This chapter analyses horizontal co-ordination among governmental ministries and vertical alignment across different levels of governance, alongside public-private partnerships for effective policy implementation. These co-ordination mechanisms and partnerships are crucial for overcoming challenges and accelerating progress towards decarbonising buildings.
Global Monitoring of Policies for Decarbonising Buildings
A Multi-level Approach
OECD Urban Studies
Abstract
Decarbonising buildings requires co-ordinated action across various levels and sectors. This chapter delves into the importance of three collaborative approaches: i) horizonal co-ordination, ii) vertical co-ordination, and iii) public-private partnerships. By working together effectively, these actors can unlock their full potential to develop and implement successful building decarbonisation strategies. This chapter will explore these collaborative approaches, drawing on data from the OECD Global Survey on Buildings and Climate (2024). The survey findings showcase promising examples of collaboration across different government levels and public-private partnerships, along with areas where further support is needed.
Considering the large number of entities involved in the decarbonisation agenda, horizontal co-ordination across ministries and agencies within the government structure is crucial in delineating a cohesive long-term vision and mobilising resources to assist subnational governments. According to the OECD Global Survey on Buildings and Climate (2024), 93% of responding countries have at least three ministries involved in decarbonising buildings. Through collaborative efforts, these diverse policy domains can create synergies and overcome potential discrepancies, ultimately leading to a more sustainable built environment (Figure 4.1, Table 4.1). Over half (57%) of responding countries have strategies in place aimed at addressing energy poverty and inequalities through the decarbonisation of buildings. According to the OECD (OECD, 2022[1]), national governments can play a vital role in promoting a whole-of-government and multi-level governance approach in decarbonising buildings. This approach is particularly important in addressing the issue of energy poverty in disadvantaged communities, where access to energy efficient buildings and resources is often limited.
Note: This figure shows the distribution of countries based on the number of ministries or agencies involved in decarbonising buildings. The national governments provided the data for this research by being asked for specific information on the functions of the several ministries and agencies in charge of the building decarbonisation plans and duties.
Source: OECD Global Survey on Buildings and Climate (2024)
* Countries where subnational governments are leading governmental bodies responsible for policies related to decarbonising buildings, alongside ministries or agencies at the national level.
Source: OECD Global Survey on Buildings and Climate (2024)
The National Observatory on Energy Poverty in Italy stands as a prime example of horizontal co-ordination. This institute engages various agencies such as the Ministry of Environment and Energy Security, the Ministry of Labour and Social Policies, the Ministry of Infrastructure and Transport, local governments and the regulatory authority for energy, networks, and the environment. Its functions include monitoring energy poverty at a national level, facilitating the exchange of experiences among regions, local administrations, research institutions and stakeholders, co-ordinating cohesive strategies to alleviate energy poverty nationwide, and implementing initiatives such as tax relief aimed at incentivising energy-efficient measures for buildings (ONPE, 2021[2]).
Colombia’s National Roadmap for Net Zero Carbon Buildings is a horizontal and multi-level initiative aimed at achieving net-zero carbon in the building sector by 2050. The roadmap was developed under the leadership of the Sustainable Construction Council and the Ministry of Environment of Colombia in 2022. Key participants include the Ministry of Housing of Colombia, the National Planning Department, the Ministry of Energy of Colombia, the Colombian Chamber of Construction (Camacol) and the Planning Departments of Bogotá and Cali, showcasing strong public-private sector involvement.
The roadmap employs a structured strategy of first-level and second-level actions to achieve these goals. First-level actions provide broad transformative strategies focusing on areas such as energy efficiency, urban resilience, life cycle analysis and the promotion of sustainable materials. These are supported by second-level actions, which offer detailed interventions, including 163 specific actions for implementation. These include the creation of energy efficiency codes, the mandatory introduction of building labelling systems and the use of GIS tools to assess climate risks, ensuring more informed decision-making in urban planning and building design (Government of Colombia, 2022[3]).
82% of responding countries are supporting local governments in decarbonising buildings. Key measures include distributing toolkits and guidelines (64%), co-ordinating regional networks for knowledge exchange and support (54%), developing online platforms to share best practices (50%) and providing funding for training (50%) (Figure 4.2).
Note: Question from the survey: “How do higher levels of government support capacity building and technical assistance for local governments to implement building energy efficiency policies?” The responding countries could select all applicable options.
Source: OECD Global Survey on Buildings and Climate (2024)
However, 74% of responding cities report that they do not receive enough support from national governments. According to the OECD Survey on Decarbonising Buildings in Cities and Regions (2022), cities and regions are calling for additional support from national governments to scale up pilot projects and raise public awareness (OECD, 2022[1]). Effective policy implementation requires co-ordinated actions at both national and subnational levels to achieve the desired outcomes and leverage synergies through a whole-of-government and multi-level governance approach.
Cities can be powerful drivers to decarbonise buildings. According to the 2024 OECD Global Survey on Buildings and Climate, 54% of countries reported cities implementing more ambitious policies than national governments. This advantage stems from their ability to pilot innovative solutions at a smaller scale. The OECD report, Decarbonising Buildings in Cities and Regions echoes this trend as 88% of the responding cities and regions surveyed demand higher energy efficiency standards than the national level in building energy code (OECD, 2022[1]). Additionally, the OECD report, Decarbonising Homes in Cities in the Netherlands: A Neighbourhood Approach, exemplifies how Dutch cities prioritise testing technically and economically viable solutions in neighbourhoods before wider implementation, informing national policy (OECD, 2023[4]).
In the Netherlands, the Dutch Natural Gas Free Neighbourhood Programme (PAW) (2018-2022) serves as a successful case study. The PAW programme bridges the gap between national ministries and local municipalities, facilitating collaboration and resource sharing across all levels of government. It employs staff seconded from both national and local authorities to ensure swift responses to local needs (OECD, 2023[4]). This multi-level governance approach allowed municipalities to tailor solutions to their specific needs while ensuring implementation of economically and technically viable measures (PAW, n.d.[5]). For instance, the municipality of Rotterdam, due to its proximity to the port, opted for district heating solutions, which were a logical fit given the local infrastructure. In contrast, the municipality of Leusden, lacking local access to district heating, focused on improving building insulation combined with heat pump installations as their primary approach to reducing natural gas dependency. Additionally, PAW provided crucial financial support (EUR 4-5 million per neighbourhood) and leveraged economies of scale within neighbourhoods for collective heat solutions. Furthermore, the programme fostered social influence and community engagement through initiatives like neighbourhood ambassadors and counsellors (OECD, 2023[4]).
Germany’s Heat Planning Act represents a crucial step towards co-ordinated national and subnational actions to accelerate the shift towards renewable heating sources. The Act, implemented in 2024, requires municipalities to develop climate-friendly heat plans. Subnational governments assess the status quo of heating as well as the local potential for climate neutral energy sources and identify which solution is most cost-efficient to decarbonise heating in a given area. Municipalities have autonomy in developing a strategy to implement the heat plans, for instance by supporting sustainable heat infrastructure (Federal Ministry for Economic Affairs and Climate Action, 2024[6]). Cities must submit plans by June 2026, while towns and municipalities with fewer than 100 000 inhabitants have until June 2028. Municipalities with under 10 000 residents may use a simplified procedure. Operators of energy infrastructure play a crucial role in supporting local governments. This is especially the case for operators of district heating networks that are required to devise plans to develop and decarbonise their heat networks using various climate neutral energy sources, such as industrial waste heat, solar energy, biomass and green hydrogen, depending on local economic feasibility and efficiency (Federal Ministry for Economic Affairs and Climate Action, 2024[6]). The Heat Planning Act also sets out the shares of renewable energy or unavoidable waste heat that need to be achieved in future in each district heating network: 30% by 2030 and 80% by 2040. In addition, the Buildings Energy Act which also came into force in 2024, mandates at least 65% of renewable energy or unavoidable waste heat for heating systems in new buildings. Together these legislative acts offer building owners, consumers, the housing industry and the heating industry a policy framework to inform their investment decisions (Building Forum climate neutral, 2024[7]).
Helsinki’s (Finland)’ proactive approach to implementing limit values on construction provides a compelling example of how cities can lead by example. By taking initiative two years ahead of the national government’s 2025 plan to introduce carbon limit value on new construction, Helsinki requires compliance with carbon footprint limit in new city plans. As of 20 June 2023, building permits must adhere to a limit of 16.0 kg CO2e/m²/year, calculated per 50 year of use.
Helsinki’s initiative is particularly noteworthy because it leverages the calculation method developed by the national government. Helsinki’s utilisation of the national calculation method serves as a practical demonstration of the method before its application to the national level. This approach also underscores the effectiveness of shared resources and expertise in driving impactful change (City of Helsinki, n.d.[8]).
Tokyo’s (Japan) Cap-and-Trade Programme, initiated by the Tokyo Metropolitan Government (TMG) in April 2010, represents Japan’ first mandatory Emissions Trading System (ETS). This programme targets approximately 40% of the metropolitan area’s emissions covering about 1 400 buildings and facilities that consume at least 1 500 kL of crude oil per year.
The programme mandates a reduction of emissions below specific baselines for these high-consumption facilities. The baselines are calculated on the basis of average emissions over any three consecutive fiscal years selected between 2002 and 2007. These emissions targets are revised and tightened over successive compliance periods, each with its set reduction goals.
The compliance periods delineate the timeline for achieving emission reduction targets. Period 1 (FY2010-FY2014) aimed for 8% or 6% reductions. Period 2 (FY2015-FY2019) targeted 17% or 15% reductions. Period 3 (FY2020-FY2024) aimed for 27% or 25% decrease. By 2021, the programme demonstrated significant success, with covered facilities achieving a remarkable 33% reduction in emissions compared to base-year levels. This achievement was attributed to the implementation of energy efficiency measures and the adoption of low-carbon energy solutions.
Looking ahead, TMG released the final design elements of the fourth compliance period based on public consultation results. This period is designed to align with the ambitious “2030 Carbon Half” objective, aiming to reduce emissions to 50% of the 2000 level by 2030. Consequently, facilities will be required to achieve a compliance factor of 48-50% below their base-year emissions during this period (Tokyo Metropolitan Government, n.d.[9]).
TMG’s initiative had a significant spillover effect on neighboring local areas. A partnership was established between the Tokyo Metropolitan Government (TMG) and Saitama Prefecture (Japan) to collaborate on emissions trading systems (ETS). Under this partnership, Saitama Prefecture and TMG share information about their respective systems and mutually exchange credits between the two regions. Saitama’s cap-and-trade system applies to approximately 600 facilities that consume the energy equivalent of 1 500 kL or more of crude oil annually over three consecutive years. Many of these facilities have their headquarters or offices located in Tokyo, making the exchange of credits between businesses in both regions highly beneficial (Department of Environment Saitama Prefectural Government, 20217[10]).
Vienna (Austria) exemplifies how cities can drive national long-term climate objectives through city-level strategies and initiatives tailored to their local context. The city has adopted ambitious, quantitative targets to achieve carbon neutrality by 2040, aligning with Austria’s national commitment (City of Vienna, 2022[11]; Federal Ministry for Sustainability and Tourism, Republic of Austria, 2019[12]).
In 2023, Vienna updated its buildings codes to mandate the use of heat pumps, district heating and cooling, and decentralised energy supply systems based on renewable energy in new constructions (Rechtsinformationssystem des Bundes, 2023[13]). However, the city’s strict tenant laws require the consent of tenants before changing the heating systems (City of Vienna, 223[14]). To navigate this challenge, Vienna’s comprehensive Phasing Out Gas programme employs a multi-layered approach including technical, financial, and legal strategies.
A key element of Vienna’s Phasing Out Gas programme is the Vienna Heat Plan 2040 introduced in 2024. This plan outlines the measures necessary for shifting towards renewable energy sources for approximately 600 000 gas heaters. The city plans to use district heating and heat pumps as primary methods for heating and cooling a significant portion of its buildings by 2040. The electricity needed for these systems will be sourced from renewable energy, mainly wind and solar power, with biomass heating systems playing a limited role. The goal is to ensure that space heating and hot water are entirely powered by renewable energy (City of Vienna, 2024[15]). Given the high percentage of social and municipal housing, the focus is on district heating, with three large heat pumps set to supply heating to 56 000 households using thermal energy from treated wastewater (International District Energy Association, 2024[16]).
In conclusion, successful city-level initiatives often generate valuable data and insights that inform policy making at higher levels of government. By rigorously documenting and evaluating the outcomes of their programmes, cities provide valuable evidence of what works or not, helping to inform the development of broader policies and strategies at the national level. This evidence-based approach is essential for crafting effective, scalable solutions that can address complex challenges on a larger scale.
Public-private partnerships are essential for decarbonising buildings, as they blend the regulatory guidance and policy support from the public sector with the innovation, resources and execution capabilities of the private sector. These partnerships are increasingly crucial in achieving climate goals and promoting sustainable building practices.
Regulatory framework can drive green investment
In the European Union, regulatory frameworks like the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) are pivotal in shaping public-private partnerships and influencing private sector standards and evaluations.
The EU Taxonomy provides policy makers and the private sector with a common language and a clear definition of what is sustainable. It was introduced as part of the EU Renewed Sustainable Finance Strategy, aims to push financial and industrial sectors towards climate neutrality based on six environmental objectives: i) climate change mitigation; ii) climate change adaptation; iii) protection of water and marine resources; iv) circular economy transition; v) pollution prevention & control; and vi) biodiversity & ecosystem protection. Under the Taxonomy, an economic activity is considered environmentally sustainable if it makes a substantial contribution to one of the six objectives above, while doing no significant harm to the remaining five objectives (European Commission, n.d.[17]).
The Taxonomy also sets out the following technical screening criteria for economic activities in the building sector, including:
Construction of New Buildings: Primary Energy Demand (PED) of new construction must be at least 10% lower than nearly zero energy building requirements.
Renovation of Existing Buildings: Must reduce primary energy demand by at least 30%.
Acquisition and Ownership: Buildings built before 31 December 2020, must be within the top 15% of national building stock in terms of energy performance or have an Energy Performance Certificate (EPC) of at least class A. Buildings constructed after this date must meet the criteria for new buildings (PEEB, n.d.[18]).
The Sustainable Finance Disclosure Regulations (SFDR) became effective from March 2021. The SFDR requires financial market participants and financial advisers to disclose at the entity and product level how they integrate sustainability risks and principal adverse impacts into their investment decision-making processes. This regulation enhances transparency by informing investors about the sustainability risks affecting their investments and the environmental and social impacts of those investments (European Commission, 2024[19]).
The EU Taxonomy and SFDR significantly influence private investment by providing clear criteria and standards for sustainable building practices. These regulations create a stable and predictable environment for investors, reducing risks associated with non-compliance and enhancing the value of investments.
In response to regulation changes in Europe, in September 2023, the Climate Bond Initiative (CBI) updated its criteria for sustainable buildings to align with the EU Taxonomy. The updated criteria now include assessments of whole-life carbon and various aspects of sustainability, reinforcing the commitment to environmental objectives (Climate Bond Initiative, 2023[20]).
Lastly, the Global Real Estate Sustainability Benchmark (GRESB), a leading ESG data provider for real estate and infrastructure, introduced a new SFDR Reporting Solution to help real estate fund managers comply with SFDR requirements. This solution offers interactive reports detailing a fund’s ESG practices, including energy consumption, estimated greenhouse gas emissions, water usage, and waste generation of building assets. By facilitating compliance, GRESB can help fund managers in meeting SFDR disclosure obligations and aligning with sustainable building standards (GRESB, n.d.[21]).
More support for SMEs is needed
Unlike large companies, small and medium-sized enterprises (SMEs) are often ill-positioned and lack the capacity to weather a crisis. Policies should support SMEs to ensure a just transition from the bottom up and engage a broader spectrum of market stakeholders. For instance, SMEs represent 99.95% of all enterprises in the European Union construction industry, including 94% micro businesses, 5.3% small enterprises, and 0.5% medium-sized enterprises as of 2017. SMEs also generate 80.4% of turnover within the European Union’s construction industry in 2017, highlighting their substantial impact on the built environment (Europoean Commission, 2024[22]).
The OECD Global Survey on Buildings and Climate (2024) reveals that more than half (57%) of responding countries have set up government funding programmes to help small and medium-sized enterprises, but further support is needed.
Stricter energy codes require skilled contractors and sufficient funds for new building projects and renovations. With 68% of countries facing a shortage of skilled labour, national governments are stepping in to provide training and assistance to SMEs in designing zero-energy buildings, installing energy-efficient equipment and calculating life cycle CO2 emissions. Public-private partnerships offer a promising avenue for governments to collaborate with private sector entities, tackling resource and labour shortages, while ensuring that buildings meet energy standards effectively (Figure 4.3).
Note: Question from the survey: “Please select all skills that receive government support for training”. The responding countries could select all applicable options.
Source: OECD Global Survey on Buildings and Climate (2024)
Public-private partnerships also play a pivotal role in enhancing the co-benefits of decarbonising buildings. For instance, the Japanese Ministry of Land, Infrastructure, Transport and Tourism (MLIT) exemplifies this approach through its collaboration between the public and private sector and academia. Their research on insulation and health has led to the creation of accessible materials, such as manga, to facilitate broader dissemination of knowledge among SMEs and citizens (Figure 4.4).
References
[7] Building Forum climate neutral (2024), Heat generation with renewable energies in detached and semi-detached houses, https://www.gebaeudeforum.de/realisieren/erneuerbare-energien/waermeerzeugung-erneuerbare-energien-ezfh/ (accessed on 18 September 2024).
[8] City of Helsinki (n.d.), , https://www.hel.fi/en/urban-environment-and-traffic/plots-and-building-permits/applying-for-a-building-permit/carbon-footprint-limit-value (accessed on 26 February 2024).
[15] City of Vienna (2024), Czernohorszky/Gaál/Hanke/Gara: Wiener Wärmeplan 2040 veranschaulicht klimaneutrale Zukunft Wiens, https://presse.wien.gv.at/presse/2024/05/06/czernohorszky-gaal-hanke-gara-wiener-waermeplan-2040-veranschaulicht-klimaneutrale-zukunft-wiens (accessed on 25 June 2024).
[11] City of Vienna (2022), Vienna Climate Guide: Towards a climate-friendly city, https://www.digital.wienbibliothek.at/wbrup/download/pdf/4047968?originalFilename=true (accessed on 25 June 2024).
[14] City of Vienna (223), Phasing Out Gas: Heating and Cooling Vienna 2040, https://www.wien.gv.at/stadtentwicklung/energie/pdf/phasing-out-gas.pdf (accessed on 25 June 2024).
[20] Climate Bond Initiative (2023), , https://www.climatebonds.net/2023/10/climate-bonds-comes-line-eu-taxonomy-low-carbon-buildings.
[10] Department of Environment Saitama Prefectural Government (20217), Emissions Trading System in Saitama, https://www.kankyo1.metro.tokyo.lg.jp/archive/en/climate/cap_and_trade/icap_tokyo_2017.files/170614icapsymposium_session3_saitame_pre.pdf (accessed on 18 September 2024).
[19] European Commission (2024), , https://finance.ec.europa.eu/document/download/0f2cfde1-12b0-4860-b548-0393ac5b592b_en?filename=2023-sfdr-implementation-summary-of-responses_en.pdf (accessed on 19 July 2024).
[17] European Commission (n.d.), EU Taxonomy Navigator, https://ec.europa.eu/sustainable-finance-taxonomy/.
[22] Europoean Commission (2024), Internal Market, Industry, Entrepreneurship and SMEs, European construction sector observatory, Data mapper, https://single-market-economy.ec.europa.eu/sectors/construction/observatory/data-mapper_en (accessed on 10 September 2024).
[6] Federal Ministry for Economic Affairs and Climate Action (2024), The Heat Planning Act: momentum for the local heat transition, https://www.bmwk-energiewende.de/EWD/Redaktion/EN/Newsletter/2023/11/Meldung/news1.html (accessed on September 11 2024).
[12] Federal Ministry for Sustainability and Tourism, Republic of Austria (2019), Long-Term Strategy 2050 - Austria, https://unfccc.int/sites/default/files/resource/LTS1_Austria.pdf (accessed on 25 June 2024).
[3] Government of Colombia (2022), National Roadmap for Net Zero Carbon Buildings, https://www.cccs.org.co/wp/wp-content/uploads/2023/05/national-roadtrip-for-net-zero-carbon-buildings.pdf (accessed on 19 September 2024).
[21] GRESB (n.d.), , https://www.gresb.com/nl-en/products/sfdr-reporting/ (accessed on 19 July 2024).
[16] International District Energy Association (2024), Europe’s biggest heat pump system put into operation in Vienna, https://www.districtenergy.org/blogs/district-energy/2023/12/19/httpsbalkangreenenergynewscomeuropes-biggest-heat#:~:text=In%20Vienna%27s%20Simmering%20district%2C%20three,for%20the%20future%20of%20heating. (accessed on 25 June 2024).
[4] OECD (2023), Decarbonising Buildings in Cities in the Netherlands: A Neighbourhood Approach, https://www.oecd.org/cfe/decarbonising-homes-in-cities-in-the-netherlands-b94727de-en.htm (accessed on 15 April 2024).
[1] OECD (2022), Decarbonising Buildings in Cities and Regions, OECD Urban Studies, OECD Publishing, Paris, https://doi.org/10.1787/a48ce566-en.
[2] ONPE (2021), , https://onpe.org/sites/default/files/2024-02/ONPE%20Italy%20EN.pdf (accessed on 16 April 2024).
[5] PAW (n.d.), , https://aardgasvrijewijken.nl/default.aspx (accessed on 23 February 2024).
[18] PEEB (n.d.), , https://www.peeb.build/imglib/downloads/PEEB_EU_Taxonomy.pdf (accessed on 19 July 2024).
[13] Rechtsinformationssystem des Bundes (2023), Wiener Stadtentwicklungs-, Stadtplanungs- und Baugesetzbuch (Bauordnung für Wien – BO für Wien), https://www.ris.bka.gv.at/GeltendeFassung.wxe?Abfrage=LrW&Gesetzesnummer=20000006 (accessed on 25 June 2024).
[9] Tokyo Metropolitan Government (n.d.), , https://www.kankyo.metro.tokyo.lg.jp/en/climate/cap_and_trade/index.html.