultantsBuyersBanks,investorsOccupiersDevelopersOwnersMaterials ManufacturersDecision influencersDecision makersSchematic Representation of the Construction Value ChainBOX 1What Is a Construction Value Chain?The const
246、ruction value chain is a complex network with multiple stages and stakeholders.The diagram shows that the value chain of construction and operation of buildings and other infrastructures comprises three main stages with varying duration:(a)materials and construction(35 years);(b)operations(up to 50
247、years);and(c)end of life(demolition).Three main decision makers intervene over the life cycle of buildings and other constructions:(a)material manufacturers;(b)developers;and(c)users.Government regulations play a key role in shaping the availability and emission-intensity of materials and the design
248、 and specifications of construction.Users determine emission intensity and waste generation in the operation phase.Financial institutions and investors influence the supply of materials and construction,while architects,engineers and other specialists can affect design and construction specification
249、s.The construction value chain plays a crucial role in the global economy.Investment in construction accounts for 15 percent of global GDP and about 10 percent of the GDP in emerging markets.*Construction is the main component of investment in most economies.Therefore,it is a key driver for aggregat
250、e demand and economic growth.Construction is also a labor-intensive activity,generating millions of low-skilled jobs in emerging markets.The value chain also encompasses some of the main industrial activities,like cement and steel,along with an extended network of downstream on-site and off-site ser
251、vices like logistics and transportation,among others.*IFC calculations based on Global Trade Analysis Project and WEO.Page 32BUILDING GREENEXHIBIT 3Cement Is the Most Carbon-Intensive Activity Globally 0.80.90.91.21.31.51.92.44.66.9 kg CO2 per$1 of outputChemical productsMetals castingGasTransportOt
252、her non-metallic mineralsNon-ferrous metalsIron and steelCoalElectricityCementNotes:Output is calculated as the sum of value added and intermediate consumption by activity.Only the top 10 most carbon intensive activities globally are included.Carbon intensity is estimated as the ratio between total
253、carbon emissions and output by sector.Emissions only include process and industrial emissions;those generated by methane are not included.Figures in the text might not be identical due to rounding.Source:IFC staff calculations based on Global Trade Analysis Project and GCCA.materials and constructio
254、n processes throughout the whole life cycle of a building or infrastructure.It includes material extraction,transport to the manufacturer,manufacturing,transport to site,construction,use phase(e.g.,concrete carbonation but excluding operational carbon from,for example,energy use of the building or i
255、nfrastructure),maintenance,repair,replacement,refurbishment,deconstruction,transport to end-of-life facilities,processing,and disposal.2929 Material Economics(2018).30 Karlson et.al(2020).31 About 50 percent demand for steel comes from construction(World Steel Association,2021).About 99 percent of c
256、ement production goes to construction(GCCA,2021).The contribution of construction materials to global emissions is,in turn,mostly due to the production of cement and steel.The construction industry consumes almost all the worlds cement and nearly half the steel produced.30 Cement and concrete produc
257、tion generate about 43 percent of the emissions from materials,steelmaking about 10 percent,and other materials about 7 percent.31 Construction materials are also heavy users of other highly carbon-intensive activities,mainly electricity,transportation,and other services,Page 33Chapter 1:Prospects f
258、or Reducing Carbon Emissions from Construction which account for the remaining approximately 40 percent of emissions(Exhibit 2).According to this reports calculations,cement is the most carbon-intensive activity globally(about 7 CO2 kg eq per$1 of output),and steelmaking(iron and steel)is the fourth
259、 most intensive(about 2 CO2 kg eq per$1 of output).Other materials and activities heavily used in construction,such as electricity,carbon,non-ferrous metals,other non-metallic minerals,transport,metal casting and chemical products,are also among the top 10 most carbon intensive(Exhibit 3).The carbon
260、 intensity of cement and steel derives in part from the massive amounts of energy needed to generate the high temperatures required to produce these materials.This energy is still mainly dependent on fossil fuels,especially in emerging markets.The chemical processes involved in producing these mater
261、ials are also a large source of emissions.32Against this backdrop,emerging markets generate more than 70 percent of total construction-32 Hasanbeigi(2021).See Box 4 in Chapter 3 for an explanation of how cement and steel are produced.EXHIBIT 4Construction-Related Emissions in Emerging Markets,2022 P
262、ercent of total,excluding China Notes:Only the largest countries measured by population are reported due to data limitations.Color of categories corresponds to the official World Bank Group regions.Figures in the text might not be identical due to rounding.Source:IFC staff calculations based on Glob
263、al Trade Analysis Project and GCCA.0.1 Ethiopia Nigeria0.10.50.8 Rest of Sub-Saharan Africa0.8 Brazil Rest of Latin America and the Caribbean Indonesia Rest of Southeast Asia and the Pacific Low-income Asia and the Americas7.2 Europe and Central Asia6.3 India0.85.8 Middle East and North Africa2.71.5
264、2.4 South AfricaPage 34BUILDING GREENrelated emissions globally today.China is the largest contributor,accounting for about 40 percent of the worlds construction-related emissions.Other emerging markets contribute about 30 percent(Exhibit 1).33 In other emerging markets excluding China,Central Asia
265、and Europe accounts for about 7 percent of global construction emissions,and India and the Middle East and North Africa follow with about 6.3 percent and 5.8 percent,respectively.In Sub-Saharan Africa,South Africa is the largest emitter(0.5 percent of global 33 Other emerging markets includes Sub-Sa
266、haran Africa unless stated otherwise.construction-related emissions),followed by Ethiopia and Nigeria(both with 0.1 percent).In Southeast Asia and the Pacific,Indonesia contributes the largest share of global construction emissions(1.5 percent).Brazil is the largest emitter in Latin America and the
267、Caribbean,with about 0.8 percent of global construction emissions(Exhibit 4).Table 2.3 in Annex 2 shows the projected contribution of each country to construction-related emissions by country grouping,region and globally between 2022 and 2035.EXHIBIT 5Emerging Markets Account for About 90 and 70 Per
268、cent of Global Cement and Steel Production 11%61%26%2%Cement33%54%12%1%Steel High incomeChinaOther emerging marketsSub-Saharan AfricaNotes:Figures in the text might not be identical due to rounding Source:IFC staff calculations based on Global Trade Analysis Project and GCCA.Page 35Chapter 1:Prospec
269、ts for Reducing Carbon Emissions from Construction Within construction value chains,emerging markets account for about 83 percent of global carbon emissions generated by the production of construction materials.For instance,China generates about 68 percent of cement emissions and about 62 percent of
270、 steel emissions globally.Other middle-income emerging markets account for 26 percent of global emissions from construction materials.34 The contribution of low-income countries is marginal.This disproportionate contribution of middle-income emerging countries in part reflects their decisive role in
271、 the supply of these materials globally.They account for about 90 percent of the worlds cement production and about 67 percent of steel.China explains about half of that,but other large emerging markets such as India,Indonesia,Brazil and other South Asian and East Asian countries have been rapidly e
272、xpanding production,driven by their rising per capita incomes,growing urbanization,and increased investments in buildings and infrastructure.Emerging markets excluding China produce about 26 percent of cement 34 IFC staff calculations based on Global Trade Analysis Project.EXHIBIT 6Construction Mate
273、rials Production Is More Carbon Intensive in Emerging Markets Than in High-Income CountriesAverage CO2 kg eq.emissions per unit of output Notes:Output is calculated as the sum of value added and intermediate consumption by sector.Figures in the text might not be identical due to rounding.Source:IFC
274、staff calculations based on Global Trade Analysis Project and GCCA.4.46.97.08.4High incomeOther emerging marketsSub-Saharan AfricaChinaCement0.61.61.51.90246810High incomeSub-Saharan AfricaChinaOther emerging marketsIron and steelAverage CO2 kg eq.emissions per unit of outputPage 36BUILDING GREENand
275、 about 12 percent of steel globally.Sub-Saharan Africa has a minor participation in the supply of both materials.High-income countries only account for about 11 percent of the global supply of cement and about 33 percent of steel(Exhibit 5).Table 2.1 and 2.2 in Annex 2 shows the contribution of each
276、 country by region to the production of cement and steel in these country groupings and globally.The significant contribution of large emerging markets to the emissions from construction materials also reflects reliance on relatively more carbon-intensive production methods.For instance,emerging mar
277、kets produce steel with almost three times more emissions per unit of output than developed economies(Exhibit 6).Similarly,cement production in emerging markets is much more carbon-intensive than in high income countries.Use of more polluting energy sources,like heavy fuel oils and coal,and more ene
278、rgy-and resource-intensive equipment mainly account for these large differences in carbon-intensity of cement and steel production between developing and developed economies.35Finally,high levels of construction emissions by emerging markets also reflect the rapid growth of investment in new buildin
279、gs and materials in these countries,particularly in middle-income economies.36 Today,emerging markets account for about half of the global investment in construction(China alone has about a quarter of the global total),up from 35 World Bank,mimeo.36 Investment in this report refers to gross fixed ca
280、pital investment in the construction sector in the Global Trade Analysis Project database.See Annex 1.37 IFC staff calculations based on Global Trade Analysis Project.38 A zero carbon ready building is highly energy efficient and either uses renewable energy directly or uses an energy supply(e.g.,el
281、ectricity or district heating)that will be fullydecarbonizedby 2050.IEA(2020).39 IEA(2020).about 30 percent in 2000.By contrast,the share of high-income countries in construction investment declined from more than 70 percent to less than 50 percent over the same period.Overall,investment in construc
282、tion and materials accounts for about 20 percent of the combined GDP of emerging markets.37 1.3.Emissions from construction are set to rise and are off track to meet construction climate commitments.The Paris Agreement calls for every building to be net-zero carbon(highly efficient and powered from
283、renewable energy sources,with any emissions offset)by 2050.Only 5 percent of new buildings,however,are net-zero and less than 1 percent of these buildings are built with zero-carbon specifications today.38 As the expected life span of buildings constructed today is about 50 years,the construction me
284、thods of today determine emissions and energy consumption of buildings for the foreseeable future.Non-carbon-neutral buildings will also need to be retrofitted in the next 30 years.39 Retrofit rates are insufficient,however,as average annual retrofit rates in buildings amount to less than 1 percent
285、of the buildings stock per year in most major markets,even in high income countries.Because of its high costs,moving aggressively in deep retrofitting or decommissioning brown buildings,however,will be challenging for most economies and it Page 37Chapter 1:Prospects for Reducing Carbon Emissions fro
286、m Construction EXHIBIT 7Dissemination of Green Building Measures by the Private Sector Has Been Limited Outside High-Income Countries and Large Emerging MarketsNotes:Analysis based on identifying selected keywords on green building certifications and construction methods in companys documents using
287、artificial intelligence text-recognition methods,natural language processing,and machine learning.Algorithms assess the tone of a transcript on a spectrum of positive to negative.The scale measures the share of companys documents registering positive“sentiment”by country.The data only includes compa
288、nys documents in English.Source:IFC and IBRD DEC based on Facset https:/ sentiments share related to Green Building Certificationshare of positive documents by country61%-100%46%-60%31%-45%16%-30%0%-15%No data2021:Positive sentiments share related to Green Building Certificationshare of positive doc
289、uments by country61%-100%46%-60%31%-45%16%-30%0%-15%No dataPage 38BUILDING GREENwill therefore most likely not be a priority for middle-and low-income countries in the years to come.More than 110 countries lacked mandatory building energy codes or standards in 2021,meaning that more than 2.4 billion
290、 square meters of floor space were built last year without meeting any energy-related performance requirementsthe equivalent of Spains entire building stock.40 Lack of adequate building codes,insufficient green financing,and the dearth of technical and enforcement capabilities explain the sparsity o
291、f low-emission buildings and materials in least developed economies,and some middle-income economies.The highly local and decentralized organization of the construction industry also makes designing and enforcing consistent green building regulations and standards challenging in many emerging market
292、s,especially in some Latin American and Southeast Asian economies.41This report employs a computable general equilibrium dynamic-circular economy model to analyze alternative scenarios for construction value chains decarbonization in emerging markets by 2035(See Box 2 and Annex 1 for a detailed desc
293、ription of the model and the scenarios).Computable general equilibrium models provide an indication of plausible paths of construction carbon emissions and the economic effects of alternative policy options rather than precise numerical estimates.These models offer valuable guidance to policymakers
294、and private investors for the design and deployment of mitigation and adaptation measures and the identification of 40 IEA(2021).41 World Bank(mimeo);and IEA(2020).potential investment opportunities.The summary of results of the simulations of the model employed in this report are presented in the f
295、ollowing paragraphs.In the absence of additional efforts to reduce emissions(the no mitigation scenario described in Box 2),the results of the model suggest that total construction-related emissions would increase by about 13 percent between 2022 and 2035 globally.About 45 percent of this increase r
296、eflects the rapid investment in conventional carbon-intensive buildings and construction materials in emerging markets other than China,driven by fast urbanization and economic growth in India,East Asia and the Pacific,the Middle East and North Africa and Sub-Saharan Africa.Chinas contribution to th
297、e increase in emissions will be moderate due to the existing excess supply of cement,steel,and other materials as well as the already massive stock of buildings(Exhibit 8).Low-income economies would make only a marginal contribution.Table 2.3 in Annex 2 provides the projected trajectory of construct
298、ion-related emissions by country and region.Only the major countries measured by purchasing power parity-adjusted GDP are displayed there due to data limitations.The operation of buildings will account for most of the projected rise in construction-related emissions.Its contribution will increase fr
299、om about 50 percent of construction emissions in 2022 to about 60 percent by 2035.In the absence of vigorous mitigation efforts(the no mitigation scenario in Box 2),this will be mainly propelled by the construction of new brown buildings,and therefore,by the expansion of the stock of Page 39Chapter
300、1:Prospects for Reducing Carbon Emissions from Construction carbon-and energy-intensive buildings.42 Retrofitting is costly,and the construction of new energy-efficient buildings,and the expected progressive greening of the energy grid,is unlikely to offset the emissions coming from conventional bro
301、wn buildings without decisive additional mitigation efforts in the next decade.43 Against this backdrop,in the next decade,advanced economies will most likely concentrate their policy efforts on scaling up carbon pricing programs,adopting stricter green codes and standards,42 IFC staff calculations
302、based on Global Trade Analysis Project.43 IEA(2020).See Chapters 2 and 4.and promoting novel mitigation and adaptation technologies not commercially viable today through fiscal incentives.Most middle-and low-income economies are likely to focus more on seizing low-hanging-fruit measures with moderat
303、e costs like green codes,regulations and standards and already commercially available technologies.With financial and technical support from development finance institutions,some upper-middle income countries could also accelerate the piloting of promising EXHIBIT 8Global Construction Emissions Are
304、Projected to Grow 20222026203020354,6625,0234,8204,6994,2895,1844,8694,5806,0696,7356,7756,52415,80416,46416,94315,019+13%ChinaHigh-income countriesOther emerging marketsMillions of CO2 equivalent tonsNotes:See Box 2 and Annex 1 for a description of the model used for the projections.Other emerging
305、markets include Sub-Saharan Africa.Figures in the text might not be identical due to rounding.Source:IFC staff calculations based on Global Trade Analysis Project.Page 40BUILDING GREENtechnologies with high abatement potential like green hydrogen.44Looking at the regional distribution in the simulat
306、ions,the models results suggest that,in the absence of additional mitigation efforts(the no mitigation scenario in Box 2),rapid population and economic growth in South Asia and East Asia and the Pacific,especially in India and Indonesia,and to a lesser extent,in Europe and Central Asia,would drive t
307、he increase in global construction emissions.The Middle East and North Africa would follow in importance 44 See Chapter 4.due to the presence of economies with abundant and intensive use of fossil fuels in the operation of buildings and production of materials.Latin America and the Caribbean,and esp
308、ecially Sub-Saharan Africa,would only make a minor contribution(Exhibit 9).The growth in construction activity will be mainly propelled by expansion in building floorspace in emerging markets,especially in high growth South Asian and East Asian countries,like India,Indonesia,and Malaysia.Building fl
309、oorspace is expected to increase by a factor of two to three in developing EXHIBIT 9South Asia Will Be Driving the Increase in Construction Emissions in Emerging MarketsNotes:See Box 2 and Annex 1 for a description of the model used for the projections.Only the major countries measured by GDP adjust
310、ed by purchasing power parity are displayed here due to data limitations.Figures in the text might not be identical due to rounding.Source:IFC staff calculations based on Global Trade Analysis Project.2022202720356227266741,0581,1501,0834606045188611,0399201,0431,2681,167396294South AsiaLatin Americ
311、a and the CaribbeanMiddle East and North AfricaEurope and Central AsiaEast Asia and the Pacific(excl.China)Sub-Saharan AfricaMillions of CO2 equivalent tonsPage 41Chapter 1:Prospects for Reducing Carbon Emissions from Construction BOX 2Modeling Alternative Scenarios for Construction Investment and E
312、missions by 2035Given the complexity of construction value chains in their interactions with the broader economy and the environment,IFC has partnered with the Global Trade Analysis Project(GTAP)at Purdue University,which developed for this report a computable general equilibriumcircular economy(CGE
313、-CE)model.The model aggregates information on national accounts,balance of payments,and input-output matrices in a consistent representation of the dynamic inter-dependencies across sectors,agents,and markets.To analyze the effects of economic and population growth and alternative mitigation policie
314、s on emissions and other environmental indicators,the CGE-CE model incorporates an explicit representation of production technologies(e.g.,primary,secondary,and recycling activities)and materials(e.g.steel,cement,glass,fossil fuels,minerals,among others).By capturing changes in both supply and deman
315、d,the model simulates adjustments in the economy following the implementation of a policy shock.For instance,if carbon pricing is adopted,this leads in the model to higher prices in brown primary and secondary activities,reduced demand for brown goods,as well as shifts in the supply mix by increasin
316、g the share of low-carbon activities in output and employment.Carbon prices also induce changes in carbon and energy intensity of total output.These demand and energy-and carbon-intensity effects cause,in turn,changes in total emissions.The model represents the economy as a circular flow in which fi
317、rms acquire factors(e.g.,labor,capital,materials,energy,etc.)to produce goods and services.Households,in turn,receive income from firms(e.g.,wages,capital gains,etc.),and demand goods and services produced by firms.Equality of supply and demand determines equilibrium prices for factors,goods,and ser
318、vices.Using the economic and environmental data described above,the model is calibrated to this theoretical representation of the economy for the baseline year of 2022 and solved as a sequence of comparative static equilibria where inputs are linked over time.For this report,the model simulates four
319、 scenarios:a)no mitigation,which assumes continuation of the current climate policies without additional mitigation measures;b)NDC,which assumes countries comply with their Nationally Determined Contributions(NDCs);c)energy efficiency,that includes compliance with the NDCs,and electrification of bro
320、wn buildings with cleaner energies and decarbonization of construction materials and new buildings with non-fossil fuels and improved energy efficiency;and d)net-zero-aligned that includes compliance with NDCs,and direct taxation of brown buildings and materials and subsidies to green alternatives.S
321、cenario b)is simulated by applying carbon taxes on all sectors to achieve NDC targets.Scenario c)is simulated by applying carbon taxes on electricity generation for buildings operations and construction materials,and assuming improvements in the use of energy.Scenario d)is simulated by applying taxe
322、s directly on the stock and flow of brown buildings and materials and direct subsidies to low-emission alternatives(Annex 1).The simulations focus on a time span(the next decade,2022-2035)when most of the technologies with the largest abatement potential,like green hydrogen and carbon storage,are un
323、likely to become widely adopted without supportive policies(IEA,2023).This approach also emphasizes the most plausible path for adopting carbon pricing in emerging markets based on the existing NDCs,instead of simulating the hypothetical carbon prices required to limit emissions below the levels est
324、ablished in the Paris Agreement.Annex 1 provides the carbon prices by country and region used in the simulations,considering the expected differences in the level and velocity of adoption of carbon pricing programs between high-income economies and emerging markets.It also provides further details a
325、bout the model employed in the report.Page 42BUILDING GREENcountries by 2060.45 According to this reports calculations using the model described in Box 2 and Annex 1,emerging markets could account for about half of global construction investment by 2035 in the no mitigation scenario.Despite the expe
326、cted deceleration of its economy,46 China is still likely to account for a quarter of the worlds construction investment because of the combination of new investments and the need to maintain the existing stock of buildings and other structures.The contribution of other emerging markets is expected
327、to rise to about 25 percent,with most of the construction occurring in India and other Asian economies.The share attributable to Sub-Saharan Africa and low-income economies in other regions would be relatively small,at 3 percent,despite the region more than doubling its construction investment in ab
328、solute terms.In contrast,the construction investment share of high-income economies is likely to decline from 50 percent in 2022 to 48 percent by 2035 due to decelerating population and economic growth.471.4.A combination of available and emerging technologies and policy actions can reverse the grow
329、th in construction value chain emissions.Compliance with the NDCs and construction-specific mitigation policies and novel and available technologies could bring down construction emissions 45 UN Environment and IEA(2017).46 Chinas GDP growth is expected to decelerate from an average 6 per cent per y
330、ear in 20142022 to 4 percent in 20222035(Global Trade Analysis Project model calculations based on near-term outlook in WEO(2022).47 IFC staff calculations based on Global Trade Analysis Project(2022).to well below todays levels.Chapters 2 and 3 discuss these existing and emerging technologies and C
331、hapter 4 examines the policies and financing required to achieve the projected reduction in global construction emissions.The model employed in this report focuses on two alternative,but not necessarily exclusive,pathways or scenarios for reducing carbon emissions in construction value chains by 203
332、5(See Box 2 and Annex 1).One pathway involves accelerating the attainment of the net zero emissions target set by the Paris Agreement by 2050 by boosting the stock of green buildings and materials through widespread carbon pricing and fiscal support measures(the net zero-aligned scenario in Box 2).A
333、nother pathway involves fostering the adoption of low-hanging fruit technologies,such as electrification of brown buildings,energy-efficient buildings and materials,and cleaner energies through measures with moderate economic costs(the energy efficiency scenario in Box 2).These scenarios entail tradeoffs between accelerating now the decarbonization of hard-to-abate sectors and the potential costs