May 21, 2009

$150B/yr Investment in Building Efficiency gives 2X long-term return of stocks

Jim Harris

A $150 billion a year can be invested in energy efficiency retrofits of buildings in six major markets with returns substantially better than the stock market and real estate investing.

In 2008 buildings account for 40% of the world’s energy use — resulting carbon emissions substantially greater than those from the transportation sector.

Aggressive reductions in energy use in buildings in order to reduce the planet’s energy-related carbon footprint by 77% (or 48 Gigatons) by 2050 to stabilize CO2 levels as called for by the Intergovernmental Panel on Climate Change (IPCC).

At $US60 per barrel oil, $150 billion a year can be invested building energy efficiency in the six markets which will reduce energy use and carbon footprints by 40% with five year discounted paybacks. That’s a 20% internal rate of return (IRR) – better than the long-term historical stock market returns (10% IRR) and better than real estate investment (16% IRR).

A further US$ 150 billion a year can be invested with paybacks between five and 10 years (10% to 20% IRR) will further reduce energy use and carbon emissions by 12% and bring the total reduction to slightly more than half.

Energy Efficiency in Buildings: Transforming the Market released May 2009 developed by World Business Council for Sustainable Development (WBCSD) and published by Continental Automated Buildings Association (CABA) focused on six markets that produce more than half of the world’s GDP and generate almost two-thirds of global primary energy: Brazil, China, Europe, India, Japan and the US.

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