Fighting Climate Change the Intelligent Way

By Saravana Sivasankaran

The issue of climate change has been a tough nut to crack. A major reason behind why it’s so hard to have countries agree on a common solution to bring down greenhouse gas emissions is the insistence of the developed economies (read the United States of America) to have developing countries such as India and China adhere to stricter norms on greenhouse gas emissions.

India and China’s counter argument is that developed economies have enjoyed a long period of industrialization which resulted in the current heightened risk of climate change; to ask developing countries, which are only now enjoying the benefits of rapid economic growth, to bear the extra costs of stricter environmental norms is unfair and hence unacceptable.

The media feverishly followed the climate change conferences including the recent ones in Durban and Doha, as it painted a vivid picture of the consequences of a successful agreement. China eventually shutting down coal power plants and bringing SoEs in line to reduce pollution. India’s much talked about power deficit worsening as a result of a compromise reached. Clearly, a divergent set of polarising opinions rose in this environoment.

But from all this noise, an industry was still growing rapidly without much attention to its contribution to the problem. Mumbai’s chaotic raid real estate development and Shanghai’s skyscrapers seem like unlikely culprits to the problem we have on hand.

But as we saw in class, the large quantum energy consumed today by buildings has largely gone long unnoticed. It was also established in class that focusing on making existing buildings energy efficient in the US would have a much larger impact than new building constructions. However, the same does not hold true for India and China which are still far from the level of economic development that the US has reached. Subsequently focusing on establishing stricter norms on new building construction in India and China could have a much larger impact on climate change than politicians take into account.

These changes can be easier to implement than we think. Suppose the Indian government had a choice between subsidizing massive wind farms to replace coal power plants versus passing new regulations for new buildings. The wind farms subsidy would essentially act like a payout and ensure power supply keeps up with demand. There is no incentive for power users to change their behavior (there will be a higher tax eventually to finance the subsidies but this is in the long term). On the other hand, the model green energy efficient building makes economic sense even without subsidies. The problem however is how to share the costs/benefits between landlord and tenant (as we saw in class). A blanket regulation requiring all buildings to upgrade to green status within a period of time would ensure that a uniform rental premium pops up in green building lease agreements ensuring no building owner is discriminated. This second option forces tax payers to recognize the importance of energy conservation and sets them on the path to reducing energy usage in other ways also.

A lot of time and money has gone into finding the holy grail of energy: finding a replacement to fossil fuels. This is definitely the long term solution in order for us to win to fight against climate change. However, we will be shooting ourselves in the foot, if we ignore the low hanging fruits that can help us reduce energy consumption in the short term. The real estate industry, long seen as a symbol of rapid economic progress, will play a central role in capturing these opportunities.

One thought on “Fighting Climate Change the Intelligent Way

  1. By John Macomber

    It would certainly seem that a unit of political effort to mandate more efficiency in buildings would be a more cost effective lever than deeply subsidizing construction of renewable energy sources. To extend that logic, a mandate around density and verticality that made mass transit actually feasible in sprawling Indian cities would reduce energy use further, generate added property value, and have almost no direct cost to implement. And therein lies the conundrum, the challenge, and the opportunity: These are not engineering or science problems. The “yessable proposition” in the above is almost entirely a matter of negotiation, of matching investment with benefit, and of making sure the parties do what they agreed to do. And so this is in our purview – business and design and law and planning people – to try to figure out. While attempting to mitigate the combined drag of political interests and crooks (assuming for this post that those are non-intersecting sets).

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