The low carbon building market is estimated to be valued at USD 654.84 Bn in 2024 and is expected to reach USD 1,720.5 Bn by 2031, growing at a compound annual growth rate (CAGR) of 11.8% from 2024 to 2031. The low carbon building market is driven by the need for renewable energy solutions and efforts to reduce greenhouse gas emissions from the building sector.

Market Driver - Increasing Awareness of Climate Change

As the impacts of climate change become more apparent through extreme weather events, people are becoming increasingly concerned about global warming. As awareness increases, more people are educating themselves on the relationship between buildings and climate change.

The materials, construction, and day-to-day functioning of a conventional building releases a lot of carbon into the atmosphere over its lifetime. Customers are realizing that the choices made regarding a building's design and operation can significantly help or hamper global efforts to curb climate change. This realization is driving demand for low carbon buildings which are energy efficient, use sustainable materials, and integrate renewable energy to reduce their environmental impact.

Developers and building owners have taken note of this shifting consumer sentiment. They know that being perceived as sustainability leaders can help their branding and give them a competitive edge in the low carbon building market. Manufacturers of green building products have ramped up research & development to meet the growing needs of an eco-conscious customer base. Overall awareness of how buildings link to global warming has become a major driver propelling the low carbon building market.

Market Driver - Stringent Government Regulations Promoting Green Construction

In response to public demand for stronger climate policy, many governments worldwide have introduced stricter building codes and regulations in recent years. These are aimed at curbing emissions from the building sector by mandating greater energy efficiency in new construction.

For example, the European Union has set sector-specific benchmarks through its Energy Performance of Buildings Directive which member states must implement at a domestic level. In the US, states like California and New York have led the nation with some of the toughest low carbon building standards domestically.

Financial incentives are also being put in place to encourage green building practices. Tax credits are offered for developments that pursue third party green certifications from LEED, Living Building Challenge, Passive House etc. Public funding supports research into innovative low carbon building materials and systems.

Governments are demonstrating that green building is a public policy priority, generating greater investor interest and private sector commitment towards low carbon solutions. Over time, regulations are anticipated to become even more rigorous, ensuring this remains a main growth driver for the low carbon building market.

Market Challenge - Limited Industry Expertise in Low-carbon Construction

One of the key challenges currently facing the low-carbon buildings market is the limited industry expertise in designing, building and operating truly low-carbon structures. While there is growing awareness of the importance of reducing embodied and operational carbon in buildings, traditional building practices were not developed with sustainability as a core priority.

As a result, most construction firms, architects, engineers and tradespeople have relatively little hands-on experience delivering projects that minimize carbon footprint. This creates execution risks around ensuring designs that prioritize low-carbon outcomes can still be built cost-effectively within typical construction timeframes and budgets. There is also a shortage of specialists with in-depth knowledge around evolving low-carbon building technologies, materials, and processes.

Overcoming these expertise gaps will require significant training and upskilling of the existing industry workforce. Players in the low carbon building market will also need to change procurement processes to properly incentivize low-carbon design and construction practices.

Market Opportunity - Integration of Renewable Energy Systems like Solar and Wind in Buildings

One major opportunity for the low-carbon buildings market lies in more comprehensive integration of renewable energy systems directly into building design. By generating clean power on-site through solar photovoltaic panels, small wind turbines, or other renewable microgeneration technologies, buildings can substantially reduce their reliance on dirtier grid electricity and lower operational carbon footprint.

With renewable energy technology costs declining, building-integrated applications have become increasingly economically viable compared to traditional construction. Forward-looking developers see significant value in developing expertise around optimizing building envelopes, roofs, facades and other elements to harvest clean energy.

As policies like renewable portfolio standards increase demand for such systems, skills around “building as a power plant” have potential for growth. Adoption of integrated renewables also helps building owners reduce long-term energy costs through revenue from excess power fed back to the grid.

Focus on energy efficiency and renewable energy sources: Players like Schneider Electric, Johnson Controls and United Technologies Corp have focused heavily on making buildings more energy efficient through various technologies and solutions.

Adopt whole building design approach: Leaders like Siemens, Johnson Controls and Honeywell have advocated for a whole building design approach where low carbon strategies are integrated from the design phase itself rather than as add-ons.

Offer building life-cycle services: Majority of the top players like Johnson Controls, Honeywell and Schneider Electric have transitioned from being product vendors to offering comprehensive building life-cycle services like energy audits, retrofits, facility management etc.

Partnerships and acquisitions: Players grow capabilities and market share through strategic partnerships and acquisitions. For example, in 2021 Johnson Controls acquired Tempered Networks to enhance its building cybersecurity portfolio.

Insights, By Type: Growing Awareness of Energy Efficiency Drives Demand for Energy-Efficient Materials

In terms of product type, energy-efficient materials contribute 48.1% share in the low carbon building market in 2024. This is due to growing awareness about energy efficiency among builders and consumers. Various energy-efficient material options such as insulated glazing, aerogel insulation, radiant barrier sheathing, and insulating concrete forms allow builders to significantly reduce a building's energy needs for heating and cooling.

Insulated glazing or double/triple glazing is becoming a standard in commercial and residential construction due to its ability to prevent heat transfer through windows. The extra layers of glass and insulating gas in between drastically reduce conduction and convection heat losses. Radiant barrier sheathing is another popular energy-efficient building material seeing rising installments. It helps stabilize indoor temperatures and minimize the need for space cooling in hot weather.

Aerogel is an ultra-light synthetic porous material with extremely low thermal conductivity, allowing it to insulate buildings four times better than fiberglass batts of the same thickness. Overall, the energy and money savings potential of advanced insulations like aerogel are boosting their acceptance in the low carbon building market.

Insights, By Applications: Commercial Buildings Lead Adoption of Low Carbon Technologies

The commercial sector accounts for 51.2% share of the low carbon building market in 2024 in terms of applications. It is due to the scale of construction activity and focus on energy management. Commercial builders have strong incentives for low carbon building designs to reduce operating expenses and appeal to environmentally-conscious tenants.

Low carbon HVAC systems find widespread adoption in the commercial segment. District energy plants with cogeneration, geothermal and solar thermal capabilities enable commercial parks and campuses to access clean heating and cooling in an efficient, low emissions manner. Chilled beam systems are also gaining traction as they use 30-50% less energy than standard variable air volume units while maintaining occupant comfort.

Low carbon building certifications continue enhancing the appeal of certified commercial space to businesses invested in sustainability. Measures like adaptive reuse of existing building stock, integration of renewable energy generation and electric vehicle infrastructure further strengthen the green credentials of certified commercial developments. This enables property owners/developers to charge premium rents while meeting business sustainability goals.

Insights, By Material: Wood Emerges as the Carbon-friendly Building Material of Choice

Among different sustainable materials, wood has emerged as the leading low carbon option in the low carbon building market owing to various superior properties. Fast-growing softwood plantations and engineered wood products allow wood buildings to be constructed with a lower embodied carbon footprint compared to alternatives like concrete and steel.

Cradle-to-gate life cycle assessments find wood sequesters more carbon than the amount released during its production, harvesting, transport and eventual disposal. Additionally, wood is a renewable resource that does not require intensive fossil fuel usage in processing like some minerals.

Aesthetically, natural wood finishes are preferred for their warmth and appeal. In the commercial sector, exposed wood interiors are linked to higher occupant well-being, satisfaction, and productivity. This growing recognition of wood's environmental, technical, and experiential merits relative to fossil-intensive alternatives is cementing its position as the material of choice in low carbon building.

• The completion of One Central Park in Sydney serves as a prime example of low carbon building practices. The building features vertical gardens and energy-efficient systems, significantly reducing its environmental impact and serving as a model for future sustainable developments.
• Buildings account for nearly 40% of global carbon emissions, highlighting the critical need for low carbon construction practices. Adopting sustainable materials and low carbon building technologies could reduce emissions by up to 50% by 2050, according to industry reports.
• The energy-efficient materials segment held the largest share (48%) in the global low carbon building market in 2023.
• The renewable energy systems segment is projected to grow at a CAGR of 16.1% (2024-2034).
• Europe held a 46% revenue share in the global low carbon building market in 2023. Asia Pacific is expected to experience the fastest growth in the global low carbon building market due to government incentives for sustainable construction.

The major players operating in the low carbon building market include Siemens AG, Honeywell International Inc., Johnson Controls International plc, Schneider Electric SE, Trane Technologies plc, Mitsubishi Electric Corporation, ABB Ltd, Kingspan Group plc, Skanska AB, Lendlease Corporation Ltd, LafargeHolcim Ltd., Saint-Gobain, and BASF SE.

• In 2023, Kingspan Group plc acquired Troldtekt A/S, a Danish company renowned for its sustainable wood-based acoustic panels. This strategic move adds eco-friendly acoustic solutions to Kingspan's product portfolio, further enhancing its focus on low carbon building materials and solutions. The acquisition aligns with Kingspan's commitment to sustainability and innovation in the low carbon building market.

• By Type
  • Energy-Efficient Materials
  • Renewable Energy Systems
  • Low Carbon HVAC Systems
  • Green Building Certifications
  • Others
• By Application
  • Commercial
  • Residential
  • Industrial
• By Material
  • Wood
  • Bamboo
  • Recycled Steel
  • Recycled Plastic
  • Other Sustainable Materials