December 11, 2015

COP21 & The Price of Efficient Buildings

Typical contracting methods favor the lowest bidder. If the building sector continues to operate this way, we cannot expect the built environment—currently responsible for 1/3 of global greenhouse gas emissions—to make gains in efficiency. Why? Energy efficiency adds upfront costs during construction, even though it’s highly profitable in the long term. Those who choose to build efficiently position themselves as contributors to a better world, both environmentally and economically.

The prevalence of building contracting methods that focus on the lowest bid can be explained by the old adage about “not throwing money out of the window”. Building owners simply prefer lower upfront costs. However, it’s well known that this model brings significant disadvantages: a combination of risky practices, poor work, “surprise” costs, and lack of long-term vision and incentive to make buildings more efficient.

If our vision of the built environment is instead based on sustainability, the rule of lowest bidder no longer applies. Energy efficiency pays, both environmentally and economically. “Construction costs should never be the number one criterion!” says Andre Rochette, Ecosystem’s president.

For over 20 years, Ecosystem has improved energy efficiency in buildings. “There is the potential for 30 to 50% improvements in every building we see,” Andre explains. And greater efficiency also means that infrastructures are better for the environment and less expensive to operate. “When buildings are designed well, they are very comfortable and consume far less energy.” During construction, it’s not the cheapest option, “but efficiently designed buildings are ultimately more profitable for building owners—why not do it?” questions Andre.

The Lowest Price Costs the Most

“Not throwing money out of the window”—this expression rationalizes the norm of choosing the lowest bidder, but if we pay less for windows with low performance, the extra money we spend on heating and cooling is literally thrown out the window. And what is the cost, for communities and the planet, of the greenhouse gas emissions associated with overconsumption? Even if this example seems simplistic, it is representative of the problem. The lowest cost is the one that will cost the most in the long term on a global scale.

There are numerous strategies to improve energy efficiency, including geothermal, heat recovery, equipment upgrades, etc. But what really makes the difference is the contractual model: tying the compensation of contractors to the performance of the projects they implement. This compels contractors to innovate and dig deeper for solutions. Performance targets are the same for both parties, who collaborate to generate the greatest possible mutual benefit, which in turn provides environmental benefits for society. At Ecosystem, energy efficiency projects have always worked this way, and the results speak for themselves: $196M in cumulative savings and 362,000 metric tons of avoided greenhouse gas emissions, combining profitability with environmental responsibility. And in the long term, these projects also increase the value of buildings.

Andre Rochette, Ecosystem’s President

Stimulating Change

The price paid to construct a building is one thing, “but we also need to recognize efforts to reduce the environmental impact of buildings” says Andre Rochette. Recognition includes being proud of environmental contributions, but financial encouragement is also key to inciting change. “If the environment is important, we need regulations to protect it.” Strong legislation and financial consequences are necessary to dissuade overconsumption. The carbon markets in Quebec and California are good examples.

“It’s great that the environmental impact of buildings is being discussed at the COP21, but until there is legislative and economic accountability, it’s still just talk” says Andre Rochette, suggesting that it’s time for action.

Sustainable Planet, Sustainable Economy

The built environment is an important area to be addressed to limit the effects of global warming. “It’s only part of the equation for addressing climate change, but it also happens to be extremely profitable,” says Ecosystem’s president. “Our projects create jobs, healthier indoor environments, modern infrastructures, and they help save the planet… everything at the same time! It’s true for our sector, and it’s also true for other sectors. We are able to achieve environmental goals and economic development.”

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