ET25SWE0031 - Embodied Carbon One-for-One Material Substitution Market Characterization
Historically, energy efficiency (“EE”) programs have focused on addressing operational energy use and emissions. As California successfully reduces carbon from operational emissions through increased renewable energy sourcing, EE, and electrification, embodied carbon (“EC”) will become an increasing share of the remaining carbon emissions in buildings. The materials used to construct and maintain buildings contribute significant greenhouse gas (“GHG”) emissions over the lifetime of a building and this concept is referred to as EC, defined by the California Energy Commission (“CEC”) as the GHG “resulting from the extraction, manufacturing, transportation, installation, maintenance, and disposal of building materials.
EC is a developing policy area which is increasing in focus on a statewide and national level. Utilities and jurisdictions across the country are developing voluntary and mandatory building codes and standards, incentive programs, and other policies to address carbon more holistically including a focus on EC. These include Massachusetts, Colorado, Washington, Minnesota, Oregon, and the cities of Vancouver, BC, San Francisco, Chicago, Los Angeles, New York, Boston, as well as others. Additionally, Mass Save has recently proposed in its 2025-2027 Energy Efficiency and Decarbonization Plan, the first EC incentive program in the country which compliments its existing EE and Building Decarbonization (“BD”) offerings such as heat pumps (See https://www.masssave.com/-/media/Files/PDFs/Mass-2025-2027-Energy-Efficiency-Decarbonization-Plan.pdf). This program outlines a programmatic pathway for harmonizing EE, BD and EC activities. Likewise, California has introduced legislation to address EC in SB 596 for cement production and AB 2446 and AB 43 to develop EC strategies and trading mechanisms while CALGreen continues to develop mandatorystandards to mitigate EC through procurement policies for public buildings. Yet, research on EC remains relatively limited, especially for California.
EC can be a complimentary policy and program pathway to EE and BD especially since it represents 13% of carbon in buildings. In order to address the state’s goal to achieve carbon neutrality by 2045 and net neutrality thereafter per AB 1279, EC will be a critical area to address. EC also shares a similar stakeholder base in new construction and major building rehabilitation projects as EE and BD stakeholders including architects, builders, general contractors and local jurisdictions. Additionally, stakeholders including the CEC, PG&E, SDG&E and the California Energy Design Assistance’s (CEDA’s) new construction program have expressed interest in EC and EC has also been an increasing topic among EE conferences including ACEEE, Getting to Zero, Energy Transition Coordinating Council (ETCC) Emerging Technology (ET) Summit and the US Green Building Council.
Some low-EC building products may also provide similar EE savings benefits as standard building products. For these reasons, EC is an important area to study in order to inform EE and BD measure and code development. Examples of products providing EE and EC co-benefits include appliances (such as Heating, Ventilation, and Air Conditioning, “HVAC”, equipment) and products and materials such as furniture and flooring which are replaced over the course of their effective useful lives (“EULs”). Anecdotal evidence also indicates that some market actors are incorporating these practices, called “one-for-one material substitution,” to reduce their buildings’ total carbon footprint. Additional evidence gathered by Energy Solutions’ Voice of the Customer (“VOC”) research identified that certain EC market actors may not incorporate EE when pursuing EC activities. This study will attempt to document these opportunities to harmonize EE and EC through the selection of building materials and/or incorporating EE during the EC design and/or building materials procurement stages via interviews with EC stakeholders. The study will also seek to answer whether low-EC building materials have an incremental price difference than standard procured materials.
This report represents an inaugural study by CalNEXT into embodied carbon, which is defined by the California Air Resources Board as all greenhouse gas emissions resulting from raw material extraction, manufacturing, transportation, construction (including installation and maintenance), and eventual demolition and disposal. Addressing embodied carbon is critical given that it represents 11 percent of global greenhouse gas emissions and increases; up to 50 percent of greenhouse gas emissions from buildings as operational carbon is mitigated through energy efficiency and building electrification programs. Addressing embodied carbon is also necessary to achieve California’s 40 percent carbon reduction goals below 1990 levels by 2030 and to achieve carbon neutrality by 2045. While policies are underway (e.g., CALGreen, Buy Clean California, Senate Bill 596, Assembly Bill 2446, and Assembly Bill 43) to develop embodied carbon strategies, including the development of an embodied carbon trading system as a potential pathway to implement Assembly Bill 2446, embodied carbon remains largely adjacent to energy efficiency and building decarbonization programs.
In order to better understand the market dynamics and behaviors of embodied carbon in California, this study attempts to document whether low-embodied carbon building materials are being adopted in California and substituted for standard building materials—also known as one-for-one material substitution. The study team had heard anecdotally that this practice was occurring in other markets, but was not clear on the market adoption trends in California. The project team conducted market research through review of existing studies and reports, accessing and using construction cost and greenhouse gas software, and conducting extensive market actor interviews. Market actor interviewees included architectural, engineering, and construction firms; contractors; building owners; developers; utility representatives; local government officials; sustainability consultants; trade associations and industry consultants; and material manufacturers.
The intent of this study was to document whether market activities for low-embodied carbon materials exists in California and whether incremental greenhouse gas reductions could occur with low-to-no project costs, as well as to identify what the key barriers and market solutions are for reducing embodied carbon in California. The project team focused on three key building materials—concrete, insulation, and steel—to better understand whether material substitutions can result in incremental greenhouse gas impacts. Further, the study aims to highlight future policy and program considerations that may enable harmonization of embodied carbon and energy efficiency programmatic structures. More specifically, this project sought to test the following four hypotheses:
- Embodied carbon can be a complementary program pathway for energy efficiency and building decarbonization programs that already address operational carbon emissions, but may also present opportunities to reduce embodied carbon impacts while maintaining or potentially increasing energy efficiency savings.
- One-for-one material substitution can achieve incremental greenhouse gas reductions at relatively modest project costs by substituting lower-embodied carbon building materials for standard building materials.
- Embodied carbon can be a complementary policy pathway to energy efficiency and building decarbonization programs by reducing carbon in buildings.
- There will be limited Environmental Product Declaration data for some building material categories, as well as a limited understanding of embodied carbon among some stakeholder groups, creating opportunities for market awareness for significant greenhouse gas savings from substituting to lower-embodied carbon materials at relatively low to no incremental costs.
Key findings from this market study include:
- Key drivers for the adoption of low-embodied carbon materials are corporate sustainability goals that value Scope 3 emissions, including embodied carbon. On an increasing basis, large corporate customers, such as Prologis, Amazon, and Meta, are announcing plans to adopt low-embodied carbon materials, or the signing of a low-carbon concrete pact (Olick). In this manner, embodied carbon is becoming an increasingly recognized and relevant goal, especially as certification programs like Leadership in Energy and Environmental Design (LEED) version 5 and green building codes like CALGreen incorporate embodied carbon pathways alongside energy efficiency savings opportunities.
- Increasing codes and standards and policies, such as CALGreen (California’s Title 24, Part 11) and the Buy Clean California Act, use Environmental Product Declarations as a central part of their implementation approach and are increasing overall awareness for embodied carbon.
- Overall awareness of embodied carbon as a sustainability goal and pathway is not yet widely known. Knowledge of low-embodied carbon products, their availability and pricing are also not well understood. Interviews with embodied carbon stakeholders identified a general expectation of price premiums for low-carbon building materials while also acknowledging a 20 percent greenhouse gas savings potential at low-to-no incremental project cost.
- In particular, concrete suppliers can reduce embodied carbon by 20 percent or more, often without increased cost due to the existing availability of lower-embodied carbon cement products. In most cases, all a customer must do is ask for such a mix. The cost to achieving a 30 percent or more reduction in embodied carbon does in fact become more expensive. This points to the need for additional market research to understand the current limits to achieving lower-embodied carbon at low-to-no incremental costs, embodied carbon is increasingly intersecting with other market intervention points of focus. During the brief development of this study, the California Air Resources Board announced a Fiscal year 2025-2026 Pre-Proposal Solicitations for Sustainable Transportation and Communities Project focused on addressing wildfire recovery and sustainable building practices in disadvantaged communities in California (CARB 2025d).
- Thus, the study of embodied carbon is intersecting with the wildland–urban interface and disadvantaged community impacts, as well as others. The study team also recently became aware of the intersection of Strategic Energy Management programs on reducing embodied carbon in building materials produced in the industrial sector that are installed or delivered to the residential sector.[1] Likewise, there are developing RESNET 1550 standards to characterize and address embodied carbon in residential buildings. As such, embodied carbon is becoming more relevant for areas of existing energy efficiency programs and developing standards.
- One possible next step could target educating and informing the public about embodied carbon. It is a common, but not entirely accurate, perception among many market actors that lower embodied carbon automatically makes a material choice more expensive, results in lower performance levels, or negatively extends project schedules. Further, there is a general lack of awareness of Environmental Product Declarations and how to use them within broad portions of the building market. Sustainability consulting firms and many premier architectural, engineering, and construction firms are well versed in them, but there is limited awareness outside of these circles.
- Market education activities are underway but on a relatively modest scale. Key efforts by programs such as Energy Code Ace, Carbon Leadership Forum, the American Institute of Architects, and others are increasing awareness of embodied carbon by offering informational content and the California electric investor-owned utilities already offer embodied carbon education through their education centers. Yet, there is still a need to inform the market about these opportunities, such as active marketing by the Energy Code Ace team on “Embodied Carbon and CALGreen Embodied Carbon Requirements” (CEC n.d.), especially given the reality that embodied carbon represents “upfront carbon,” meaning the greenhouse gas emissions released during the materials production and construction phases of a building even before its used or occupied. These upfront emissions are also not typically reduced over the course of the building’s use, but rather, at only key points of design and construction, rehabilitation, or decommissioning. This means that key points of intervention are limited during a building’s typical 40-year effective useful life.
- There are also various permitting and zoning approaches that may incentivize adoption of low-embodied carbon materials. For example, a building department could offer a floor area ratio bonus, allowing an extra story to be built on a multistory building, or could offer expedited permitting if low-embodied carbon goals are met.
Looking forward to future opportunities to harmonize embodied carbon with energy efficiency, a significant step would be further studies on EC’s integration with EE such as the development of an embodied carbon avoided cost calculator, similar to the refrigerant avoided cost calculator. This would allow quantification of the greenhouse gas benefits of low embodied carbon building materials. There are additional possible approaches to advance lower-embodied carbon building materials that could involve commercial property assessed clean energy finance, a prize competition format, sales tax waivers, property tax reductions, or reduced permit fees.