Design of smart new buildings that use less energy and a cost-effective overhaul of the current building stock could feasibly reduce projected energy use in the buildings sector by 50% by 2020. Global emissions reductions from buildings would be on the order of 5 billion tons of CO₂e, or 10% of 2009 annual emissions, under this scenario.

The rapid scale up of these sensible practices will require new business models that incorporate attractive financing and policy action at the city level to create the right incentives in the marketplace. There have been a number of pioneering efforts in both industry and government that have yet to scale. These design examples have demonstrated that new buildings can be built to use up to 50% less energy than comparable existing buildings for a 1% to 3% increase in construction costs; the investment is paid back in less than three years through energy savings.

New business models are needed that address the fundamental market barriers: high upfront costs for consumers, inconvenience of retrofits, lack of consumer information, and the principal-agent problem. The biggest challenge – highlighted in recent publications by McKinsey & Co., the Center for American Progress, and the IPCC – is attractive financing and incentives for energy efficiency, as substantial market failures persist. Standard financial products that offer low-interest attractive financing are needed in place of today’s recourse financing options.

Market-based Approaches
Carbon War Room’s objective is to accelerate the market for energy efficient buildings by (1) partnering with institutions to provide successful financing at the city-level for energy efficiency measures and (2) facilitating opportunities for businesses with new building technologies. Once tested, these market-based solutions will require policy support to scale rapidly.

There are three targets to reach an inflection point in the industry by 2013: