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Policy Brief 09-8

Energy Efficiency in Buildings: A Global Economic Perspective

by Trevor Houser, Peterson Institute for International Economics

April 2009


Trevor HouserAt the 2008 summit in Hokkaido, Japan, G-8 leaders called for a 50 percent reduction in greenhouse gas (GHG) emissions by 2050 in order to avert the most serious dangers from climate change. An essential component of meeting this goal will be improving the energy efficiency of buildings, which has been heralded by some studies as the most cost-effective way of reducing GHG emissions. Until now, however, few studies have attempted to assess the cost of completely overhauling the building sector in order to meet this emission-reduction goal.

Using a newly developed model from the World Business Council for Sustainable Development (WBCSD) [pdf], Trevor Houser studies the economics of improving building-sector energy efficiency. While improving the energy efficiency of the building sector would be more expensive than some studies have suggested, Houser finds that the GHG abatement costs of improved building efficiency are cheaper than the abatement costs in other sectors. However, significant barriers to investments in energy efficiency will make it difficult to take advantage of these lower abatement costs, even if a relatively high price for carbon is established. New financing approaches, improved building standards, government investment, and enhanced awareness of the energy cost savings from increased efficiency are all needed to reduce emissions from the building sector and thus to assist in meeting the 50 percent reduction target.

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