ESG: Embedded carbon- how does this affect real estate development across Europe?

How are different countries grappling with the issue of embedded carbon? Is the prevailing approach to demolish and rebuild or to try to retrofit, refurbish and adapt existing stock? We consider how the UK, Germany and Italy are dealing with this burning question.


Michael Gove's refusal last July of Marks and Spencer's proposal to demolish and rebuild its flagship store on Oxford Street, London, caught the industry's attention and, although the case turned on a variety of factors, it shone a light on the demolition versus refurbishment debate. This centred on whether the carbon impact of demolishing and rebuilding a building is proportionate to the benefits of having a new more energy efficient building. In his decision, Gove acknowledged that over the proposed new scheme's lifetime, it would likely use less carbon than if the building were refurbed (and had to rely on its inefficient core). However, he also noted that the embodied carbon (being the one-off carbon costs) involved in demolishing and redeveloping the site would be much greater than in any refurbishment works. In this instance, Michael Gove decided that the store should not be demolished (although importantly, this was not exclusively on carbon grounds).

The considerations in this case reflect the increasing importance placed on assessing the whole life-cycle carbon of a development from transporting materials during the build process to disposing of waste following demolition, and everything in between.

This concept has been reflected in policy, in some places, for a while. For example, policy within the London Plan focuses on minimising greenhouse gas emissions and requires all development proposals in the city which are referable to the Mayor (such as those of more than 150 residential units or over 30 metres high) to calculate their whole life-cycle carbon emissions using the Whole Life-Cycle Carbon Assessment. The associated guidance explains that retaining and refurbing buildings (either in whole or in part) must be prioritised over demolition due to the associated carbon impacts.

As well as promoting Whole Life-Cycle Carbon Assessments,  the London Plan sets out various carbon monitoring obligations. For example, major developments must report on energy performance to the Mayor for at least five years via an online portal. Although these examples are London based, it has been suggested in the government’s Mission Zero Independent Review that there should be national standards for things like carbon monitoring and it seems likely that these will be introduced in the near future as England works towards a zero-carbon economy.

Indeed, moving to a low carbon economy is also part of the environmental objective of the National Planning Policy Framework. As part of this objective, the planning system should "encourage the reuse of existing resources, including the conversion of existing buildings; and support renewable and low carbon energy and associated infrastructure". It’ll be interesting to see whether the current government builds on any of these policies, particularly as the environment continues to be a hot topic. 


The basis of the debate in Germany is the "grey energy" contained in each building, i.e. the CO2 consumption or embodied carbon contained in the building already constructed.

The structure of buildings in Germany varies. Most buildings were built in the 1950s or later. Some historic buildings are themselves already reconstructed. There is a consensus that in most cases it is technically possible to renovate today's buildings without any problems. The existing building fabric in Germany is therefore generally suitable for refurbishment.

In fact, the CO2 emissions caused by embodied energy are not currently taken into account when considering new projects. Current regulations, in particular the German Energy Performance of Buildings Act, only consider the energy efficiency of a building during operation. Legislative proposals by some coalitions in some German states to include CO2 emissions from embodied energy, at least for new public buildings, have not yet been adopted.

In Germany, a demolition permit is generally required for the demolition of buildings, but this only covers issues relating to building regulations, safety and the protection of historical monuments, not the question of whether refurbishment would be more ecologically sound than demolition. The current Federal Government rejects a general legal obligation to refurbish. The aim of legislation should be to provide more flexible options for sustainable construction, taking into account the entire life cycle of a building.

In order to prevent climate-damaging demolitions, the German Environmental Aid has published a legal opinion on the implementation of a mandatory demolition permit. This shows that a general permit requirement for building demolitions, coupled with an analysis of the environmental and climate impact, would be legally possible and could be implemented directly by the federal states. In addition, there are various associations and initiatives, such as the Demolition Moratorium Initiative and the Association of German Architects, which also call for active promotion of the renovation of buildings and for buildings that could have been renovated not to be demolished. However, there are currently no uniform federal regulations or legislative initiatives in this area.

In Germany, the construction industry is responsible for around 55 percent of all waste. Although the majority of this waste is reused, it is generally only recycled through 'downcycling'. On 1 August 2023, the Substitute Building Materials Ordinance came into force, setting out uniform and legally binding requirements for the production and use of mineral substitute building materials. This means that mineral building materials from construction and demolition waste are no longer automatically treated as waste, but can be reused as recycled building materials in new buildings.

There is also a focus on cradle-to-cradle concepts involving full recycling or upcycling. However, this too is not legally binding. Nevertheless, the German government's timber construction initiative supports the use of sustainable raw materials in new buildings and renovations.

In summary, there are many different trends towards sustainable construction in Germany. What unites them all is the desire for sustainability. However, there is still no clear, uniform and legal line for deciding whether a building should be demolished or renovated. Currently, it is up to the building owner to decide whether to renovate a building or demolish it and build a new one. However, many property owners follow the Global Decarbonisation Pathways outlined by CRREM and also take into account the CO2 emissions not released by avoiding demolition when assessing whether their building meets the requirements of the taxonomy criteria.


Embedded carbon is a new approach to building emissions and parties are increasingly taking into account the entire lifecycle of a building (including the extraction of materials, their transport and the entire construction phase) rather than just the carbon emissions resulting from the use of the building. Under these parameters, demolishing and rebuilding is less environmentally efficient than renovating an existing building (which would result in up to 75% fewer emissions).

Italian legislation does not to-date expressly regulate embedded carbon in buildings; however, there are certain prescriptions that have indirect implications on it.

On one side, in certain regions (Lombardy for instance) under certain conditions demolition and reconstruction of existing buildings is encouraged through incentives (e.g. discount on construction costs); this provision shall be read in the context of the planning rules on limitation of new soil consumption, which tend to promote interventions on existing buildings rather than new construction.

On the other side, demolition and reconstruction is considered under the building legislation a “heavy” intervention, and its authorization is subject to specific requirements which mostly change from Region to Region. Needless to say that specific rules apply to historic buildings, where restorative interventions are mostly allowed and an authorization from the Heritage Administration is required as a condition precedent for any intervention.

On the basis of the above, we consider that regulation of embedded carbon is definitely on the horizon in Italy, within a more complex evaluation of emissions in buildings which take into account the entire lifecycle of buildings.

Next steps

There can be no doubt that coming into this year we are seeing ESG ripples echoing across all industries, sectors and geographies, and we are seeing constantly evolving laws and regulations in this area. As all the countries we’ve considered here work towards a zero carbon economy, we may well see more in the way of carbon monitoring and reporting obligations, whole life carbon assessments and a drive for ever more flexible options for sustainable construction and more options in terms of retrofitting and refurbing. We shall watch this space and continue to update you as legislation and regulation in this area evolves.



Authored by Rosie Shields, Sabine Reimann, and Maria Deledda.


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