22. In Box 2 we discuss an example of long-lived capital stock of type 4, which is strongly associated with the dynamics of urbanization. This dynamic can be graphed as a logistics curve starting with a low proportion of total population living in urban areas, gradually accelerating in response to rural to urban migration, and then decelerating, before stabilizing with a high proportion of total population living in urban areas. Construction of physical capital in response to this urbanization process creates a cumulatively larger stock of buildings (residential, schools, civic buildings, offices, etc). The later energy efficiency standards are adopted and implemented in this one-way process, the smaller the potential for growing out of inefficient energy use later, as evidenced in the example below.

**<mark>Box 2. Poor energy efficiency in long lived buildings increase future costs of abatement: The case of the residential sector in France</mark>**

<mark>23.</mark> **<mark>The building sector in France provides a good example of how investment decisions over a relatively short period of time can determine carbon emissions over long periods of time (up to 100 years)—especially when technical and economic costs of</mark>** **_<mark>retrofitting</mark>_** **<mark>or</mark>** **_<mark>premature retirement</mark>_** **<mark>are high.</mark>** <mark>In 2006 there were an estimated 25.7 million residential (habitation) units in France. The vintages of this residential building stock can be roughly divided into three groups of approximately equal size:</mark>

- <mark>one third (30.6%) built prior to 1949,</mark>

- <mark>one third built during the 25 year post-war reconstruction boom (1949-1975) prior to the adoption and enforcement of any regulation on building energy efficiency, and</mark>

- one third built after 1975, under increasingly strict energy efficiency standards.

<mark>24. GHG emissions associated with the residential buildings include both direct on-site emissions from e.g., home boilers or fireplaces, and indirect, off-site emissions associated with the production of the power and heat consumed by (but not produced within) buildings. Direct emissions were 90 MtCO</mark> 2 <mark>in 2002, and indirect emissions can be estimated at</mark> _<mark>circa</mark>_ <mark>12 MtCO</mark> 2 <mark>(a small number due to the predominance of nuclear power generation, and thus the low emissions per kWh in the country). Overall, the residential building stock accounted for approximately 18.5% of France’s GHG emissions in 2002 (by vintage, the youngest third accounts for approximately 25 percent, while the oldest two account for approximately 75 percent).</mark><sup>24</sup> <mark>25. Since the national share of the urban population has more or less stopped growing in France since the 1990s, the bulk of the housing stock in France is already built and the rate of annual additions is very small. Because the average life duration of habitation units in France is well over a century, further improvements in the efficiency standards for</mark> _<mark>new</mark>_ <mark>building alone cannot prevent further growth in energy consumption and emissions from the residential building stock over the next half century (Traisnel, 2001). In fact, 60% of the expected residential building capital stock in 2050 has already been built. To reduce emissions in this sector, accelerated retrofitting of old buildings (via e.g., improved window and wall insulation) and/or accelerated replacement of capital stock are necessary to meet mid-century emission targets—even though both options will be costly, and are likely to be costlier than having adopted and implemented higher energy standards 25 years earlier than they were. This dilemma contrasts strongly with the ‘short window of opportunity’ to grow out of inefficient energy use described in the Chinese case (Box 6).</mark><sup>25</sup>

> 24 Direct emissions from the residential sector are derived from IEA (2005). Indirect emissions are computed by multiplying the share of residential consumption in total final consumption of electricity by total emissions from the electricity & heat producing sector. Emissions by vintages are estimated based on data in Traisnel (2001) showing that post-1975 buildings are on average 40% more energy-efficient than pre-1975 ones.

> 25 There is only limited scope for fuel-switching in domestic heating systems, as most coal-fired boilers have been already been eliminated, and as liquid fuels represent only 20% of total energy consumption in the residential sector

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