Getting to Net-Zero: How Climate Change Initiatives Are Changing Business in the Infrastructure Sector

• Pages: 46-69
• Date: 01 October 2024
• Author: Brendan Hennessey,Laszlo von Lazar,Amanda Schermer MacVey

Published in The Construction Lawyer Volume 43, Number 4, ©2024 by the American Bar Association. Reproduced with

permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any

means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Forum on Construction LawThe Construction Lawyer Fall 2024

46

Getting to Net-Zero: How Climate Change Initiatives

Are Changing Business in the Infrastructure Sector

By Brendan Hennessey, Amanda Schermer MacVey, and Laszlo von Lazar

Brendan Hennessey is counsel at Pillsbury Winthrop Shaw Pittman LLP in Washington, DC. Amanda

Schermer MacVey is a partner at Venable LLP in Washington, DC. Laszlo von Lazar has earned a

reputation as one of the top execution professionals in the EPC space throughout his 33-year career.

No longer are climate change initiatives only the concern of the “environmental specialist.” Rather, they

present challenges—and opportunities—for estimators, project managers, executives, and attorneys in

the infrastructure sector. Simply knowing the landscape of climate change initiatives can be the rst

stumbling block, as recent legislation and ever-expanding corporate sustainability policies are increasingly

focused on the infrastructure sector’s contributions to global greenhouse gas (GHG)1 emissions (which are

estimated to be 40 percent).2 Understanding the new infrastructure required to meet these initiatives—and

how best to build that infrastructure—is needed to succeed in this changing commercial landscape.

The most prominent climate change initiative is achievement“net-zero” emissions. Net-zero emissions

initiatives aim to reduce GHG emissions from industrial operations, to the largest extent possible, and

then offset any unavoidable GHG emissions through programs such as the planting of trees that remove

carbon from the atmosphere. Many pledges to achieve net-zero emissions—by either governments or

companies—target the years 2050 or 2070.3 While this may sound like a long way out, action in the short

term is necessary to meet these goals. This is particularly true in the infrastructure sector, where large

projects are planned, engineered, designed, and constructed over years or even decades.

Designing projects to meet corporate net-zero emissions targets and/or to address regulatory requirements

associated with net-zero goals is particularly challenging for the infrastructure sector, given that a

substantial portion of its emissions are released before an asset is even used. The production of materials

accounts for 15–20 percent of building emissions and 50–60 percent of infrastructure emissions.4 This

is why recent legislation in the United States has targeted the emissions profile of materials used in

infrastructure projects and why the federal government is promoting projects that prioritize increased

energy efficiency.

Many new requirements address the “embodied carbon” of construction materials and the construction

process. Embodied carbon includes any carbon dioxide (CO2) created during the manufacturing

of building materials, including material extraction, transport to manufacturer, and manufacturing.

Embodied carbon also includes the transport of materials to the jobsite and construction practices

used. Other examples are the CO2 produced from maintaining a building and eventually demolishing

it, transporting the waste, and recycling such waste. Importantly, embodied carbon is distinct from

operational carbon (which is used, for example, in heating a building). Consideration of embodied carbon

in infrastructure projects—at least on a large national scale—is a new development.

Net-zero initiatives will require that companies involved in construction and infrastructure projects

undertake new considerations for decreasing carbon emissions during all phases of a project including

design, use (e.g., energy consumption), repair and maintenance, and end of life (e.g., demolition and waste

Published in The Construction Lawyer Volume 43, Number 4, ©2024 by the American Bar Association. Reproduced with

permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any

means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Forum on Construction LawThe Construction Lawyer Fall 2024

47

versus recyclability).5 This will create challenges for an industry that has traditionally operated in a siloed

manner with prescribed roles—owners finance, architects design, contractors build, etc. Nevertheless,

the challenge posed by climate change requires unprecedented market transformation, which, in turn,

will require new collaborations—starting with project design and material selection. As more owners

incorporate emission reduction goals into sustainability targets and such targets are included in technical

and contract documents, there will be new parameters to consider during a project’s construction phase.

Product substitutions or value engineering proposals may be impacted. What was previously considered

a technically equivalent material or equipment may not be accepted by the owner, and a substitution

that achieves the same “construction purpose” may be unacceptable due to its higher embodied carbon

emissions profile.

This article identifies some of the critical levers that will impact project development decision points and

explores the infrastructure sector’s current efforts to achieve net-zero GHG emissions. Focus is given to

the energy sector given its critical role in the net-zero transition. This article also provides commentary on

some of the considerations that owners, architects, engineers, and contractors will want to consider as net-

zero policies become more prevalent and begin to catalyze market transformation.

I. What Climate Change Initiatives Are We Talking About?

Net-zero and other climate initiatives support the overarching international goal to limit global warming

to well below two degrees Celsius as compared to pre-industrial levels. This goal was set by the United

Nations’ Intergovernmental Panel on Climate Change (IPCC) at the 2015 UN Climate Conference (COP

21) in Paris. The “Paris Agreement” has been signed by 196 countries. To reach this temperature goal,

countries need to achieve carbon neutrality by 2050.6

Most G20 countries have pledged to achieve carbon neutrality by 2050 or 2070. According to the

International Monetary Fund (IMF), achieving net-zero emissions by 2050 will require substantial

infrastructure investments in the range of 0.5 to 4.5 percent of gross domestic product over the next

decade.7 This will require both government and private investment, as well as risk sharing through

insurance and guarantees.

Indeed, private investment is already pushing to align investment portfolios with net-zero emissions

goals. In some cases, investment stems from environmentally conscious investors concerned about the

implications of climate change, while in other cases, investment aims to “future-proof” economic value

and investment returns of infrastructure projects that may be impacted by climate change forces, such

as extreme weather (e.g., sea level rise impacting coastal infrastructure). Various initiatives are being

developed to inform the market of which investments have the “best” net-zero profiles. For example,

Moody’s Investor Services announced the launch of a scoring system for corporate net-zero pledges

“aimed at enabling investors to evaluate and compare companies’ decarbonization plans and actions.”8

Infrastructure that does not account for resiliency needs or increasing demand for net-zero emissions

capabilities runs the risk of becoming a stranded asset. Additionally, corporate decarbonization pledges

continue to drive investment in infrastructure projects with reduced embodied emissions. For example,

Salesforce has set a goal of 80 percent reduction in embodied carbon in its construction efforts by 2030

and to be net-zero by 2050.9 Additionally,Forbes recently recognized seven different real estate investment

trusts (REITs) for their respective targets to reduce GHG emissions by 2050.10

II. What Emissions Are We Talking About?

To assess how a company might be expected to achieve net-zero status, it is rst important to understand

what types of GHG emissions are considered. The World Resources Institute’s “Greenhouse Gas Protocol”

is a commonly used framework that places emissions into three categories: Scope 1, Scope 2, and Scope 3.