BUILDINGS account for 37% of global carbon dioxide (CO2) emissions. The sector is by far the largest emitter of greenhouse gases, according to the United Nations Environment Programme.
To meet the target of keeping global warming below 1.5ºC by 2050, operational emissions caused by building energy consumption must reduce by 5% annually between now and 2050. About 72% of the total CO2 emissions from buildings comes from “operational carbon” – produced by the building in use, including from lighting, cooling and energy.
Considering this, the Energy Efficiency and Conservation Act (EECA) stands as important first step toward decarbonising buildings in Malaysia. Mandatory energy audits for energy consumers are beneficial to detect inefficient systems and areas of energy waste, enabling targeted improvements to reduce consumption.
We are encouraged that office buildings, particularly those with an area of 8,000 square metres (sq m) or more, are not exempt from the EECA. In fact, the average vacancy rate for green-certified buildings fell by 5 percentage points during the third and fourth quarters of 2023, according to JLL, highlighting strong market demand and tenant preference for sustainable properties.
However, a significant financial risk looms over 90% of existing buildings, as their inability to decarbonise could lead to a decrease in value of up to 30%, making them less appealing to potential investors and tenants.
We must prioritise retrofitting existing buildings to lower carbon emissions associated with energy demand. In fact, retrofitting can cut life-cycle carbon emissions by as much as 83%. Typically, a building’s carbon emissions are split between embodied carbon, which accounts for around 28%, and operational carbon, making up about 72%. We need to focus on reducing operational carbon emissions without increasing embodied carbon emissions.
However, the substantial initial investments required for retrofitting, compliance costs for energy audits, and ongoing expenses (such as certification fees for the Green Building Index) can hinder building owners in their sustainability efforts. This is especially concerning as we need to accelerate action to combat climate change while also addressing market demands.
Here’s the breakdown:
► The most basic initial investment for “Light Interventions” in retrofitting – aimed at compliance and implementing metering, monitoring, and active building management for efficiency – ranges from €75 to €200 per square meter (approximately RM350 to RM940 per sq m).
For office buildings of 8,000 sq m or more, this translates to an investment of RM2.8 million to RM7.5 million. The return on investment is expected within one to three years, with the potential for up to a 45% annual reduction in CO2e emissions.
► The average compliance cost for an EECA energy audit – which includes appointing a registered energy manager, implementing energy management strategies, and conducting energy audits – amounts to RM120,000 per year for affected industrial users and RM100,000 per year for commercial users over a five-year cycle.
► For GBI registration fees, existing buildings ranging from 4,000 sq m to 10,000 sq m incur a fee of RM9,000. The first renewal fee is RM2,500, with subsequent renewals costing RM1,000 each.
This estimate does not account for the costs associated with updating aging building management systems, which are essential for effective retrofitting and system upgrades. Additionally, to achieve net-zero status, buildings will require comprehensive envelope retrofits or deep renovations.
We recognise that the EECA has the potential to inspire action among energy consumers, and the higher tariff further facilitates this shift. However, to reach Malaysia’s goal of carbon neutrality by 2050, we need to lower barriers for building owners and facilitate faster adoption of energy efficiency practices.
We hope the government will provide incentives or rebates to assist owners of office buildings sized 8,000 sq m and above with their green certification fees. Alternatively, we suggest extending the Energy Audit Conditional Grant 2.0 for 2021-2025 to include these buildings as well.
While this journey must ultimately include broader decarbonisation efforts, it has to start somewhere. By taking these initial steps, we can lay the groundwork for a more sustainable future for Malaysia.
This article is contributed by Schneider Electric country president for Malaysia, Eugene Quah.
