By Kenneth Langer & Robert Watson
On Nov. 10, 2005, U.S. Green Building Council (USGBC) President Rick Fedrizzi presented leadership awards to 10 Chinese real estate developers and government leaders for their "pioneering work in transforming the world's largest building industry." The developers, who represent some of China's largest developers, have one thing in common: they are the first to pursue USGBC's Leadership in Energy and Environmental Design (LEED) certification. The awards were announced during the Greenbuild Conference and Expo in Atlanta, representing an important milestone in China's acceptance of green buildings, in general, and USGBC's LEED rating system, in particular.
The World Bank estimates that between now and 2015 roughly half of the world's new building construction will take place in China. The majority of these projects are large, commercial office buildings between 1 and 1.5 million square feet and mixed-use developments that may have 10 million square feet in total construction area. China's entry into the World Trade Organization, its successful bid for the 2008 Olympic Games, and the country's general integration into the world economy have all resulted in an investment boom. China's Ministry of Construction (MoC) estimates that China will add 2 billion m2 (21.5 billion square feet) in new construction in 2005 and will double its current building stock by 2020.
To most real estate developers caught in this gold rush, the game is about constructing mediocre buildings as quickly and profitably as possible. But the group of progressive developers receiving USGBC awards are designing and building China's best green building projects without compromising the bottom line.
For most of the last 20 years, the government's top priority has been economic development. But in the last few years, environmental degradation has become so severe that it threatens to undermine economic growth. China's State Environmental Protection Administration (SEPA) estimates that damages from pollution total nearly 10 percent of annual GDP. Much of this pollution is the result of increased manufacturing, largely based on coal fired power plants, that has sustained China's near double-digit growth over the past 20 years. Water, too, is in short supply in two-thirds of China's cities, and less than half of the available water is fit for human contact.
Environmental problems have prompted national, state, and local governments to emphasize environmental protection. China budgeted $84 billion for environmental projects in the current five-year plan (2001-2005). Shanghai's annual budget for environmental protection is a healthy three percent, and Beijing has allocated roughly $12 billion for environmental projects in preparation for the 2008 Olympic Games.
The building industry accounts for approximately one-third of China's electric power, and the demolition of old buildings and construction of new ones contributes to a host of environmental problems. As a result, certain progressive cities are beginning to offer financial incentives to developers that use energy-efficient building technologies. For example, the Shenzhen municipal government offers interest-free mortgages for hotels that install thermal ice storage systems - a technology that shifts energy consumption to off-peak hours. These measures send a strong signal to real estate developers that the government is beginning to throw its weight behind environmental protection.
Changing Codes and Standards
Market transformation involves the development and implementation of a regulatory "push" through the establishment of mandatory minimum performance standards and a complementary "pull" from market-based mechanisms. The first stage of market transformation is the establishment of a regulatory framework of mandatory codes and standards.
In 1986, China's MoC issued an energy-saving code for cold and severe cold climates, beginning a two-decade effort to develop codes and standards for different building types in China's four main climates. The commercial code, expected in 2005, will set new rules for each of China's climatic regions. The code will require greater insulation in the walls and roof, as well as double-glazing and insulated window frames in certain climates. Lighting energy limits will be between 8 and 15 watts per m2 depending on the type of building. Heating, ventilation, and air conditioning (HVAC) systems will have to be more efficient.
China's codes, which are prescriptive and performance based, aim to improve indoor air quality and reduce energy consumption by 50 percent compared to buildings constructed in the 1980s. Despite great progress, China's building standards still fall short of international standards. For example, Chinese ventilation requirements are less than half as stringent as U.S. ASHRAE standards.
Though regulations establish minimum thresholds and remove the worst performers from the market, they do not stimulate major technological innovation, nor do they give real estate developers economic reason to leapfrog to high performance buildings. Recognizing this, MoC, and the Ministry of Science and Technology (MoST) have become increasingly interested in LEED and other international green building certification systems. For example, MoST, with technical support from Beijing's Qinghua University, has introduced The Green Olympic Building Assessment System (GOBAS) for the 2008 Olympics. The system is modeled primarily on Japan's Comprehensive Assessment System for Building Environmental Efficiency (CASBEE) and, to a lesser extent, LEED.
