Constructing New Zealand’s low-carbon economy

Climate change is having a significant impact on businesses, society, and individuals and it is increasingly understood a shift towards a low-carbon economy is needed. The construction sector will play a central role in this shift.

To date, the building and construction sector accounts for 15.1% of New Zealand’s total emissions. The sector’s large diesel fleet, the production of concrete and building waste are all large sources of emissions where significant investment and change is needed.¹

At the same time, the sector plays a critical role in keeping Kiwis connected, safe and healthy. Months of deluge and the wettest year (2022) in New Zealand history has cut off communities, submerged homes, damaged roads, and destroyed crops and livelihoods.

Construction is the key to New Zealand’s transition to a low-carbon economy

The construction sector will play a critical role in not only rebuilding infrastructure damaged over the past 12 months, but also upgrading existing and building new infrastructure to support New Zealand’s transition to a low carbon economy.

Modelling from Deloitte’s latest Turning Point report shows if New Zealand and the world limit global warming to 1.5°C above pre-industrial levels, the country’s economy could be $64 billion larger in net present value terms by 2050; $28 billion of which could come from the construction sector alone.

In fact, out of all New Zealand sectors, construction’s contribution to New Zealand’s transition to a lower carbon future is the second largest, behind only the renewable energy sector. In reality, both sectors are interconnected, as the growth of the renewable energy sector relies on the construction sector’s ability to build infrastructure for renewable energy generation.

Greater investment today will lead to large gains in the future

This transition will not only require significant capital investment to build, repair and upgrade infrastructure, but also investment from within the sector to build its workforce. Our modelling suggests an additional 16,400 construction jobs could be created by 2050 if New Zealand takes decisive action on climate change.
 

Throughout its transition (which has already started), New Zealand’s construction sector will initially face slower growth before rapidly increasing. From 2031, the benefits of decisive climate action will start to outweigh the upfront costs as illustrated by the green line (decisive action) in the diagram crossing the blue horizontal line (baseline). As a result, the construction sector is modelled to reach its turning point (2031) five years earlier than New Zealand’s turning point (2036). Only the renewable energy sector reaches its turning point earlier.

Bold plays required to achieve this benefit

Bold plays and upfront costs are needed to rapidly decarbonise the construction sector.

Clear and consistent policy direction, transition assistance from both the public and private sector and appropriate regulation settings must all be put in place to continue to support the construction sector’s transition.

Technological change and additional investment are underway, but further progress is needed. Low carbon building materials already exist, but high costs remain a barrier to mainstream use, and additional support and incentives are needed to accelerate adoption. Implementation of recyclable materials and closed material flows in the refurbishment and demolition phases (circularity of building materials) is also needed.

Equally important is the development of manufacturing technologies to reduce embodied carbon from concrete production. Compared to operational carbon emissions – produced from driving diesel vehicles and the like – there has been much less focus on reducing embodied carbon from the extraction of raw materials, manufacturing, and disposal. Moreover, given that cement is the second most widely used substance on earth (after water), achieving this technological breakthrough is critical to facilitating the sector’s transition.²

Once achieved, a decarbonised construction sector will enable and support every other sector to reach its turning point and support New Zealand’s overall transition to net zero by 2050.

Construction will play a key role in reducing the impact of climate change on New Zealand’s communities, including the effects of sea level rise in low-lying and coastal areas, heat stress on workers, and stalled productivity and investment from repairing existing assets. The construction sector is also a major contributor to climate change. However, it also has a significant role to play in New Zealand’s transition. What is needed is nascent technology to be available and used so the domestic construction sector can transition without a huge cost impact.

End notes

1. The building and construction industry accounts for 9.4 percent of emissions that are produced domestically (excluding imports and exports). If you include import and export trade, this figure increases to 15.1 percent. Source: Construction Sector Transformation Plan 2022-2025 (constructionaccord.nz)
2. Colin R. Gagg, “Cement and concrete as an engineering material: An historic appraisal and case study analysis”, The Open University, United Kingdom.