UNEP: Construction Sector Stalls on Decarbonisation

The construction and buildings sector employs nearly one in ten people worldwide and accounts for more than 10% of global GDP, according to the UN Environment Programme. The industry is also responsible for more than a third of global carbon emissions and almost half of material use.

More than a decade after the Paris Agreement, construction remains off track to achieve full decarbonisation by 2050. According to the UN's Global Buildings Climate Tracker, which measures decarbonisation progress in the construction industry, sector-wide decarbonisation has stalled since 2020.

The index increased to three decarbonisation points in 2023 but declined to 2.8 in 2024. This leaves a 49.3-point gap to the net-zero target.

The stagnation is due to a 1% rise in operational emissions, which reached a record 9.9 gigatonnes of CO₂ in 2024. Achieving net zero goals requires a 56% reduction in operational emissions by 2030.

Energy efficiency gains continue

From 2015 to 2024, global building floorspace grew by 20% to 273 billion square metres, while final energy demand increased by only 11%. This could indicate that efficiency measures have limited energy demand growth in the construction sector.

According to the UN, without these interventions, energy consumption would have doubled. However, these improvements are offset by population growth, rapid urbanisation and increased demand for energy services.

While grid electricity is becoming cleaner, on-site renewable generation has stagnated at about 5% over the past decade. This is due to high upfront costs and regulatory barriers.

Demand for fossil fuels in buildings has also remained steady, slowing the reduction of direct operational emissions.

Construction materials industry responds

"The transformation of the building sector is no longer optional. It is a systemic necessity and a collective opportunity," says Pascal Eveillard, Deputy VP of Sustainable Development & Group Director for Sustainable Construction at Saint-Gobain, a French multinational corporation that designs, manufactures and distributes materials and services for the construction and industrial markets.

Fabienne Robert, Director of the Sustainable Construction Observatory and International External Relations at Saint-Gobain, says decarbonisation sits alongside housing affordability, resilience, adaptation, health, resource pressures and long-term performance.

"The question is not which issue should be prioritised, but how to avoid solving one challenge while creating pressure somewhere else," says Fabienne.

"Perhaps part of the challenge now is to better connect the different forms of value that sustainable construction already creates. In other words, scaling may depend not only on proving that solutions work, but also on making the different dimensions of value easier to recognise and assess together within decision frameworks."

Investment shortfall threatens targets

Addressing this stagnation requires a significant and immediate increase in global investment. From 2015 to 2024, cumulative investment in building energy efficiency reached US$2.3tn.

According to the UN, annual investment grew by 3% to US$275bn in 2024. This is less than two-thirds of the required amount.

By 2024, investments were US$1.3tn short of the target. To meet the 2050 net zero pathway, cumulative investments must reach US$5.9tn by 2030, requiring an additional US$3.6tn or about US$592bn per year.

This investment gap is due to structural barriers, including reduced public support, high upfront costs and policy uncertainty.

Financial mechanisms emerge

The financial sector is introducing asset-linked mechanisms to mobilise capital at scale for construction projects. Property-Linked Finance frameworks assign repayment obligations to the property rather than to the owner.

This enables long-term financing to transfer automatically when the asset is sold. The approach could remove a key financial barrier to deep energy retrofits in the construction sector.

International development banks are increasing institutional capital flows for building projects. The European Investment Bank has launched a housing action plan, allocating €10bn (US$11.6bn) over the next two years.

Green Building Councils are also developing unified green building taxonomies worldwide. These aim to clearly define which construction projects qualify for institutional investors.

Without coordinated regulatory and financial action, the gap between the sector's current trajectory and its net-zero goals will continue to widen.