TEN TRENDS FOR A ZERO CARBON WORLD
10. Just rewards
“Climate change is more than an environmental crisis – it is a social crisis and compels us to address issues of inequality on many levels: between wealthy and poor countries; between rich and poor within countries; between men and women, and between generations.”
- The World Bank, 20211
Climate change is currently responsible for approximately 150,000 deaths per year around the world2. This figure is expected to rise to 250,000 deaths annually between 2030 and 2050 due to the increasing risks of extreme weather, disease and malnutrition resulting from the climate crisis3. Millions more will face economic insecurity arising from the impact on their properties and livelihoods4.
This increased risk will not be distributed evenly – geographically or socially. Those who have, so far, contributed the least toward the climate crisis are generally expected to be the hardest hit5. Nearly a third of the world’s population live in arid or semi-arid climate zones, which have larger concentrations of disadvantaged groups and are facing additional challenges due to climate change6. Not only are these groups expected to shoulder a disproportionate share of the impacts, but they also tend to be less well placed to deal with their consequences.
COUNTRIES WITH THE LARGEST CUMULATIVE EMISSIONS (1850-2021)
The sustained scale of these impacts is set to become the defining characteristic of the current era. Thousands have taken to streets around the world to demand greater action from businesses and governments in reducing emissions and dealing with the impacts of climate change that are already apparent. Governments and the private sector each have a key role to play; both need to ensure that in developing solutions to the climate challenges we face we do not compound existing social inequalities.
Climate change is increasingly presenting existential threats to homes and lives – not in a “future of the planet sense” but in very direct and immediate ways. The World Bank estimates that in just six regions of the world alone, by 2050 216 million people could be displaced by rising sea levels, more frequent extreme weather events and food shortages7.
The impacts are not confined to remote parts of the globe. In the US, more than 1.2 million Americans are currently away from their homes because of flooding, severe storms, and wildfires. In the past 10 years, around 8 million US citizens have lost their homes from such events, with 50 million more expected to join them in the coming decades8.
Within the population affected, climate events disproportionately impact low-income and BAME communities. American Indians and Alaska Natives are 48% more likely than other groups to live in areas that will be inundated by flooding from sea-level rise, whilst Latinos are 43% more likely to live in communities that will lose work hours because of intense heat9. Beyond the US, this problem is magnified: 90% of the 1.5 billion people facing at least moderate levels of flood risk live in low- and middle-income nations10.
Greater understanding of the potential impacts of climate change will help planners and developers target climate-safe areas and ensure buildings are designed to be as resilient as possible. Alongside the rapid decline in emissions necessary to achieve net zero by 2050, such a focus on sustainable development could mitigate the number of climate refugees by up to 80%11, making a significant impact on social equality.
Governments have a crucial role to play in framing policies which incentivise people and companies in the right way. Land use zoning, taxation and subsidies that encourages the use of public transport at the expense of private vehicles can have huge social and economic as well as environmental benefits. Increasing access to employment opportunities is good for workers and companies. Equally, punitive charges for use of older combustion engine vehicles may seem environmentally sound, but can have unintended socio-economic consequences for those who rely on their car or van for work but cannot afford to trade up to a shiny new electric model.
Governments have a crucial role to play in framing policies which incentivise people and companies in the right way.
Sustainability begins at home
Even if not immediately under physical threat, the majority of global housing stock needs immediate attention. Energy inefficient homes cause huge environmental and social damage by using more energy than necessary for heating and cooling. This excess energy consumption, usually due to inadequate insulation, increases living costs which has a disproportionate economic impact on lower-income households.
“Fuel Poverty” occurs when households have above-average fuel bills that push them below the poverty line⁵. It is estimated that around 7% of the population of Europe struggled to keep their homes adequately warm in 2019 due to fuel poverty12. In the US, 25 million homes reported going without food or medicine in order to pay energy bills, while 17 million households had their energy supply put at risk or shut off due to non-payment13. The UK government spends an average of £27 million each winter in cold-weather payments to UK residents who cannot otherwise heat their homes adequately14.
As weather patterns become more severe and less predictable, this problem will be compounded environmentally and financially. Gas-heated, poorly-insulated homes will require more energy to regulate their temperature during more frequent extreme weather events, while energy prices will rise due to the cost of the transition away from fossil fuels towards electrification (currently a more expensive way to heat our homes) and the likelihood that taxes on non-renewable fuels will rise significantly in the years ahead.
This is a scenario we are already seeing play out across Europe. A colder-than-average winter in 2019/20 depleted gas reserves more than usual. Storage filling, which usually occurs over the warmer summer months, was slower than usual in 2021, attributed in part to a more limited supply from Russia and demand from China. The phasing out of coal plants has reduced alternative energy supply, while low windspeeds have reduced the contribution of some renewable sources.
This “perfect storm” of conditions has reduced gas supply while seasonal demand has increased just as businesses look to ramp up production following relaxations in Covid restrictions. The result is soaring gas prices, with an eight-fold increase over just six months during the summer and autumn of 202115. The burden of these increases will fall disproportionately on those least able to afford them16.
Energy inefficient homes cause excess consumption, usually due to inadequate insulation, which increases living costs and has a disproportionate economic impact on lower-income households.
Identifying the opportunity
As we recognise the importance of moving away from fossil fuel-based heating and cooling to reduce our negative impact on the environment, we must also recognise that there are inequalities in our ability to access alternatives. These inequalities include, but are not limited to, earnings and levels of disposal income (which undermine buying power), the proportion of people who do not own their home (who have less ability to directly influence their energy supply), and levels of understanding of alternative energy sources (which reduces the ability to make effective decisions).
Residential landlords, most particularly commercial operators who develop and invest at scale, have a crucial role – and responsibility – to help address this issue. Investment in upgrading of assets has both environmental and social benefits by reducing emissions and lowering fuel bills for renters.
On-site renewable facilities for self-generated energy also provide a great potential for reducing bills and improving living standards for households, as well as reducing load pressure for the wider grid. Solar panels and other new photovoltaic technologies raise the potential for passive domestic energy generation, with applications such as roofing slates and windowpanes. Ground source heat pumps also offer an energy efficient means of heating homes, saving money and carbon. While these can be more easily included in new build developments, retrofitting is also an option. The prices of these systems are high but are falling annually17, meaning they’re fast becoming a useful tool for making homes more sustainable and affordable to live in.
A prime example of a place-based climate justice investment can be found in Portsmouth, UK. In 2018, the City Council undertook the largest EnerPHiT18 standard scheme delivered to date with residents in-situ, improving the physical condition (and value) of the housing stock and creating positive impacts including resident health, well-being, and reduced fuel bills. Such examples are encouraging, but easier to implement for public sector landlords whose stakeholders more readily factor such social value benefits into the cost-benefit analysis for the project.
The challenge for many asset owners is the extent to which existing stock is “fit for energy upgrade” – driving fears that regulations requiring improvements to energy inefficient could lead to the demolition of many existing homes. This would have the doubly negative effects of releasing additional embodied carbon and reducing stocks of affordable housing. Governments need to think and plan carefully to ensure they avoid unintended consequences of well-intentioned environmental policies.
The challenges are real, but significant commercial opportunity exists for the creation of economic, social, and environmental value via strategic investment in thoughtful new development designed with climate in mind, and intelligent and innovative retrofit of existing buildings. Such an approach requires a focus on asset value retention over the long term, during which assets will suffer less risk, have lower maintenance and insurance premiums, and benefit from happier, healthier (and wealthier) residents. Governments have a part to play in creating a regulatory environment which encourages and supports such an approach, but the onus lies on the private sector to do what it does best: identify the commercial opportunity and then find ways to capitalize on it as efficiently and effectively as possible.
A question of mindset?
The major challenge we face is that current solutions to the climate crisis are often expensive and unpopular – with individuals and businesses. Innovation and creativity are required to develop solutions that are effective, affordable and implementable without requiring actions that will go beyond what people and businesses are prepared to accept. Attitudes are changing; money is increasingly being allocated to impact investment funds that target specific environmental or social benefits. In some areas this can already be shown to make good commercial sense19. In others, there is a greater element of belief that investment in making communities and cities sustainable will pay dividends in the end.
The recent pandemic – and even the Financial Crisis a decade or so ago – gives us some indication of what will be needed to address the challenges of climate change. It also suggests what may be possible. When faced with an obvious and significant crisis the global community of governments, companies and individuals is capable of coming together to act in unison. When COVID-19 struck governments clubbed together to fund vaccine research, entire aspects of society closed down, unimaginable amounts of debt were taken on to fund job protection schemes, companies and individuals changed the way they worked (and shopped, and travelled) at the drop of a hat. As a result, vaccines were developed and rolled out in record time, saving of millions of lives, and enabling a rebound in the global economy.
The global response to the COVID-19 pandemic shows what can be achieved when society aligns behind a common goal. If recognition that a genuine crisis exists is the key to unlocking such collaboration, one can only hope that a major catastrophe will not be needed to trigger the action required. In the meantime, forward thinking investors and developers are already seeing how the landscape is changing, offering opportunities to deliver environmental and social benefits in ways that still provide a commercially attractive return.
1https://www.worldbank.org/en/topic/social-dimensions-of-climate-change#1 2https://www.who.int/heli/risks/climate/climatechange/en/ 3https://www.who.int/news-room/fact-sheets/detail/climate-change-and-health 4https://www.unhcr.org/uk/climate-change-and-disasters.html 5Islam, S. N. & Winkel, J., 2017. Climate Change and Social Inequality. UN Department of Economic & Social Affairs, 152. Available at: https://www.un.org/esa/desa/papers/2017/wp152_2017.pdf 6https://www.un.org/esa/desa/papers/2017/wp152_2017.pdf 7https://www.worldbank.org/en/news/press-release/2021/09/13/climate-change-could-force-216-million-people-to-migrate-within-their-own-countries-by-2050 8https://www.nytimes.com/interactive/2020/09/15/magazine/climate-crisis-migration-america.html 9https://www.washingtonpost.com/climate-environment/2021/09/02/ida-climate-change/ 10https://www.bbc.co.uk/news/world-us-canada-58565627 11https://www.worldbank.org/en/news/press-release/2021/09/13/climate-change-could-force-216-million-people-to-migrate-within-their-own-countries-by-2050 12https://www.odyssee-mure.eu/publications/policy-brief/fuel-poverty-energy-efficiency-buildings.html 13Bednar, D. J., Reames, T. G., 2020. Recognition of and response to energy poverty in the United States. Nat Energy (5). Available at: https://doi.org/10.1038/s41560-020-0582-0 14https://www.gov.uk/government/statistics/cold-weather-payment-estimates-2020-to-2021/background-and-methodology-cold-weather-payment-estimates 15https://www.ft.com/content/c94cee7d-4ffe-4946-a83b-b4f85026b74f 16https://www.euronews.com/2021/10/01/fuel-poverty-to-rise-dramatically-in-uk-as-natural-gas-prices-soar-charities-warn 17https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2021/Jun/IRENA_Power_Generation_Costs_2020.pdf 18EnerPHit is the established Standard for refurbishment of existing buildings using the Passive House basic principles and components, but recognising that existing buildings are often impossible to retrofit to the same performance standards as a new building. 19See Dollars and sense