The construction industry is responsible for around 40% of all CO2 emissions worldwide. The renewable, CO2-absorbing wood can provide a remedy as a building material. In order for more wood to be used, new financial incentives and financial products are needed for real estate investors, construction and the forestry and timber industry.
One of the simplest, most scalable and cost-effective solutions to permanently store more CO2 is timber construction: with its high CO2 absorption rate and additional timber harvesting potential of 2.8 million m3 per year, the Swiss forest can provide around 1.1 million m3 of solid wood for the Swiss construction industry as an alternative to emission-heavy steel or concrete. This means that 1.1 million tonnes of CO2 per year can be stored long-term in buildings and at the same time emissions can be avoided by replacing concrete and steel. Of course, without reducing the forest area and with simultaneous preservation and care of our forests!
Compared to Europe and North America, Switzerland has a very high timber construction quota of around 15%. However, the potential for timber buildings is massively higher. Why is it not being exploited?
Further reduction of financial barriers
One of the relevant barriers preventing real estate investors from increasingly building with wood is the cost: 9 out of 10 institutional real estate developers and investors are not yet prepared to accept the higher costs of around 10%, especially for Swiss wood. [1] And therefore resort to conventional (climate-damaging) building materials such as concrete and steel.
The solution – a CO2 certificate
The Timber Finance Initiative (TFI) – founded in Zurich in 2021 – has set itself the goal of defusing this financial barrier: We are currently developing the world’s first tradable CO2 storage certificate for timber construction. With an international working group of experts, we are drafting a global CO2 methodology as a basis for CO2 storage certificates and, in parallel, creating a Swiss project pipeline of certifiable timber buildings. The methodology is expected to be recognised by one of the highest international climate standards in 2023. The timber construction CO2 storage certificate is intended not only to compensate for a large part of the additional costs of timber construction, but also at the same time to compensate forest owners for their sustainable forest management and for higher timber harvesting costs – for example in difficult locations. Because if no more (Swiss) wood comes out of the forest, no more can be used.
The CO2 markets are booming
The TFI certificates are sold in the CO2 markets to companies with a net zero commitment, which use them to offset their residual emissions. The CO2 markets are booming in Switzerland and internationally, mainly thanks to Carbon Dioxide Removal (CDR) projects. In these projects, CO2 is extracted from the atmosphere and stored for as long as possible 100 years. Before Swiss engineered timber construction can participate there, however, it still has to fulfil one prerequisite: It must be finally recognised as a storage technology and a so-called negative emission technology (NET) by the relevant professional political bodies. All signs indicate that we are on the right track: In July this year, the United Nations Climate Council (UNFCCC) also included “Timber in Construction”[2] as a CO2 storage technology in its official nomenclature. The Federal Council also envisages CO2 storage in timber construction[3] in its report “CO2 Capture and Storage (CCS) and Negative Emissions (NET)” of May 2022. Switzerland has a great opportunity to continue to play a leading role internationally with its forests and the outstanding Swiss timber engineering.
| About the Timber Finance Initiative
The Timber Finance Initiative (TFI) was founded in Zurich in 2021 and offers clients and members from the forestry, real estate, timber and finance industries access to financing, investment opportunities, CO2 certificates, timber procurement and builder advice. |
| The CO2 storage certificate in brief
The planned CO2 storage certificate of the Timber Finance Initiative is intended to be a sector solution and, in the medium term, to replace or supplement existing sector solutions in the forest or in industry. It is intended to compensate for the climate performance of the forestry sector (forest management) as well as of building owners (investment decision) and thus to favour the demand for Swiss wood, from which the entire Swiss wood industry chain benefits. This would allow the Swiss forestry and timber sectors to once again act together on the CO2 market. |
| Author: Thomas Fedrizzi is Co-Founder of the Timber Finance Initiative and Frank Vasek is an expert in carbon finance and leads the TFI Timber Carbon Capture and Storage project. |
[1] Timber construction indicators for investors – Wüst und Partner,
[2] https://unfccc.int/sites/default/files/resource/a64-sb001-aa-a05.pdf
[3] https://www.newsd.admin.ch/newsd/message/attachments/71551.pdf