Barriers to Mitigation in the Building Sector

To a large extent the inherent barriers that the IPCC identified for the world at large, also apply in the Colombian case, including for social housing. These include the large number of stakehold-ers involved; fragmented market and institutional structures; cultural aspects; challenges of en-forcing existing building guidelines; the sector's high heterogeneity with vast variances in build-ing practices through time; cognitive and behavioural patterns, in different geographic regions, and between construction firms; a large number of measures would lead to comparably small emissions savings; split incentives between building owners and renters (principal agent prob-lems); transaction costs; long investment payback periods; limited capital / access to financing’;

risk aversion; distorted tax regimes and energy consumption subsidies, patents and barriers to technology transfer; a lack of information and awareness hinder investments to be made; and the monitoring and verification of which pose challenges as well as high transaction costs (Lucon et al., 2014).

3.2.1 Fragmented Market and Institutional Structures

General sector characteristics such as the diverse and dispersed nature of the housing units (as indirect emissions sources) represent a challenge to implement mitigation measures in the sec-tor compared to large point indirect or direct emission sources. The challenge is also related to the large number of potential measures that could contribute to increased efficiency from build-ing design, appliance efficiency, and on-site renewables such as solar hot water heatbuild-ing or solar panels. Generally, there is a lack of sectoral data. Accurate and granular information on energy use is not public but could presumably be gained from utility companies.

On the local level, a large number of companies and other stakeholders are active in the building sector. Many construction companies are small and family owned, with varied interactions with different local authorities that have their own regulatory powers. A lack of capacity as well as expertise for monitoring and evaluation, and ensuring compliance with building codes of so many construction companies also constitutes a major barrier.

As mentioned in section 2.2.4, the overall 20% GHG reduction target from the national projected BAU scenario is subdivided into 20% reductions among several ministries, including the Minis-try of Housing and the MinisMinis-try of Energy. The reduction target has created an accounting chal-lenge, because different ministries take measures reducing emissions in the same sector. The Ministry of Housing expects to achieve the 20% reduction primarily through Resolution 0549 and the associated Sustainable Construction Guide (see Section 3.3.1.3). The Ministry of Energy is implementing a number of measures including in the area of energy efficiency of household appliances that may overlap with the measures of the Ministry of Housing. This has led to poten-tial coordination challenges that constitute a barrier to policy implementation in the sector. The Ministry of Environment, which has a general function in terms of climate policy implementation is involved in the baseline setting. However, the Ministry of Housing has already expressed scep-ticism about the methodology to determine baselines the Ministry of Environment uses.

3.2.2 Capacity Deficits

According to various stakeholders, a lack of resources on the national and subnational levels to monitor, verify, and enforce compliance with energy efficiency standards forms a significant bar-rier to the effective implementation of these standards. This leads to data inconsistencies and a lack of data that constitute a further major barrier for setting baselines and data collection was

61

particularly problematic in cities. Informal buildings with no construction licence account for al-most 50% of all construction in Colombia (H. Vargas et al., 2013), for these buildings no data is collected at all and they do not apply for construction licences. For buildings to qualify as social housing, however, local authorities must issue a construction licence. There is limited

knowledge of lower emission building in the construction sector, and contractors are generally not prepared to implement energy efficiency measures (ibid).

While the Ministry of Housing is responsible for setting and achieving national targets, enforce-ment almost completely falls on local governenforce-ments. This leads to unclear and uneven outcomes.

In terms of national energy efficiency standards, as described in the Sustainable Building Guide, compliance largely depends on “auto-declaration” where a real estate developer or housing con-struction company attests to adhere to norms at the time of getting concon-struction license. Aware-ness and processes for implementation to check for the measures in Resolution 549 varies on the local level, but because of time lags, buildings built in 2020 may still be based on construc-tion licences issued before the auto-declaraconstruc-tion was incorporated into the construcconstruc-tion licence form.

According to interviewees, in some cases, corruption and a lack of expertise may play a role in a construction company failing to adhere to building and energy efficiency norms. The POTs and other building codes, such as for seismic stability, are supposed to be overseen by Curadores, but a lack of strict oversight has been a problem. Two recent collapses large residential buildings -

“Space” in Medellin and of “Portal Blas de Lezo II” near Cartagena - illustrate the problems in the sector. There are currently 238 disciplinary proceedings against curators for failing in their con-trol and surveillance duties. Curadores are normally directly appointed by local mayors, leading in many cases to appointments without the qualifications to carry out their oversight mandate (M. Vargas, 2018). These proceedings prompted a reform of the qualification and appointment of the system of Curadores, but the reform needs time to take full effect (Cañas Carmago, 2014).

Further, there is a general lack of well-trained building inspectors and verifiers with the neces-sary qualifications to assess the energy efficiency of buildings, an issue corroborated by work-shop participants. Interview partners noted that only six inspectors in Colombia were certified to perform inspections for standards such as LEED. This compares to over 200 for Brazil and many more in other Latin American markets.

3.2.3 Limited Capital / Access to Financing

Generally, although energy efficiency investments may lead to overall savings over time, many mitigation technologies are associated with frontloaded costs, which lower income groups are least likely to be able to afford.

A larger barrier than the costs themselves, however, is the perception of costs. Although the costs for many measures are actually relatively low compared to the overall cost of construction, construction companies perceive them to be high. Awareness efforts may play a large role in overcoming this issue.

With regard to Energy Service Companies (ESCOs), a significant barrier to an energy efficiency market is the limited knowledge and experience of local financial institutions with the sector (IDB, 2015). As a result, these institutions generally are unwilling to finance ESCOs based on long term future capital flows. Interviewees also cited unfamiliarity of companies with the ESCO model, and the lack of the ability to enforce longer term contracts in some cases.

62

3.2.4 The Principal Agent Problem and (Perceived) “Circle of Blame”:

The principal agent split incentive barrier, where the actor with the ability to carry out struc-tural improvements (e.g. landlord) is not the actor that would benefit from the investment (e.g.

renter) is not directly relevant in the Colombian social housing sector. Inhabitants of social hous-ing buildhous-ings often buy their apartment, rather than renthous-ing it from a landlord. Some interview-ees mentioned that a similar principle agent problem existed in that construction companies do not have an interest in incorporating energy efficient features because they do not profit from the savings. Camacol, the Colombian construction industry association, for instance describes a

“circle of blame”²⁵ where (Jaimez, 2018):

► Potential homeowners say that they are interested in efficient housing measures such as for lighting and water savings, but such options are not on offer;

► Construction companies and developers say that they could construct efficient buildings, but that there are no incentives to do so; and

► Finance institutions say that they could finance efficient building, but there is no demand for such buildings.

The Colombia Green Building Council (CCCS) suggested that better communication could help overcome this barrier and that the interest of potential home owners in energy efficient housing meant that such housing is sold faster than other housing options. This should provide an inctive for the construction of more energy efficient housing. Moreover, at the very minimum en-ergy efficient features allow for “green marketing” which could provide an incentive for con-struction companies and housing developers to move towards more energy efficient housing in some markets²⁶. The CCCS cited a number of social housing projects where energy efficiency fea-tures were the primary selling point for buyers and that interest of buyers was the main consid-eration for the construction company involved in the building.

3.2.5 Past Efforts to Promote Uptake of Natural Gas a Fuel

Prior to the 1990s, electricity and oil played a larger role in household energy use. Expecting to discover additional oil and gas resources, the Colombian government made efforts to encourage increased use of natural gas (DNP, 1991, 1993). The increased dependency on gas poses prob-lems for emission mitigation in the sector compared to the period in the 1990s when electricity played a bigger role in cooking and water heating.

3.2.6 Specific Barriers in the Social Housing Segment

In addition to the mitigation barriers prevalent in the building sector, specific barriers hinder mitigation in the social housing segment. These barriers relate to price caps for VIS-VIP housing and energy subsidies

3.2.6.1 Price Caps for VIS-VIP Housing

Price caps for VIS and VIP housing represent at least a perceived barrier because building more energy efficient housing comes at additional costs for building developers. Because the cost of VIS and VIP housing is capped by the government, builders are not able to pass increased cost onto homebuyers. However, several stakeholders, including CCCS and Camacol, found a

25 Circulo de Culpa

26 Interview with the Colombia Green Building Council (CCCS). 14 March 2018. Bogotá, Colombia

63

significant number of energy efficiency features could be implemented at little to no cost. This suggests that the perception of higher costs and current practice are higher barriers than the costs themselves.

3.2.6.2 Energy Subsidies

Despite recent reforms, energy subsidies for lower strata (section 3.2.6.2) are still considerable.

These subsidies reduce the financial incentive to invest in energy efficiency or to extend pay-back periods for efficiency investments. Nevertheless, cost of subsidised power can have some impact on occupant behaviour. For instance, the interest in solar PV installation in social housing came from the Antioquia region, where power charges are among the highest in the country.

Another important barrier to mitigation are the disconnected objectives of short-term social housing provision and long-term sustainability. Social housing policies are currently directed to cater the most urgent housing needs of the lower income groups at the lowest possible upfront cost. Yet, these policies do not take the overall energy costs in the short- or medium-term for ei-ther the government or the residents into consideration, let alone long-term sustainability and comfort in social housing construction. Making the compliance with the building energy effi-ciency measures of resolution 549 mandators for most buildings, but voluntary for social hous-ing is an indicator of these delinked agendas.

Lastly, a challenge in implementing energy efficiency measures in low-income housing is that the housing dwellers in this segment are likely using less energy than they would if they had an av-erage standard of living. If their incomes rise, they are likely to consume substantially more en-ergy. Voluntary sustainability and energy efficiency certification programmes such as EDGE and BEA take this into consideration when estimating future energy requirements for thermal com-fort in buildings separately. In the EDGE programme, for instance, buildings with no plan for space heating and cooling systems, a scenario when such energy requirement would exist is ad-ditionally presented (called ‘virtual energy’) and is used in calculation of energy consumption improvements. BEA includes additional voluntary mitigation measures that also enhance ‘ther-mal comfort in social housing²⁷.