Guest Entry: Climate Change and the Construction Industry

By: Trevor Shah

We frequently hear about the negative impacts of climate change, but not often do we talk about the potential positive impacts and the opportunities that can stem from it. I wanted to take the chance to write about an industry that stands to benefit from increased global temperatures: the North American construction industry.

But before I begin explaining why this industry will benefit from higher global temperatures, please note that I will be using the A2 scenario from the Special Report on Emissions Scenarios (SRES). This conservative scenario projects an increase in global temperatures by about two degrees Celsius. Evidently, this temperature rise will contribute to many environmental changes which will greatly affect the construction industry.

To begin, there will be a rise in home and corporate building retrofits which will generate additional business for the construction industry. This is primarily due to rising electricity and natural gas prices in North America. Total electricity demand is projected to increase by 30 percent in 2035 (from 2008 levels). Accompanying this growth in demand is a 39 percent rise in electricity prices from the current average price. In addition, the price of natural gas in the U.S. and Canada is expected to double as demand intensifies and lower-cost resources are depleted. If the United States and Canadian governments decide to introduce a carbon tax system, the price of natural gas will rise even further. This is because natural gas produces 117,000 pounds of carbon dioxide per billion British Thermal Units (BTU) of energy.

Due to rising energy prices, housing and building retrofits will generate higher savings and shorter payback periods. Furthermore, building retrofits will grow even more profoundly if Canadian and American governments continue to offer incentives such as energy retrofit programs. The U.S. Government will be offering $452 million for the Property Assessed Clean Energy (PACE program) which will allocate funds for energy efficiency retrofits. The United States government also recently introduced the Federal Housing Administration (FHA) PowerSaver Loan Program which provides Americans with up to $25,000 in low-cost loans from the U.S. Department of Housing and Urban Development (HUD). These programs will lead to considerable growth in home retrofits resulting in additional business for the construction industry.

Second, the United States will continue to experience increasing weather extremes due to climate change: heat waves and heavy downpours are very likely to increase in frequency and intensity. Substantial areas of North America are likely to have more frequent droughts of greater severity, hurricanes, heat waves, rainfall intensity and cold season storms are likely to become more frequent with stronger winds. Combined, these weather extremes will cause a surge in property damage.

In addition, regions with rivers and lakes will need to be protected from floods as the amplified intensity of rainfall and storms continues to rise. The associated clean-up and repair work will generate considerable business for the North American construction industry. This is what Matt Kahn discusses at length in his book Climatopolis. That is, forward looking entrepreneurs --such as those found in the construction industry -- can reap huge profits if people start to think more seriously about the value of adapting to climate change. People will soon realize the need to make their homes more climate change resilient and this will allow the construction industry and other forward looking entrepreneurs to innovate and make profits.

The demand for more resilient building materials, greater protection buffers around our homes and even the floating home idea proposed by Tom Mayne, will not only help urbanites adapt to climate change risks (floods, hurriances etc) but bring about new innovation, smart design and creativity from construction companies, product designers and more.

There will certainly be negative consequences of rising global temperatures on the North American construction industry. Firstly, the cost of construction materials are likely to increase due to higher demand, greater transportation costs, depletion of natural resources and future carbon taxes. Secondly, rises in global temperature may create unsafe working conditions due to extreme heat and the frequency of heat waves (say if you live in cities like LA or Phoenix). Lastly, melting of the permafrost will reduce the bearing capacity of the soil causing settlement and structural damage. However, these negative impacts are offset by the significant benefits.

I don’t mean to paint a negative or daunting future for North America. Instead, I wanted to talk about some of the opportunities that climate change can bring to industries like construction and forward looking people who care about the future and environmental sustainability.

Trevor Shah is a third-year commerce student at Queen’s University in Kingston, Ontario. He is currently on an international student exchange in Bangkok, Thailand.