In cities around the world, buildings generate more carbon emissions than anything else. In Vancouver, 55 per cent of all carbon pollution vents from buildings; in places that are significantly colder in the winter and hotter in the summer, like New York, building emissions can reach 70 per cent.
Older buildings are the worst culprits – they’re like clunker cars with multicylinder engines that consume a lot of gasoline. And just as vehicles with high fuel consumption are now a hard sell, buyers are also avoiding gas-guzzler buildings.
In a worldwide CBRE survey, released in February, almost half the investors said they would “seek a discount or walk away from a deal altogether” when considering a building that has high energy consumption and carbon emissions.
Increasingly, the key deterrent is government-imposed penalties for buildings that pollute too much. Laws that limit carbon emissions from buildings are more prevalent in Europe and the U.K. but they’re catching on in North America.
In the wake of B.C.’s record-setting flood, forest fires and heat dome of 2021, the City of Vancouver became the first Canadian jurisdiction to enforce limits on building emissions, with hefty fines for owners whose buildings surpass them.
The city’s 2022 Annual Greenhouse Gas and Energy Limits bylaw, which emulates similar laws set in five U.S. cities, including San Francisco and New York, zeros in on large commercial offices and retail buildings. Fines go into effect starting in 2026.
The goal of the bylaw is to reduce big building emissions by 50 per cent by 2030 and by 100 per cent by 2050, says Micah Lang, senior green building planner at the City of Vancouver.
Vancouver has just over 200 large buildings of 100,000 square feet or more that will be affected by the bylaw, Mr. Lang says.
The fee for the fine is on par with New York’s – where one of its oldest commercial and residential real estate developers, Durst Organization, expects to incur a US$2.4-million annual fine for one of its midtown skyscrapers.
But Mr. Lang predicts “no one [in Vancouver] will have to pay the fine. Only the worst performing 25 percentile – or 50 buildings – will be over the 2026 limit, and only by less than 10 per cent.”
Most of these owners “can take low-cost building tune-up actions, which can have quick, positive returns on investment,” in order to comply with the bylaw.
“The city is not interested in collecting money from these buildings,” Mr. Lang explains. “We’re interested in helping building owners take action to reduce emissions.”
That’s because anything the city can do now “to catalyze action” will prepare owners for the bylaw’s far more severe second phase, he adds.
The building industry has been driving all this time without a speedometer.— Alex Lau, vice-president of Golden Properties Ltd.
Starting in 2040, the greenhouse gas emission limit will be lowered to zero and a further stringent heat energy limit also comes into effect.
Essentially banning the use of fossil gas in building operations, this phase will require upgrades to 95 per cent of large buildings if fines are to be avoided.
Mr. Lang says building owners should plan for investments of $500,000 to $3-million to install electric systems – such as electric hot water tanks and heat pumps for both heating and cooling – or more than $10-million to make energy-conserving insulation improvements to the building envelope.
Ready or not
Companies with large real estate holdings aren’t likely to own any of Vancouver’s 50 non-compliant buildings, according to an extensive bylaw report, involving 400 stakeholders.
Yet even a green giant like Cadillac Fairview, which has reaped global awards for reducing emissions across its $35-billion portfolio by 56 per cent since 2007, will just have completed a major retrofit project by the deadline, says Lillian Tummonds, Cadillac Fairview’s vice-president of office operations.
“I think we should be good. But we’re still putting projects in place. We’re planning to install heat recovery chillers in our Waterfront Properties,” she says, referring to a system that captures and reuses the enormous amount of heat waste generated by a building’s machines.
A member of the board of the Building Owners and Managers Association of BC (BOMA), Ms. Tummonds says awareness of bylaw has been “amplified, so I should hope everyone is ready for it. But there’s a full spectrum of landlords. Some will need a lot of help.”
Provincial and federal governments and utility companies offer a range of incentives and funding programs, which Cadillac Fairview has taken advantage of, Ms. Tummonds says.
For Golden Properties, some of those incentives and a five- to seven-year payback period were enough to convince the small, family-run company to decarbonize its 1968 downtown office tower.
A multistage plan centred on electrification, along with passive conservation measures to the building’s envelope, has reduced the 27-storey building’s carbon footprint by 80 per cent and slashed operating costs.
Yet the project continues. “My goal is to reach zero carbon,” says Alex Lau, vice-president of Golden Properties Ltd.
Mr. Lau thinks it’s about time the city regulated building emissions.
“The building industry has been driving all this time without a speedometer,” he says.
“Energy and carbon aren’t in the core wheelhouse of a lot of building managers. It’s not their language. They speak rent and square footage. And a lot of times, even if it makes economic sense, it’s not part of their job,” Mr. Lau says.
“This bylaw makes it their job to figure out how to use less energy.”
The good news is that, by 2040, when emissions limits fall to zero, the 20- to 25-year lifespans of gas-burning HVAC systems in Vancouver’s buildings will have expired, says Scott Sinclair, chief executive officer of energy-efficiency engineering firm SES Consulting, which helped develop the bylaw.
As a result, most buildings will install energy-saving electric systems well in advance of 2040 as part of their capital plans, he predicts.
“These investments are going to make these buildings more valuable,” Mr. Sinclair says. “And by comparison, the buildings that don’t make them are going to be less attractive. Especially with these new regulations, investors will think, ‘Oh, you haven’t done these upgrades yet, so this building is going to have to start paying penalties in 2040. Why would I take on that liability?’ "