Achieving climate goals in the United States will require deep and rapid reductions across the building sector to keep limits on temperature increases within reach of 1.5°C in line with the Paris Agreement. Among U.S. commercial buildings, the focus of this report, there are notable signs of progress, and yet further action is needed to decarbonize over the next ten years to align with climate
There are several reasons for hope. Commercial building efficiency has gone up and emissions intensity has gone down over the past 16 years. Unprecedented funding is currently available for building energy efficiency retrofits, made available through government programs such as the Inflation Reduction Act.
Challenges that need attention include the uneven distribution of decarbonization progress across the country, with decarbonization targets, building performance, and grid conditions lagging in less urbanized states. Decarbonization efforts also follow patterns of income inequality and racial discrimination, threatening to leave marginalized communities behind.
The lack of comprehensive building benchmarking data also hinders decarbonization progress, preventing all levels of government from formulating effective building performance standards and other policies.
The signs of progress are encouraging and show that the sector’s efforts are working to decarbonize commercial buildings in some areas of the country. However, more comprehensive action that addresses all corners of the United States will be required if the commercial real estate sector is to achieve its share of U.S. decarbonization goals.
State of Decarbonization: Progress in U.S. Commercial Buildings 2023, first released at COP28 in December 2023, is the first report to bring together, in one place, a discussion of the U.S. commercial real estate sector’s progress, the current status of data availability, and an exploration of the mechanisms and levers available to reduce the carbon emissions of commercial buildings in the United States. With full citations, sources, and methodology provided, these analyses focus on energy and operational emissions where data are more robust and actions more mature. This report complements critical new resources for building decarbonization, including the RMI-USGBC report Driving Action on Embodied Carbon in Buildings released earlier this year, to help policymakers, advocates, and companies understand the landscape and develop strategies to achieve the urgent scale of action needed.
1. Absolute operational emissions from U.S. commercial buildings have stabilized. Despite tremendous growth in the volume of square footage developed, absolute emissions from the commercial real estate sector have stabilized within the past 16 years. Commercial buildings in the U.S. have become 37% less carbon-intensive and 26% more energy-efficient since 1990 on a per-square-foot basis. This is one of the greatest success stories in the built environment in the past 30 years and speaks in large part to the green building movement’s leadership in advancing operational building efficiency, advocacy for more stringent energy codes, as well as the broader growth in renewable energy at the building and utility-scale.
Between 1990 and the mid-2000s, total emissions from the commercial building sector rose in concert with rising square footage. Total emissions peaked in 2007 when efficiency improvements began to significantly offset growth from new construction. Total emissions now are back at 1990 levels, even though commercial building square footage has increased by 55% over that period. This drawdown in emissions intensity has flattened the curve of absolute emissions growth, but to sustain this downward trend further action is needed for both new construction and existing buildings.
2. Decarbonization progress varies substantially across the United States, with more urbanized metro areas and states in the vanguard of systemic change.
The geographical variation in decarbonization efforts is characterized by several factors. First, differences in the regional energy grid mix mean there are variations in the carbon intensity of electricity and thus the emissions impact of electricity use from state to state. Second, there are disparities in requirements mandated by government agencies, with some states implementing stringent building energy codes and existing building standards in line with their climate action commitments, and others using standards over 10 years old, and leaving existing building retrofits to the market or local government to address. Third, the measurement of progress varies, depending on what data is collected or not collected, making geographic comparisons challenging.
States with larger urban cores are leading the way on decarbonization actions across the board: emissions targets, emissions intensity performance, building energy performance for new buildings (code), existing buildings (performance standards), and data collection. Across all U.S. states, California consistently emerges as the most advanced on the decarbonization curve across all these factors.
3. Commercial building decarbonization progress expands as corporations are increasingly making climate commitments and reporting on emissions and progress.
Several factors are driving increased engagement by corporations in climate commitment and action to reduce emissions. First, investors continue to have high interest in climate financial risk. Secondly, emission reporting regulations are going into effect in Europe, affecting an estimated 3,000 U.S. companies.1
Based on our analysis of the top publicly traded real estate investment trusts (REITs) focused on commercial buildings, there is a trend towards broader commitment and disclosure.
4. Commercial buildings located in historically vulnerable communities see less investment and face higher barriers to decarbonization.
Building decarbonization efforts are not evenly distributed across communities, following other patterns of income inequality and historical discrimination in the United States. Buildings throughout low-income communities are under-resourced, making investments in decarbonization retrofits less accessible or inaccessible through market forces alone. While much is written about this pattern with respect to affordable housing, the same occurs in commercial buildings, affecting businesses, economic opportunity, and climate resilience in these communities.
Though there is insufficient existing data to fully assess the conditions of commercial buildings in low-income communities and communities of color, it is crucial to recognize that this sector faces analogous challenges to residential buildings in the same communities, including disinvestment and often discriminatory policies.
The Joint Center for Housing Studies (JCHS) underscores that low-income households are more likely to inhabit sub-par housing due to factors such as backlogs of deferred maintenance and limited access to capital.2
Low-income communities and communities of color also bear more significant energy burdens compared to higher-income and white-majority communities, according to the American Council for an Energy Efficient Economy (ACEEE).3
Many U.S. regions and urban centers are contending with post-pandemic economies, which include unprecedented vacancy rates, reflecting a trend in workers remaining remote, as well as prolonged underemployment in regions such as the Rust Belt. While building vacancies have risen markedly, owners face escalating maintenance costs and plummeting property values. This represents a detrimental feedback loop creating challenges for reinvestment in not only vacant and deteriorating buildings but potentially
surrounding properties as well.4
5. The Inflation Reduction Act is a generational investment in climate change with a substantial focus on decarbonizing buildings over the next 12 years.
The Inflation Reduction Act (IRA) of 2022 is an unprecedented investment in decarbonization. The resources provided by the IRA are projected to reduce U.S. greenhouse gas (GHG) emissions by 20% below a non-IRA scenario by 2035. Furthermore, if the IRA programs realize a high level of participation, the law could enable the building sector to meet its proportional share of the U.S. Paris target early, by 2029.
However, these historic investments in clean energy and climate action initiated by the IRA alone are not enough to achieve the U.S. commitment under the Paris Agreement of a 52% reduction in GHG emissions below 2005 levels by 2030. Based on EPA projections, the U.S. would have to reduce emissions by an additional 17% beyond the IRA’s impact to achieve the U.S. commitment under the Paris Agreement.
6. There is an opportunity for the IRA incentives to dramatically expand the rate of renovation and retrofit of commercial buildings, a crucial lever for decarbonization.
In 2022, the IPCC called for developed countries to double the rate of building retrofit, pointing to low renovation rates and low ambition when existing buildings are renovated as a driver of emissions.5
Deep energy retrofits in commercial buildings can draw down energy use intensity by 30% or more. 6 Over the past eight years, the market for commercial renovations and retrofits in the U.S. grew by 39%. Despite its potential as a force for decarbonization, historically only around 17% of total renovation spending has gone to energy efficiency-related retrofits. By incentivizing retrofits that target energy performance in the least efficient buildings, the IRA has the potential to increase spending on commercial building energy efficiency retrofits by up to 11% annually by 2027.
7. The absence of comprehensive benchmarking policies for commercial buildings in the United States is impeding decarbonization progress at scale.
Benchmarking policies serve as an important foundation for building performance standards, which empower governments to transform decarbonization priorities into enforceable policies. Despite this, current benchmarking policies apply to only <1% of commercial buildings nationwide. California buildings account for 39% of the total number of buildings benchmarked in the United States. In areas without benchmarking policies, data and the context for understanding building performance are lacking, which deter both private sector action as well as jurisdictions’ policy development.
8. The expansion and enforcement of rigorous energy codes across all states must be prioritized to meet current climate targets.
Advanced energy codes have proven to be one of the most impactful methods for optimizing commercial building performance. Accounting for current code progress and projections of new construction, buildings constructed in 2023 are expected to be 15% more energy-efficient than those built in 2017. More jurisdictions are adopting newer and more stringent codes. The percentage of new construction projects built to be less than or equal to the efficiency of standard ASHRAE 90.1-2010 (four update cycles ago) decreased by 78% from 2017 to 2023. However, more than half of all states are using energy codes from 2013 or earlier, and almost half of new
commercial area built in the next four years will be no more energy efficient than 2013 standards.
9. Embodied carbon emissions are significant and actionable through green building strategies.
Up front emissions can include emissions embodied in the materials and products used in buildings as well as emissions related to energy use at the construction site. A building’s embodied carbon emissions include the greenhouse gas emissions arising from the manufacturing, transportation, installation, maintenance, and disposal of building materials. The total of up-front emissions from all buildings is estimated at up to 370 million tons of CO2 e annually, or 6% of total U.S. GHG emissions per year; total emissions here are inclusive of both embodied carbon in materials and energy use at the construction site.7 Although data regarding upfront GHG emissions from building construction in the U.S. have historically not been quantified or collected systematically, and therefore cannot be isolated in the data presented in this report, we know enough to say that the impact is significant and addressable through strategies such as those outlined in the RMI-USGBC report Driving Action on Embodied Carbon in Buildings.
In conjunction, these headlines indicate that the U.S. commercial real estate sector is improving rapidly, but progress is uneven and varies widely due to vast differences in state and local government regulations.
As a result, the rate and scope of change will be neither fast nor broad enough to fulfill Paris Agreement commitments or 1.5 degree-aligned emissions budgets.
The State of Decarbonization report highlights where the sector is making progress and areas that continue to pose a challenge to decarbonization targets. Explore the full report to delve deeper into the key findings summarized in the Executive Summary as well as other statistical insights.