Buildings account for 37% of global CO2 emissions. The sector is by far the largest emitter of greenhouse gases, according to the UN Environment programme.
To meet our 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 our 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 that office buildings, particularly those with an area of 8,000 sq. m or more, are not exempt from EECA. In fact, the average vacancy rate for green-certified buildings fell by 5 percentage points during Q3 and Q4 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 prioritize 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 RM 350 to RM 940 per square meter).
For office buildings of 8,000 sq m or more, this translates to an investment of RM 2.8 million to RM 7.5 million. The return on investment (ROI) is expected within 1 to 3 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 RM 120,000 per year for affected industrial users and RM 100,000 per year for commercial users over a five-year cycle.
- For GBI registration fees, existing buildings ranging from 4,000 to 10,000 m² incur a fee of RM 9,000. The first renewal fee is RM 2,500, with subsequent renewals costing RM 1,000 each.
This estimate does not account for the costs associated with updating aging building management systems (BMS), 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 (EACG 2.0) for 2021-2025 to include these buildings as well.
While this journey must ultimately include broader decarbonization efforts, it has to start somewhere. By taking these initial steps, we can lay the groundwork for a more sustainable future for Malaysia.
