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    Lucas Bretschger – Professor of Economics, ETH Zurich, Switzerland; Director of CER-ETH, the Center for Economic Research at ETH & a member of the Advisory Body on Climate Change to the Swiss government.

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    “During the last years, you can see a remarkable increase of innovation due to exploding energy costs.” – Swiss economics professor Lucas Bretschger at the 4th Holcim Forum.

Those who build sustainably must often dig deeper into their pockets. Swiss economics professor Lucas Bretschger is convinced that these investments pay off in the long run – and that sustainability in no way chokes economic development.

Last updated: October 01, 2013 Mumbai, India

The economics of sustainability is a broad and extremely important field – or, as the economics professor Geoffrey Heal put it: “Sustainability is a metaphor for some of the most perplexing and consequential issues facing humanity. These might even include the very survival of our species.” In spite of this, only a few economics experts are dealing with the subject – and very few with sustainable construction.

One of these experts is the Swiss economics professor Lucas Bretschger. Presenting a few key figures, he showed why his profession should give more attention to sustainable construction: The construction sector is one of the most important energy consumers on earth – in most countries it uses up to 40 percent of the primary energy. It is also the world’s largest contributor to greenhouse gas emissions. It is responsible for ten percent of the global GDP, and it provides employment for some 111 million people. Bretschger asserts that this all shows the great potential the construction industry carries for the economy, environment, and society. Today there is unquestionably a great need for sustainable buildings:

“We have changing demographics. Then we have economic changes and changes in lifestyle and technology – and the big issues like climate change, changing energy prices and systems and the associated policies.” All this influences the long-term return on real estate. But it is difficult to predict precisely how large this influence will be, admits the expert. Sustainable development is hindered not only by the lack of information but often by the lack of incentives and specialists. Personal preference also plays an important role: “We know that some people prefer lower investment costs now over lower operational costs later. So it’s also a question of how much you value future benefits as opposed to present cost savings. If you have very impatient investors, this might be an obstacle for getting green investments.”

Energy efficiency yields a profit

Of course, sustainable buildings have many direct advantages, such as lower costs for energy, water, and maintenance; productivity; or health and well-being of the building users. “But this is only a potential, there are no guarantees,” says Bretschger, “and when there is a potential we have to think about how we can reap the profits that are possible from this.” In sustainable building projects, it is important to incorporate every such idea already in the design phase and to work with a team of specialists. Bretschger is convinced that “successful green buildings will cost only a little bit more than normal buildings.” From the macroeconomic perspective, experts face the question of whether not only investors but also society and business should press harder for sustainability, “and the answer of course is: Yes, we should care about it.” For instance, if you can save some of your costs for importing oil and instead use that money for local projects, much good can be achieved. “For me, the distinction between the long and the short run is crucial,” says Bretschger. Although it might be easier and cheaper in the short term to use fossil fuel, this situation could change in the long term. Bretschger substantiates this with one of his studies: “There is a negative relationship between the energy used per capita and the growth rate per capita in rich countries. This means, if you choose to use less energy, in the long run you will have a profit.”

Bretschger demonstrated the importance of long-term thinking using a model developed for Switzerland. It shows that a strict carbon tax policy slows down economic development a bit, but has an impressive effect regarding sustainability. The implementation of such a policy requires financial and technical investments, but it pays off in the end and the negative impact on economic development is negligible.

As a member of the Swiss Delegation at the United Nations Climate Change Conferences COP 15 and 17, Bretschger strongly advocated simplification of the negotiations concerning Climate Agreement 2015. It’s important not to try to do too many things but rather to concentrate on a few key principles that apply to everyone: principle of “ability to pay” – who can contribute more should do so –, the dessert principle – who does more for the environment should receive a greater reward –, proportional burden sharing regarding the realization costs incurred by individual countries, and general technology development. If agreement could be reached within such a framework, ample freedom would remain for each country to decide independently how to restructure its economy in a sustainable manner.

4th Holcim Forum 2013 – “Economy of Sustainable Construction”

The ongoing economic challenges in many parts of the industrialized world are drivers of a paradigm shift: governments, companies and individuals are all becoming aware that although sustainable development incurs costs, it also offers considerable economic potential. This topic: “Economy of Sustainable Construction” was the focus of the 4th International Holcim Forum for Sustainable Construction, held in Mumbai, India, from April 11 to April 13, 2013.

Read more on the 4th Holcim Forum 2013 »