Decarbonizing real estate portfolios considering optimal retrofit investment and policy conditions to 2050

Summary

Retrofitting existing buildings is crucial for achieving Net Zero emissions. Institutional real estate owners play a key role because of their significant ownership, especially of large buildings. We utilize an interdisciplinary approach to evaluate cost-optimal decarbonization conditions for three Swiss real estate portfolios owned by a global institutional investor. We leverage a bottom-up optimization framework for building asset retrofitting, scaled to the portfolio-level, to study the effect of policy scenarios and implementations. Results indicate that achieving Net Zero necessitates significant investments, largely through thermal energy efficiency measures and low-CO ₂ energy systems, as early as possible to avoid locked-in emissions. Owners will be challenged to smooth long-term capital investments, pointing to a potential liquidity crisis. Consequently, hard-to-decarbonize assets are unable to reach regulatory benchmarks largely because of lingering embodied emissions. To lower transition risk, we recommend that policymakers move toward average CO ₂ benchmarks at the real estate portfolio-level, emulating automotive fleets.

Graphical abstract

Highlights

• •

  Interdisciplinary approach to evaluate cost-optimal real estate decarbonization

• •

  Bottom-up existing building retrofitting models scaled to the portfolio level

• •

  Achieving whole life Net Zero requires significant capital to avoid carbon lock-in

• •

  Policymakers play a role in innovating policy implementation to lower transition risk

Abstract

Energy resources; Energy policy; Energy Modeling; Energy flexibility