Priorities in Building Decarbonization: Accounting for Life-Cycle Carbon and the Time Value of Carbon in Cost-Benefit Analyses of Residential Retrofits

Allison Hyatt

Energy consumption in new construction is decreasing thanks to stricter building codes, but few codes limit emissions of existing buildings, particularly in existing homes. This study, which won the Center's Best Paper on Housing Prize, investigates the carbon- and cost-effectiveness of three decarbonization strategies in residential retrofits: electrifying buildings, upgrading envelopes, and adding renewable energy. Each strategy is further broken down into distinct retrofit interventions to guide homeowners and policymakers in prioritizing energy upgrades. Focusing on single-family homes built before 1980 in Houston, Los Angeles, and Chicago, the study analyzes homes in three cities with distinct climates and grid emission rates. Many studies on building performance upgrades have investigated the operational carbon reductions associated with different retrofit strategies, but embodied carbon, grid decarbonization, and the time value of carbon (TVC) are often omitted. And if those subjects are addressed, they are rarely analyzed all together. Using energy simulation and Life Cycle Assessment, we quantified the life-cycle carbon reduction and Life Cycle Cost associated with each retrofit, ranked the interventions accordingly, and calculated how the rankings would change if electricity grid emission rates decreased or if we accounted for the TVC. Assuming current grid emission rates, envelope retrofits tended to rank better than renewable energy and electrification upgrades in terms of carbon reduction per dollar spent. However, as anticipated emission rates decreased, electrification upgrades improved in rank, while renewable energy upgrades declined. Including the TVC generally caused retrofits with high initial carbon investments to drop in ranking. The results illustrate that considering life-cycle carbon and the TVC has important implications on decarbonization recommendations. Future work could explore policy tools to incentivize different retrofit approaches or propose an appropriate discount rate to more accurately assess the TVC.