a son of a shopkeeper breaks a window, causing a crowd to gather. The members tell the shopkeeper not to be angry: the broken window is in fact a reason to celebrate, because it creates work for the glazier. In the story, the crowd imagines the work involved in repairing the window, but not the work involved in everything else the shopkeeper could have spent his money on—unseen possibilities that would have brought him greater happiness. The parable, written by Frédéric Bastiat, a 19th-century economist, sought to draw attention to a common form of argument that has become known as the “broken-window fallacy.”
If the window were broken today, the crowd might have a different reaction, especially if it were smarts who are against local construction. Their concern could be about the “embodied carbon” released by the shopkeeper’s son when he smashed the window. Temperatures of more than 1,000°C may be required for the production of a glass pane. For example, if the furnace is coal-fired, the replacement window would incur significant carbon costs. Likewise, the bricks, concrete and glass in a building are remnants of past emissions. They are, so the logic goes, clumps of embodied carbon.
Maintaining what already exists, rather than adding to the building stock, prevents these embedded emissions from increasing – or so NIMBYs often suggest. The argument turns out to be effective. On March 12, the EU has adopted a directive requiring that buildings built after 2030 must produce zero emissions throughout their lifetime. The city of San Francisco points potential builders to an “embody-carbon-reduction strategies checklist,” which starts by suggesting they “build less and reuse more.” Last month, the British government tried to quash proposals from Marks & Spencer, a department store, that would involve rebuilding its flagship store in London because its demolition would release 40,000 tons of embodied carbon.
At worst, such statements are based on distorted logic. Greenhouse gases released during the construction of an existing building will warm the planet, whether the building is vacated, refurbished or demolished. The emissions have been taken out of the world’s ‘carbon budget’, so treating them as a new write-off means double counting. Even if this mistake is avoided, embedded emissions must be handled carefully. The right question is simpler: is it worth using the remaining CO2 budget to renovate a building or is it better to demolish it?
Choosing between these options requires thinking about the invisible. It used to be said that construction emitted two types of emissions. In addition to the embodied types in concrete, glass and metal, there were operational variants of cooling, heating and supplying electricity to residents. The additional carbon costs associated with renovating a building to make it more energy efficient can be justified on the basis of savings from lower operational carbon costs. According to the World Green Building Council, a charity, buildings worldwide are responsible for 39% of annual emissions, of which 28 percentage points come from operational carbon.
These two types of emissions may be sufficient for the architects designing an individual building. But when it comes to broader questions, economists should also consider how the placement of buildings affects the way people work, shop and especially travel. The built environment shapes an economy, and thus its emissions. Just as the emissions from dragging out the green transition are partly the responsibility of climate change deniers, NIMBYs are partly responsible for emissions from residents forced to live further from work in sprawling suburbs.
For most NIMBYs, the residents who cannot live in new homes are an afterthought. But no matter where they live, they still have a carbon footprint, which would be lower if they could move to a city. Density reduces the per-person cost of public transport, and this reduces car use. It also means that more land can be transferred to nature elsewhere. Research by Green Alliance, a pressure group, shows that in Britain a policy of ‘demolition and densification’ – replacing semi-detached homes near public transport with blocks of flats – could save significant emissions over the life of an average building of sixty years. Without such demolition, potential residents would normally have to move to the suburbs, saving money on rent but using more energy, even if the government manages to get more drivers into electric vehicles. While green infrastructure, towers and wind turbines all contain carbon, not building them also involves emissions from the continued use of fossil fuels.
Compromise on quality
There is little point in deciding such choices on a case-by-case basis. The UK’s planning system, in which the government considers whether a particular department store will derail the national target of achieving net-zero emissions, is especially foolish. The wiser approach is to use a carbon price, rather than the judgment of a central planner. Putting a price on the remaining carbon budget that can be used for new physical infrastructure, as well as on the services people use at home, means taking into account the real climate costs of each approach. Under such a regime, energy-efficient homes close to public transport would be worth more. Those with less embodied carbon would be cheaper to build. Developers who demolished and densified were therefore often rewarded with greater profits.
Targeted subsidies, especially for building materials research and development, and minimum efficiency standards could strengthen the impact of carbon pricing, accelerating the pace of decarbonization of the built environment. What will never work, however, is letting the loudest voices decide on land use and ignoring the carbon emissions of their future neighbors once they are out of sight. ■
Read more from Free Exchange, our column about economics:
An economist’s guide to the luxury handbag market (March 7)
What do you do with the 191 billion frozen euros that Russia possesses? (February 28)
Trump wants to hit Chinese companies. How badly could he hurt them? (February 22)
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