Climate Finance | November 18, 2017

Low-cost green buildings will be lit by LEDs well before 2030

The team at


Low-energy light-emitting diodes, or LEDs, have already captured the bulk of new lighting installations and could grab three-quarters of the market in the next decade.

With costs continuing to fall, the LED advantage continues to grow. “Given the very short replacement cycles of legacy lamps, LEDs are likely to have replaced the installed lighting base well before 2030, making it potentially one of the fastest technology shifts in human history,” a Goldman Sachs report found last year.

Now comes the International Energy Agency, which estimates that only 1% of the potential for energy savings have been achieved in lighting, meaning there are huge potential efficiencies ahead.

There were still seven billion incandescent lights in use in 2016, according to the UN Environment Program. All told, the energy efficiency of buildings could be improved by up to nearly 70% by enhancing building envelopes and using high-performance equipment, according to the International Finance Corp.’s “Creating Markets for Climate Business” report.

Traditional buildings generate 19% of energy-related greenhouse-gas emissions and use 40% of electricity globally.

The IFC estimates building green represents upwards of a $3.4 trillion investment opportunity through 2025. Energy-efficient heating, ventilation, and air conditioning are a $76 billion annual market. “Building envelopes” — i.e. the physical barrier between the interior and exterior of the building — make up the largest share of investments in green buildings.

Green building offers obvious and immediate benefits: cutting emissions at low cost and locking in energy and water savings for decades. That has attracted energy service companies, or ESCOs, which invest in energy-efficient technologies for commercial buildings and earn royalties on the energy savings, without owning the property itself. In China alone, ESCO revenues are about $13 billion a year.

Green construction bonds, green mortgages, and green mortgage-backed securities are financing low-carbon building. So are affordable housing investors: International Housing Solutions blends catalytic and commercial capital for low-cost green homes in South Africa.