Financing Building Decarbonization: The Roles of Government and Private Sector Investors

White Paper, 2024

In a white paper issued by the Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government and Belfer Center for Science and International Affairs, Managing Principal Judy Chang and coauthors Marco Fornara and Rushabh Sanghvi analyze the challenges of decarbonizing the building sector as a step toward reaching net-zero emissions by 2050. Because buildings are responsible for approximately 30% of greenhouse gas (GHG) emissions in the US, the authors contend, decarbonizing buildings has the potential to make significant carbon emission reductions nationwide.

To do so, the authors find, will require extensive retrofitting of existing buildings, and they detail the reasons why there is a funding gap for such projects, including the need for customized solutions and a lack of opportunities for economies of scale, especially for residential buildings. In response to these challenges, Ms. Chang and her coauthors propose a framework for prioritizing retrofit projects that sets out to maximize investors’ returns on investment and creates a pathway for further investment in similar projects. Finally, they explore the role that green banks – public or quasi-public entities established to facilitate investment into low-carbon infrastructure – could play in incentivizing building decarbonization projects, in addition to government policies and regulations.

Read the paper

Authors

  Chang J, Fornara M, Sanghvi R