Briefly Explained: CRREM Update 2023

Example of ESG Performance Analysis in Alasco, Determining the Position on the Decarbonisation Pathway

As of the new year, CRREM has updated the 1.5°C decarbonisation pathways for the real estate sector and revised the emission factors. What does this update entail, and what impact do the new values have on your assets?

New Decarbonisation Pathways

The previous CRREM tool values were based on 2018 data, which have now been updated to 2020. The new data shows that the real estate sector needs to significantly intensify its efforts to achieve the 1.5°C target. What are the key drivers of these changes?

• Reduction of the Remaining Global Carbon Budget and Sector Overshooting: The CRREM decarbonisation pathways outline the annual CO2 emissions a building must adhere to in order to achieve climate neutrality by 2050. These CO2 emissions are derived from the globally available Global Carbon Budget. Updating the base year from 2018 to 2020 reveals a greater reduction in the CO2 budget than previously predicted (468 vs. 519 Gt CO2-only). Thus, 10% less CO2 budget is available than was forecasted in 2018 to reach the 1.5°C target by 2050. The real estate sector, in particular, has consumed a higher share of its allocated CO2 budget than initially predicted, resulting in steeper decarbonisation curves.
• Growth Rate of Building Stock with Largely Unchanged Projections: Additionally, the slightly increased growth rate of floor space from 1.6% over the previous data for the period from 2020 to 2050 has a minor impact. With an unchanged CO2 budget, an increase in usable floor space means that the CO2 intensity per square meter must be reduced to meet the maximum allowable CO2 emissions. Consequently, the new decarbonisation pathways are steeper.

Division of the Usage Type “Industrial (Warehouse)”

For more accurate differentiation, the existing usage type “Industrial Warehouse” has been divided into:

• Industrial (Warehouse, cold)
• Industrial (Warehouse, warm)

Impact on Assets with the Old Usage Type “Industrial (Warehouse)”?

If an asset is reclassified to Industrial (Warehouse, cold), the values change only slightly. However, for assets classified as warm warehouses, the new benchmark emissions are significantly lower.

New Emission Values

The 2023 CRREM update includes a revision of the emission factors for electricity generation, with most factors decreasing due to the faster-than-expected decarbonisation of the electricity grid. The emission factors for heating have been slightly revised.

Change in Calculation Methodology:

The most significant change in electricity emission values results from CRREM’s methodological adjustment. The previous version included transmission and distribution losses of electricity generation, but the new update excludes these losses, attributing them to the energy sector rather than the real estate sector. Consequently, the new emission factors for electricity are lower.

Additional factors considered in the value update include:

• More ambitious decarbonisation: Globally, the electricity grid aims to be fully decarbonised by 2040.
• Change in energy mix: A higher share of electricity in the energy mix by 2050 (“electrification”).

Analysing ESG performance is the first step to improving the environmental sustainability of buildings. Whether it involves the acquisition, maintenance, or sale of a property, a current analysis helps stakeholders determine appropriate measures to enhance sustainability and, therefore, the asset’s value. The CRREM tool provides crucial support for this and is integrated into Alasco’s ESG management software. Alasco users will have access to the entire CRREM update from 1st March, enabling them to analyse and benchmark their assets according to the latest market standards, identifying risks and opportunities early on.

Note: The official and detailed explanation of CRREM can be found in CRREM’s publication (especially page 6).