Megatrends and Their Consequences for German Real Estate

Table of Contents

List of Abbreviations

List of Figures and Tables

1 Introduction
1.1 Problem Definition and Objectives
1.2 Course of Investigation

2 Fundamentals and General Framework
2.1 Megatrends, Sustainability, and Green Buildings
2.2 German Real Estate Industry

3 Factors of Green Building Movement
3.1 Global Change and the Need to act
3.2 Media, Policy, and Culture
3.2.1 Layers of implementation
3.2.2 Media and Public Relations
3.2.3 Culture
3.3 Impacts of Green Building on Economical, Ecological, and Social Factors
3.4 Legal Framework and Certificates
3.4.1 Germany’s Legal Framework
3.4.2 LEED
3.4.3 DGNB
3.4.4 National and International Norms
3.5 Demand and Barriers
3.6 Summary

4 The German Real Estate Market
4.1 Macro Analysis
4.2 Possibilities of Energetic Renovations Using the Example of an One Family House
4.3 Adaption to Existing Buildings
4.4 Past Trends
4.5 Future Implications
4.6 International Settlement

5 Conclusion and Future Work

Reference List

Appendix II

Appendix III

Appendix IV

Appendix V

Appendix VI

List of Abbreviations

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List of Figures and Tables

Figure 1 (Adapted from “CO2 Emissions from Fuel Combustion 2009 - Highlights,” by IEA, 2009)

Figure 2 (Adapted from “Nachhaltigkeit in der Immobilienwirtschaft: Eine empirische Untersuchung des deutschen Marktes,” by Reichhardt & Rottke, 2010, I (p.14); “Energieeffizienz. Neue Spielregeln auf dem deutschen Markt für Gewerbeimmobilien,” by Friedemann, Roden, & Scheunemann, 2007, p. 4; “Zukunft des Deutschen Gütesiegels Nachhaltiges Bauen,” by Sedlbauer, 2009, p. 14)

Figure 3 (Adapted from “Struktur des Energieverbauchs Deutschland,” by BMWI, 2009).

Figure 4 (Adapted from “CO2 Emissions from Fuel Combustion 2009 - Highlights,” by IEA, 2009; “Global Annual Temperature Anomalies (Land Meteorological Stations) (1880-2008),” by Hansen, Ruedy, Sato, & Lo, 2009)

Figure 5 (Adapted from “Preise: Daten zur Energiepreisentwicklung,” by Destatis, 2009).

Figure 6 (Adapted from “The Greening of U.S. Investment Real Estate: Market Fundamentals, Prospects and Opportunities,” by Nelson, 2007, p. 5)

Figure 7 (Adapted from “Green Buildings, Greenwashing and Future Green Values,” by Giljohann-Farkas & Pflederer, 2008, p.3)

Figure 8 (Adapted from “Leadership in Energy & Environmental Design,” by USGBC,

Figure 9 (Adapted from “CO2 Gebäudereport 2007,” by Becker, et al., 2007.)

Figure 10 (Adapted from “Globalization and Global Trends in Green Real Estate Investments,” by Nelson, 2008, p. 5.)

Table 1 (Adapted from “Wirtschaftlichkeit energiesparender Maßnahmen im Bestand vor dem Hintergrund der novellierten EnEV,” by Enseling & Hinz, 2008, pp. 31-36.)

Table 2 (Potential of energy saving in existing buildings built before 1979. Own calculation, based on assumptions from: “Bauen als Klimaschutz,” by Auer, Heymann, & Just, p.21, 2008; “Green Buildings, Greenwashing and Future Green Values,” by Giljohann-Farkas & Pfleiderer, 2008, p. 4, “Klimawandel und Branchen: Manche mögen's heiß!,” by Heymann, 2007, p. 17; “Nachhaltigkeit in der Immobilienwirtschaft: Eine empirische Untersuchung des deutschen Marktes,” by Reichhardt & Rottke, 2010, Ökonomie vs. Ökologie: Nachhaltigkeit in der Immobilienwirtschaft?,p. 47.)

1 Introduction

At the beginning of 2009, the owner of the Empire State Building unveiled his plan to “go green”. The world famous skyscraper was completed in 1931 in New York, USA. The Art Deco building is currently in the midst of a $500m renovation, where $100m of these funds are designated for the green initiative. The green renovations are expected to decrease energy expenditures by 38 percent or $4.4m annually (Jonas, 2009).

The example of the Empire State Building is not unique, since increased environmental awareness has affected nearly every industry. Companies across all industries and nations have launched green initiatives in order to improve their environmental performance and in response to the expressed concerns regarding their immediate environment. Currently, corporations compete to adopt and implement sustainable policies.

Particularly the role of the real estate industry in reducing the environmental burden is considered to be the most important, as this industry is one of the largest emitters of harmful chemical substances and a major user of natural resources (Nelson, 2007, p. i). However, it is not enough to consider only the ecological aspects of real estate. This is because real estate, as a commodity, has an enormous economical impact. Other dimensions including economic and social aspects must also be examined.

The term sustainability unites the three relevant dimensions. Over the last 20 years, bringing environmental protection to the same level as economic development and social concerns, sustainability has become a worldwide guiding principle. Sustainable development takes the future of mankind into account (Grunwald & Kopfmüller, 2006, p. 7). In the context of global challenges, sustainability means ensuring the addressing of future generation’s needs. Rorsted (2009) explain it as follows:

“We have to encourage innovative and sustainable consumption, since world’s population, average living standard, and thus consumption steadily increases. Thereby resource exploitation as well as emissions advance rises, too. Therefore, we have to develop better products and solutions and simultaneously facilitate responsible purchase decisions and product applications for consumers” (Rorsted, 2009).

In contrast to other industries, the real estate industry has been slow to develop sustainable practices. However, today, the idea of sustainability greatly influences actions and motivations associated with the real estate industry. Efforts to create sustainability in real estate are reflected in the names of a large number of the development of building labels, including Green Buildings, Sustainable Buildings, or Zero Emission Buildings. In Addition, more and more developers, architects, engineers, property owners, and lenders consider sustainability issues when planning, constructing, renovating, or living on property.

Sustainability and real estate are compatible. In future, properties will be evaluated according to their fulfillment of sustainable criteria. This process will create more harmonious spaces for humans to interact with the natural world.

1.1 Problem Definition and Objectives

Sustainability is an undeniable megatrend in the real estate industry. Recently, there has been a rapidly growing concern about environmental issues and a rising interest in sustainable practices. Increased sustainable consciousness has produced the rapid growth of green investments in the real estate industry. Tenant space requirements, governmental regulations, and demands for socially responsible investments (SRI), are primary motivations for this growth. However, real estate is not comparable to other investment assets that gained a huge enhancement, due to early understanding of social responsibility (Lorenz & Lützkendorf, 2005, p. 2). Real estate is a special investment asset class and needs to be examined separately.

Real estate is a long-term investment. Therefore, it is necessary to pay special attention to long-term trends, regardless of short-term volatility and real estate industry cycles. Regarding the relay of the buy-and-sell strategy with the buy-and-hold strategy, sustainable development of property portfolios becomes more and more valid (Baba, Braun, Heising, Heyn, Pfeiffer, & Simons, 2009, p. 3). Hence, a number of international and national, governmental and non-governmental initiatives have been developed to promote Sustainable Buildings. However, to date, not enough long-term experience has been gained.

This study aims to give a brief overview of the terms and methodology, to summarize past and current developments, to identify the key drivers of development, and to forecast the progress of the Green Building Movement. Furthermore, this study will focus on the consequences for the German real estate market with in the context of megatrends and the future of the industry. In addition, evidence, as to whether sustainability is going to become a factor of value or is only a short-term trend, still needs to be found.

1.2 Course of Investigation

The section two of this work will outline fundamental terms and methodologies. Terms including Green Buildings and sustainability will also be defined, because the definition and the placement of these terms in the context of the real estate industry is crucial to the understanding of this work. This context is further influenced by megatrends. Over the course of the second chapter, this discussion is applied to the situation in Germany. Furthermore, a justification for a partial focus on the German real estate industry is given.

Based on this basic understanding, subsequent to the second chapter, the third chapter discusses various aspects of the Green Revolution. Initially, they are analyzed in the context of associating megatrends and then broken down into the elemental push and pull factors of the megatrend Green Buildings. These factors are subdivided according to factional economic groups. These groups are important to further analysis within the scope of this study.

The fourth chapter discusses the preceding defined fundamentals in the context of the German real estate industry and the future consequences of their application. The possible effects of sustainable development of the German residential real estate industry are analyzed based on a previous evaluation of a single example.

Recapitulating study findings, chapter five gives an outlook for possible implications for the German real estate industry. Furthermore, a recommendation for future research is given.

2 Fundamentals and General Framework

The subsequent chapter introduces the topics of Green Building and the German real estate industry. For further understanding, the term Green Building is defined in the context of megatrends. In addition, the intimate correlation between this term and sustainability is examined. To enable further examination on this research topic, the German real estate industry is evaluated and broken down into its essential components.

2.1 Megatrends, Sustainability, and Green Buildings

Megatrends

Demographic change, globalization, urbanization, and climate change have challenged mankind since the beginning of the 21st century. The demographic shift of the Western societies is, as opposed to the exponentially growing emerging market countries, characterized by a shrinking and ageing population (UNPD, 2008). Whereas the world’s population is estimated to gain up to 9.1bn people by the year 2050^[1], Germany, for example, will have to cope with a significant population decrease. The German Population is anticipated to decline under 70m by 2050^[2], with an average age of 64 (Destatis, 2009, p. 12; UNFPA, 2009).

Globalization, in terms of the economy, is considered from varying perspectives as: (1) a growing network, such as tourism, language uniformity, information and communication, and cargo, (2) generating increased trade volume and foreign investments, (3) a homogenization of financial markets, and (4) a growing number of multinational corporations. Each of these four perspectives reflect central topics pertaining to globalization and have generated significant upturns since 1985. These trends are captured in figure one (Bundeszentrale für politische Bildung, n.d.).

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Figure 1. Average growth of annual world’s GDP in $ bn (100=1971; exchange rate based on year 2000). Adapted from “CO2 Emissions from Fuel Combustion 2009 - Highlights,” by IEA, 2009.

Since 2008, more than half of the world’s population has been living in cities and in urban areas. It is estimated that by 2030 this number will increase to 60-70 percent (UNFPA, 2007, p. 11). Consequently, real estate investors will be faced with the challenge of deciding which regions to invest in. This is because the speed, size, and location of the growth are not fixed and vary from region to region (Linking Population, Poverty, and Development, 2007).

The Stern Review on the Economics of Climate Change cautions against climate change accompanied by global risks (Stern, Executive Summary, 2007, p. i). Stern (2007) claims sustainable action from society, policy makers, and economy, due to the fact that climate change “threatens the basic elements of life for people around the world - access to water, food production, health, and use of land and the environment” (pp. XVI - XIX).

Such megatrends need to be taken into account, particularly by the real estate industry. The question arises as to where and in what kind of real estate it is reasonable to invest in, in order to ensure a sustainable cash flow and yield (Linsin, Schanz, & Wenzel, 2007, p. 2). This dilemma implies a call for sustainable investment opportunities.

Sustainability

Housing constitutes a basic human need and has therefore a large share of the economy. Currently 85 percent of net capital assets are invested in real estate (Lorenz & Lützkendorf, 2005, p. 11). However, despite the Green Revolution that is rapidly affecting the entire world, the sustainability of real estate investments is not guaranteed (Yudelson, 2008, p. 1). According to the report Our common future (1987), “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987, p. 43). Sustainable development is inseparably connected with responsibility for future generations (Grunwald & Kopfmüller, 2006, p. 27).

The term sustainability was first used at the beginning of the 18th century in the context of forestry and forests suffering from over-exploitation. Due to a scarcity in wood stock piles, sustainable farming should require that the rate of felling lies below the growth rate (Grunwald & Kopfmüller, 2006, p. 14). Modern definitions for the term sustainability assume either a single-bottom or a triple-bottom line basis. Whereas the single-bottom line has an underlying ecological motive, the triple-bottom line concept rejects an ecological precedence and stresses equally ranked dimensions. These dimensions are classified as ecological, economical, and social (Grunwald & Kopfmüller, 2006, pp. 41-46).

Sustainability and Real Estate

When adapting the latter key concept, that prevailed over the former, to buildings, various requirements must be met including: coverage of demand for quantity and quality; minimization of life-cycle costs; the maintenance or enhancement of the property value; minimal space use; the reduction of pollutants; reasonable use of resources; the reduction of emissions and other environmental dangers; and the protection of health and comfort of occupants (Grunwald & Kopfmüller, 2006, p. 57; Lorenz & Lützkendorf, 2005, p. 21; Reichardt & Rottke, 2010, p. 30). The term Green Building is usually linked only to ecological criteria. Thus, social and economical criteria frequently remain unaddressed (Gromer, Lützkendorf, Rohde, & Schäfer, 2008, p. 27). Nevertheless, Yudelson (2008) describes Green Buildings as “energy-efficient, healthy, productive ... [buildings] that reduce or minimize the significant impacts ... on urban life and on the local, regional, and global environments” (p. XV).

Energy efficiency is frequent erroneously used as a synonym for Green Buildings. In fact, energy efficient measures are sustainable, however, sustainable measures do not have to be energy efficient (Buechner & Friedemann, 2010, pp. 69-70). For instance, an environmentally friendly paint on the exterior wall, do not have any repercussions on energy efficiency. The term energy efficiency used in this work is a measure, which refers to the proportion within a fuel that is converted into given a final output, which is in terms of real estate heating or electric energy for electronic devices. With improving efficiency it is meant, for instance, using less gas to heat a specific building to a given level of temperature (Stern, 2007, p. 219).

Within the scope of this study, Green Buildings meet the three dimensions of previously discussed requirements for sustainability. In regards to the economic aspect of, acquisition costs and construction costs as well as operating costs have significant impacts (BMVBS, n.d.b). Thus, the focus of Green Buildings lies in diminishing life-cycle costs (LCC). As figure two illustrates, operating costs generate approximately 80 percent of total LCC, which is the largest share in LCC. Green Buildings could reduce up to 50 percent of these costs (Friedemann, Roden, & Scheunemann, 2007, p. 4; Reichardt & Rottke, 2010, p. 31). When it comes to the ecological dimension, resource-conservation construction and minimal resource consumption become prominent themes. In this way, environmental burden is lowered and the ecological footprint is reduced (BMVBS, n.d.b; Eichholtz, Kok, & Quigley, 2008, p. 2). The social and cultural dimension highlights the composition and the aesthetic of the building, as well as its barrier-free accessibility, its healthy living environment and level of comfort (BMVBS, n.d.b).^[3]

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Figure 2. Average share of LCC in buildings. Adapted from “Nachhaltigkeit in der Immobilienwirtschaft: Eine empirische Untersuchung des deutschen Marktes,” by Reichhardt & Rottke, 2010, I (p.14); “Energieeffizienz. Neue Spielregeln auf dem deutschen Markt für Gewerbeimmobilien,” by Friedemann, Roden, & Scheunemann, 2007, p. 4; “Zukunft des Deutschen Gütesiegels Nachhaltiges Bauen,” by Sedlbauer, 2009, p. 14.

2.2 German Real Estate Industry

The German real estate industry constitutes 11 percent of German production overall and occupies 12 percent of all insurable employment opportunities. Furthermore, as mentioned above, 85 percent of net capital assets are invested in real estate and 55 percent of all investments take place in the real estate industry (Hegner, 2009, p. 18). The real estate market can be roughly divided into two categories: residential real estate and commercial real estate. The commercial real estate market is characterized by a great extent of leasing contract freedom, whereas the residential property market is bounded to rigorous laws and regulations that advantage tenant rights (Rebitzer, 2005, p. 14).

Regarding the energy consumption of the two real estate sectors residential and commercial, figure three shows that households have tended to consume an average of 28.1 percent of total primary energy provided since 1990. The commercial industry accounts for the smallest share in primary energy consumption. (BMWI, 2009). Also, due to this fact, this study will focus on the residential real estate industry.

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Figure 3. Structure and individual share of primary energy consumption in Germany. Adapted from “Struktur des Energieverbauchs Deutschland,” by BMWI, 2009.

However, the German residential real estate industry is not homogenous. Therefore a differentiated inspection of the building sector is necessary. Germany accommodates 39.7m private households, 74 percent of which were built before 1978 (Destatis, 2006). Obviously, this constitutes the majority of Germany’s accommodation units. In addition to economic interest, in existing residential real estate, the ecological impact is also vast. This real estate sector accounts for 23 percent of all carbon dioxide emissions in Germany, compared to 14 percent of all non-residential buildings (Auer, Heymann, & Just, 2008, p. 19). Therefore, this study will focus on the residential real estate industry and especially on existing residential buildings.

3 Factors of Green Building Movement

In this section various factors of the Green Building Movement are analyzed and discussed. Starting with the global change process, an overview of environmental and structural drivers is given. Afterwards, various push and pull factors are introduced and evaluated and the regulatory framework for Green Buildings is investigated and consolidated. Eventually impacts, demand, and barriers concerning such buildings are considered.

3.1 Global Change and the Need to act

The world is currently in the midst of change. Global warming, environmental disasters, rising energy and resource prices, and international conflicts increasingly dominate our everyday life. It would be difficult to avoided addressing wide-spread public issues, such as climate change. The impact of human beings and advanced technologies on global warming and carbon dioxide^[4]emissions is indisputable (Averyt, et al., 2007, pp. 237, ch. 3). According to the latest assessment report of the Intergovernmental Panel on Climate Change (IPCC), “Warming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global average sea level“ (Averyt, et al., Summary for Policymakers, 2007b, p. 5). Figure four shows the increase of global temperature and the progression of carbon dioxide content in the atmosphere. The correlation of the two progressions is evident. Given that this development is referable to human behavior, only the human being can decelerate or even stop it (Brey, 2010, p. 328).

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Figure 4. Development of carbon dioxide concentration in the atmosphere and development of surface average temperature. Data is relative to 1971 base mean and 1951-1980 base period means respectively. Adapted from “CO2 Emissions from Fuel Combustion 2009 - Highlights,” by IEA, 2009; “Global Annual Temperature Anomalies (Land Meteorological Stations) (1880-2008),” by Hansen, Ruedy, Sato, & Lo, 2009.

Due to the development of the carbon dioxide concentration in the atmosphere and the increase of global surface temperature, the IPCC predicts potential temperature increases under different conditions between 1.8°C and 6.4°C in the years 2090 to 2099. This prediction is based upon the perception that 11 of 12 years, from 1995 to 2006, rank among the 12 warmest years in the history of instrumental record of global surface temperature. The observed increasing temperature support the conclusion that the global climate change of the past 50 years can not be explained without considering external forces (Averyt, et al., Summary for Policymakers, 2007b, p. 10).

Mountain glaciers, snow covers, and the poles are shrinking, which will result in a rise in the sea level between 0.18 and 0.59 m (Averyt, et al., Summary for Policymakers, 2007b, p. 13). Thus, global warming is especially a threat to coastal areas. The IPCC already observed a sharp increase of sea level by approximately 200 mm, referred to the base year 1870 (Averyt, et al., Summary for Policymakers, 2007b, p. 6). Regions, with a higher risk of flooding, due to high water levels of rivers, have to invest anymore in flood prevention (Auer, Heymann, & Just, 2008, p. 6).

However, temperature increase does not cause just flooding, but also further environmental disasters, which threaten the population. Extremely weather conditions can occur including heat waves, heavy precipitation, and intensive storms are some impacts (Averyt, et al., Summary for Policymakers, 2007b, p. 15). Agricultural cultivation is aggravatingly vulnerable, as well. Nevertheless, the IPCC made mistakes and environmental data should be valued carefully, since large parts of environmental analyzes are based on the work of IPCC (Edenhofer, 2010).

Furthermore, figure five shows that the prices for the finite fossil energy sources have risen heavily in recent years. Most researchers predict higher energy prices for the future. Nevertheless, forecasts concerning the development of energy prices were almost never accurate. With regard to the real estate markets and real estate occupants, energy costs have already become a “second rent” (Ens, 2007, p. 90).

Prices for raw materials have also risen significantly. Since February 2005, the price for steel has risen by over 50 percent. Moreover, prices for copper and cement have doubled during the past 10 years (Halstenberg, 2009, p. 11).

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Figure 5. Price development of imported petroleum and gas from 2000 through the end of 2009 relative to year 2005 in Germany. Adapted from “Preise: Daten zur Energiepreisentwicklung,” by Destatis, 2009.

Because buildings are the major emitters of carbon dioxide, the real estate industry plays a major role in fighting these changes (RICS, 2007, p. 4). The building sector consumes up to 40 percent of all energy used, obstructs nearly a third of all available resources, uses 20 percent of fresh water, and occupies 10 percent of available land (RICS, 2007, p. 4). At the same time, it is responsible for 40 percent of carbon dioxide emissions and up to 50 percent of total generated waste (UNEP, 2003, pp. 6-8). However, some sources estimate higher levels of resource consumption and generated emissions (Halstenberg, 2009, p. 11; Lorenz & Lützkendorf, 2005, p. 11; UNEP, 2003, p. 6). Thus, Green Buildings have the potential to strongly reduce its impact on environment and economy.

The risks to real estate companies ignoring the challenges presented by global change processes, such as global warming, were analyzed and concluded by Llewellyn (2007) as follows:

“Global warming ... is likely to prove one of those tectonic forces that - like globalization or the ageing of populations - gradually but powerfully changes the economic landscape in which [businesses], and one that causes periodic sharp movements in asset prices. Firms that recognise [sic] the challenge early, and respond imaginatively and constructively, will create opportunities for themselves and thereby prosper. Others, slower to realise [sic] what is going on or electing to ignore it, will likely do markedly less well.” (Llewellyn, 2007, p. 1)

3.2 Media, Policy, and Culture

Today, Green Building is prominently discussed in media, policy, and society. The world’s primary energy^[5]consumption has doubled since 1970 and is forecasted to continue growing, especially in emerging markets such as China and India. These nations have become major primary energy consumers (Bundesumweltministerium, 2008, p. 4). As worldwide environmental pollution accrues, due to increasing energy consumption, international climate protection remains the toughest global challenge. Policy still will be a major motivating force in the Green Building movement. However, media has a large influence as well. Furthermore, the culture shapes the perception of sustainability and by association Green Buildings.

3.2.1 Layers of implementation

International Level

The discussion and alertness of sustainable development did not arise in recent years. However, it has been recognized since 1970 (Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit, 2009). In The Limits to Growth, a report published 1972 by the Clube of Rome, Prof. Dennis Meadow and his research team examined the earth’s environmental state and the consequences of the growing population, exploitation of resources and environmental pollution. The bottom line of this study is that persisting behavior trends would result in a global collapse during the next 100 years. The United Nations (UN) have since created an environmental program called United Nations Environmental Program (UNEP), which established several sustainable development programs in cooperation with UN organizations (Grunwald & Kopfmüller, 2006, pp. 17­18).

Considering the worldwide recession, unemployment, rising energy prices, and so forth, the United Nations World Commission on Environment and Development (WCED) published a report titled Our Common Future, also known as the Brundtland Report, which defined the term sustainable development and contributed an ethical perspective to a predominantly ecological discussion (Grunwald & Kopfmüller, 2006, pp. 20-21).

At the suggestion of the WCED, the members of the UN signed the United Nations Framework Convention on Climate Change (UNFCCC) at the 1992 Earth Summit in Rio de Janeiro, Brazil. This document signified an agreement upon a continuous negotiation process at the international level. The participating countries declared that in annual conventions manifold aspects of international climate policy would be discussed (Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit, 2009). Furthermore, the Agenda 21 was decided upon and ratified. Agenda 21 is an action program for the 21st century that is subdivided in four major topics: social and economic aspects, conservation and management of resources for development, strengthening the role of major groups, and the development of a means of implementation (UN Economic and Social Development, n.d.). The best-known resulting development is the Kyoto Protocol, which was negotiated in 1997 at the 3rd conference of parties in Kyoto, Japan, and ratified 2005. The Kyoto Protocol “sets binding targets for 37 industrialized countries and the European community for reducing greenhouse gas ... emissions” (Kyoto Protocol, n.d.), and introduces an international emissions trading market.

International policy is assisted by the IPCC, created in 1989 by UNEP and the World Meteorological Organization (WMO). Its task is to support the international discussion with needed scientific material and forecasts, developed by more than 1,000 participating scientists all over the world (IPCC, n.d.).

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^[1]Germany’s current population is 82.002m people (Destatis, n.d.).

^[2]The World’s current population is 6.829bn people (Destatis, 2009).

^[3]Operating costs are expenses in the using phase of a building. Not only costs for energy are operating costs, which account for 50 percent of operating costs, but also expenses for maintenance, management, real estate taxes, insurances, utilities, and supplies.

^[4]Carbon dioxide (CO2) is a gas at standard temperature, which is a chemical compound of two oxygen atoms bonded to a single carbon atom (RICS, 2009, p. 2). In context of this study, carbon dioxide also stands for equivalent gases such as methane (CH4), nitrous oxide (N2O), and chlorofluorocarbons (CFCs), which can be grouped as greenhouse gases (GHG).

^[5]Primary energy is the energy stored in natural resources prior any human-made transformations. Examples of primary energy resources include coal, crude oil, gas, sunlight, wind, running rivers, vegetation, and uranium.