Low-Carbon Label and Bio-based Buildings

General Introduction to the Low-Carbon Label

What is the purpose of the Low-Carbon Label, and how does it work?

Created and administered by the Ministry of Ecological Transition, the Low-Carbon Label (LBC) aims to contribute to France's climate commitments through the contribution to funding two main types of projects: (i) projects togreenhouse gas emissions avoidance and (ii) the projects of carbon sequestration.

For each of these two types of projects, the label does not certify the absolute amounts of carbon sequestered by the project, but rather the the difference in emissions or carbon sequestration between the proposed project scenario and a baseline scenario (that is, what would have happened if the project had not been implemented).

From a practical standpoint, this label helps bring together two complementary stakeholders:

1. Some project leaders seeking funding to implement projects that effectively contribute to the fight against climate change, whether by preventing emissions or increasing carbon sequestration capacity;
2. Some funders seeking to highlight their contribution to the fight against climate change by funding environmentally responsible projects.

In fact, this supplementary financing mechanism enables project developers to undertake ambitious activities aimed at carbon emissions avoidance or carbon sequestration that would be impossible to implement without this financial support (see the additionality criterion defined below). At the same time, the funder can claim a quantified contribution to emissions avoidance or increased sequestration capacity in a transparent and recognized manner, thanks to the project’s certification by the Low-Carbon Label.

It should be noted that the cost of avoided and/or sequestered emissions (€/tCO2e) is not set under the LBC framework. It is determined by mutual agreement between the project sponsor and the financier, the main reason being that The purpose of the label is not to establish a market price (as may be the case with other certificate systems) but rather funding for projects as a whole. This price may therefore vary depending on the project's location, the method used, the co-benefits generated, etc.

Basic Requirements for the Validity of a Project

To be eligible for the LBC, each project must meet five basic requirements:

1. Measurability : Emissions avoided or sequestered by the project must be quantifiable in tCO2e using a robust and transparent methodology;
2. Verifiability : The carbon emissions avoided or carbon sequestered as a result of the project must be verifiable by a third party based on sufficient documentation;
3. Office Hours : Emissions avoided or sequestered as part of the project must be permanent (or deemed equivalent through a robust and transparent methodology);
4. Additionality : Emissions avoided or sequestered under this certification must be additional—that is, they would not have occurred without the funding provided by the Low-Carbon Label;
5. Uniqueness : The amount of emissions avoided or sequestered under the issued certification is unique and may be held and used by only a single entity. The Low-Carbon Label must therefore ensure ongoing transparency and traceability of the certificates, from the project sponsor to the financier.

In addition, the LBC also ensures that human rights are respected within the framework of the project in question and can highlight a number of social, economic, and environmental co-benefits (particularly those related to biodiversity).

Status Report to Date

To date, 13 methods have been approved by the Ministry:

• 3 in the forestry sector (afforestation, restoration of degraded stands, and thinning);
• 6 in the agricultural sector (cattle farming, hedgerows, orchards, input management, methane from dairy cattle, field crops);
• 2 in the construction sector (particularly renovation projects involving the reuse of materials and new construction using bio-based materials);
• 1 in the transportation sector (remote work in third places in sparsely populated areas);
• 1 in the marine environment (Posidonia seagrass beds)

In addition, about 20 new methods are currently being developed in most of these sectors.

As of October 16, 2023, 748 projects had been certified (according to the Low-Carbon Label website, which is updated every 15 days).

As a general guide, these projects have an initial range of average prices varying between 8 and 125 €/tCO2e)

Description of the Method for New Bio-based Buildings

Scope and Objective of the Method

The method applies to projects involving new permanent buildings larger than 500 m² in metropolitan France, all types of buildings (residential, commercial), excluding single-family homes, and using a significant amount of bio-based materials. It may also apply to projects involving the addition of extra stories.

The operation must be BBCA-certified (or any other label approved by the DGEC that requires a calculation of the building’s carbon footprint over its entire life cycle, with requirements equivalent to or stricter than those of the BBCA label).

The project must also exceed current environmental regulations and achieve the RE2020's 2025 threshold for the indicator Ic Construction (carbon footprint of the construction site and the construction products and equipment used).

The goal of this method is to quantify the amount of carbon sequestered over the long term by bio-based materials used in buildings.. This amount is expressed in metric tons of stored biogenic CO₂, based on the indicator stockC as defined in RE2020. Thus, only materials that have an environmental and health declaration form may be included (FDES) specifying the corresponding stock value C. In addition, it is mandatory that the products come from sustainably managed forests (FSC, PEFC) and, for the products in question, be classified as Class A or A+ as defined in the decree of April 19, 2011.

Baseline Scenario and Justification of the Additionality Criterion

The reference scenario for this method corresponds to a CO2 stock per square meter of floor area (SDP) that is representative of standard practices for incorporating bio-based materials into buildings. These figures are based on past and future market averages according to scenarios derived, in particular, from the2019 FCBA BIPE Prospective Study.

The The additionality criterion is deemed to be met as long as a project is eligible for this method. It is not necessary to prove this for every submitted project.

To demonstrate this additionality criterion, it is necessary to demonstrate that the proposed method does indeed go beyond legal requirements and current practices, as well as to identify the various barriers—particularly regulatory and economic ones—faced by developers of new construction projects that incorporate a significant proportion of bio-based materials:

1. Regulatory Requirements :
   1. the eligibility criterion “Ic Construction "at least equivalent to the 2025 RE2020 threshold" currently ensures additionality with regard to the carbon footprint of materials (the corresponding threshold currently in effect being the 2022 threshold);
   2. Carbon storage (stockC) is mentioned in the RE2020 regulations, but no minimum threshold is specified.
2. Regulatory barriers :
   1. Fire safety regulations require additional justification for facades that incorporate bio-based materials;
   2. Additional premiums for construction defect or ten-year liability insurance may be required for tall wooden structures.
3. Financial constraints :
   1. Various modeling studies, particularly those conducted as part of the preliminary work for RE2020, show that, as things stand, the additional costs associated with wood construction are in the range of 10 to 15% for residential buildings and 5% for commercial buildings;
   2. Furthermore, there are no public subsidies for the development of long-term carbon storage in buildings.
4. Other obstacles :
   1. Several recent studies (the FCBA-BIPE prospective study, the Plan Bois Construction) have identified a lack of training in the specific aspects of wood and bio-based construction;
   2. Due to structural shortcomings in the French timber industry, it is currently unable to fully meet current demand, which relies on massive imports;
   3. It can be difficult to demonstrate the quality and compliance with standards for certain less-common bio-based building materials;
   4. A number of cultural, urban planning, and heritage-related barriers are hindering the growth of demand for wood construction.

Putting the Benefits of Carbon Sequestration into Perspective

Relevance within the framework of the National Low-Carbon Strategy (SNBC)

Carbon sequestration is an integral part of the national strategy to combat climate change, as outlined in the SNBC. Indeed, this strategy is based not only on a drastic reduction in France’s greenhouse gas emissions but also on a significant development of carbon sinks, in which the forestry and wood industry plays a major role, particularly through the use of long-lasting bio-based materials in buildings.

In fact, the projected evolution of the carbon sink under the SNBC relies primarily on an increase in the forest carbon sink, but above all on redirecting sequestered carbon flows toward long-lived wood products (the focus of the method LBC - New Bio-based Buildings). In fact, according to the SNBC itself: “The production of long-lasting wood products (particularly those used in construction) tripled between 2015 and 2050”.

However, the main challenge at present is not to focus on expanding this forest carbon sink but rather to ensure that existing carbon sequestration capacities are maintained. In fact, although French forests are growing in both area and volume, their carbon storage capacity declined by 25% in 2019 compared to 1990 and by 50% compared to 2010. This decline in France’s forest carbon sink is primarily due to long-term structural causes that have been greatly exacerbated by climate change: droughts and water stress, pest outbreaks, slowed growth, and increased harvesting (article https://www.carbone4.com/carbone-climat-facteurs-determinants-forets).

It is therefore urgent to ensure that these sequestration capacities are maintained and then increased so that these flows can be redirected toward long-lived wood products, thereby ensuring the expected contribution to achieving France’s carbon neutrality goal by 2050.

Significance in the Context of a Corporate Strategy

Beyond national commitments to combat climate change, every company can and must also contribute, at its own level, to achieving the goal of carbon neutrality—both nationally and, more broadly, globally. In line with the national strategy, a company must, as a priority, drastically reduce emissions resulting from its operations across its entire value chain, but As a greenhouse gas emitter, it must also contribute to the development of carbon sinks. This principle of contributing beyond simply reducing one’s own indirect emissions is described in detail in the Net Zero Initiative framework (link to NZI) and is reflected in a triple carbon accounting matrix: indirect emissions, avoided emissions, and carbon sequestration.

So that means Pillar C is where the value of promoting carbon sequestration as part of a corporate strategy becomes evident aimed at contributing to the fight against climate change and, consequently, to achieving global carbon neutrality. The rationale for the required contribution across all three pillars for all types of businesses—particularly real estate companies (including under Pillar C for businesses outside the land sector)—is described in the existing NZI documentation (link).

Define a coherent corporate carbon sequestration strategy (Pillar C)

The method for setting the carbon sequestration target (Pillar C) was defined in the 2021 NZI report (NZI Report 2020–2021), so this article does not go into detail about this method.

The central idea of this is that Each company contributes to the development of carbon sinks at the same rate as the region in which it is located. In other words, the company determines its absorption path using the same Absorption-to-emission ratio (Pillar C / Pillar A) than that of the territory in question. The trajectory then shows the dynamics of carbon sequestration over time, and progress toward the targets can be tracked on an annual basis or over a time window spanning several years (which is more consistent with the dynamics of carbon sequestration in natural sinks, for example).

For France, this ratio is calculated based on information provided by the National Low-Carbon Strategy (SNBC). The SNBC sets out a pathway for reducing France’s emissions, on the one hand, and developing national carbon sinks, on the other. This ratio currently stands at 9% in France and is set to reach 100% by 2050 (the goal of territorial carbon neutrality). The table below provides order-of-magnitude figures. The global figures will be updated in 2023 based on more recent data.

Difference Between Pillar C Reporting and the Low-Carbon Label for Buildings

It is therefore clear that, for a company, Reporting on carbon sequestration and generating credits through the low-carbon label are two distinct things. Although in both cases the project undertaken allows for the sequestration of a given amount of carbon, the accounting for this sequestration must be unique in order to avoid double-counting, which could distort the overall objective of balancing emissions and sequestration on a global scale (or, at a minimum, on a national scale) by 2050.

This concept of uniqueness is, in fact, one of the fundamental conditions for the allocation of credits under the low-carbon label methodology (see the section “Fundamental Conditions for Project Allocation”). As we have seen, in this case, the uniqueness requirement means that a quantity of sequestered carbon certified by the label can be claimed by only a single financier. However, this uniqueness requirement also pertains to a second, equally important point: If a project developer sells a credit certifying the sequestration of a given amount of carbon through its project, it will not be able to claim that sequestration in its own reporting. (Pillar C as defined above).

Thus, every company must contribute to increasing global sequestration capacity, which translates into an annual amount of emissions to be sequestered proportional to the amount of emissions generated by its own operations (see the previous section, “Defining a Corporate Sequestration Trajectory”). However, Not all companies are expected to contribute in the same way to the development of these wells. For example, it is intuitively clear that a forestry company or an agricultural cooperative (referred to as “well operators”) has a special responsibility to safeguard and develop the wells they manage and, therefore, the capacity to monetize very large quantities of sequestered carbon. These companies will therefore most certainly be able to meet their sequestration target (Pillar C) through their “traditional” projects and then develop more ambitious sequestration projects requiring external financing—which is where the low-carbon label comes into play.

Conversely, since a real estate developer does not “directly” manage any carbon sinks, it will be more difficult for this stakeholder to demonstrate a sufficient contribution under Pillar C. However, more difficult does not mean impossible. Indeed, if a developer uses sufficiently large quantities of bio-based products across all of its projects, we have seen previously that this practice contributes significantly to long-term carbon sequestration (which is why it is so highly recommended under the SNBC). Thus, it would be possible to distinguish three main groups of developers:

1. An initial group of developers will be able to demonstrate an annual carbon sequestration volume (the sum of their projects over the year) that meets their Pillar C target. In that case, these developers will meet their annual carbon sequestration target without additional funding;
2. A small portion of this first set, mainly Pure players in the bio-based construction sector could see the total amount of carbon sequestered in their annual project portfolio exceed this target through particularly exemplary projects. In this case, these developers could use the low-carbon label to finance these projects by reselling carbon credits from these certified low-carbon operations;
3. A final group of developers—certainly a large majority today, though this number is bound to decline over time—will not be able to demonstrate a sufficient contribution to their Pillar C solely through the amount of carbon sequestered in their own projects. In this case, these stakeholders will have to achieve their goal (Pillar C) by funding carbon sequestration projects. They will then be able to, among other things, fund exemplary projects certified as low-carbon by the second category of developers (or other non-real-estate projects that have generated carbon credits).

Recommendations for Structuring Your Pillar C Strategy

This section outlines some recommendations for effectively structuring your Pillar C strategy, drawn from the recent publication “Net Zero Initiative—The Pillar C Guide” (NZI - Pillar C Guide) and reorients the production of low-carbon credits as part of a strategy to contribute to carbon sequestration.

Set a progressive C/A target that is “just right”

The method for setting the carbon sequestration target (Pillar C) described above results, at a minimum through 2030, in a “Pillar C / Pillar A” ratio of less than 20% through at least 2030, which may seem counterintuitive to a number of stakeholders who have historically based their climate strategy on a “offsetting” approach (i.e., “1-for-1”). Conversely, NZI recommends avoiding setting a target higher than that proposed by the C/A method for several reasons:

1. Seeking to achieve a more ambitious goal would require mobilizing significant resources (both human and financial), which could come at the expense of other climate actions—particularly emissions reduction efforts—yet the latter must be an absolute priority in the climate strategy of companies, especially real estate firms;
2. It is also possible that, in order to reduce the significant financial costs associated with a higher target, the company might turn to financing low-cost carbon sequestration projects, which tends to undermine the quality of these projects and, consequently, the original target. It is therefore more appropriate to allocate this additional funding to high-quality projects while adhering to the target set by the C/A ratio method. The low-carbon label, particularly through its co-benefits, can help identify these high-quality projects.
3. Finally, the global potential for carbon sequestration would not be sufficient to offset the very high volumes of emissions generated by all economic actors; setting overly ambitious short-term sequestration targets could lead to competition for land with other uses necessary for the low-carbon transition.

Exceeding Your Pillar C Target Through the Low-Carbon Label

Let’s consider a company in the second category of promoters mentioned above, whose business portfolio includes a sufficiently large amount of bio-based materials to meet its annual carbon sequestration target—set at the appropriate level—and even exceed it by 30%. In this case, it is possible to capitalize on the additional sequestration (i.e., the 30% above the company’s revenue-based target) through the low-carbon label.

The company in question will then need to adopt the “Bio-based New Buildings” standard and comply with all the conditions described in the method (as outlined in the “Description of the Method” section of this article). If credits can indeed be generated using this method, they will enable the issuer to finance the projects in question and allow the financier (for example, a developer in the third category mentioned above) to contribute to achieving its Pillar C objective.

Example of the Bas-Carbone Label with Numerical Data New Bio-Based Buildings

The purpose of this final section is to illustrate the application of the “Bio-based New Buildings” method, step by step, using a generic example.

• Preamble:
  • The building used as an example is not based on an actual project and intentionally incorporates a very high proportion of bio-based materials (much higher than the average market practices observed);
  • The building was modeled using Vizcab software; the associated technical (seismicity, specific use) and/or regulatory (fire, urban planning) constraints were not analyzed beyond the software’s capabilities.

• Brief Description of the Project
  • Completion in 2023, BBCA certification, RE2020 2028 threshold met;
  • Residential building with a gross floor area of 2,000 m² spread over 5 stories;
  • Vertical load-bearing elements (facade/partitions) + floors + CLT (Cross-Laminated Timber) flat roof;
  • Exterior-insulated facade (rock wool) + wood siding;
  • Exterior wood trim;
  • Solid wood main staircase.

• Method Used

Step 1: Calculating the CO2 stored in the entire building

Step 2: Calculating the baseline scenario

Step 3: Calculating the project's additional CO2 stock

Step 4: Calculating the anticipated emission reductions (AER) that can be generated

The components that contribute most significantly to carbon sequestration are the CLT elements in the structure and floors, which have a theoretical lifespan of 100 years. Other components, such as exterior cladding and raised access floors, also have long theoretical lifespans (around 50 years). Consequently, the discount factor (Cdv) is relatively low for this project.

Step 5: Calculating the Generated Stored Emissions

Conclusion

While the 509 tCO2e generated in this example remain hypothetical—since they would require the use of a quantity of bio-based material far exceeding current practices— this goal is nonetheless achievable for 100% wood construction projects, some of which are beginning to emerge.

Furthermore, these 509 tCO2e correspond more or less to the carbon sequestration volumes reported for reforestation projects covering approximately 1.5 ha, as presented on the Bas-Carbone label’s website. The goal of making the building sector a major contributor to the carbon sequestration chain through the use of long-lasting wood products therefore seems reasonable in light of these figures. This is provided that we allocate the necessary resources to achieve our ambitions—both upstream, by protecting and strengthening the forest carbon sink, and downstream, through our construction practices.