rethink sustainability
The air conditioning paradox: cooling our way to a warmer world
“Growing demand for air conditioners is one of the most critical blind spots in today’s energy debate.” – Fatih Birol, Executive Director, International Energy Agency
It is estimated that there are 1.9 billion air conditioning units in operation today1, almost one for every four people on the planet. According to the International Energy Agency (IEA), electric fans and air conditioning units currently account for 10% of the world’s entire annual electricity consumption2, and this figure is expected to grow.
Driven by rising global temperatures and increasing affluence in developing nations, the IEA projects that between 2018 and 2050, energy demand for cooling in buildings will triple – the equivalent of adding 10 new air conditioning units to the power grid every second until the middle of the century.
This summer, the world has experienced record temperatures on both land3 and sea4, further stoking demand for air conditioning, fans, and coolers. All this newly-cooled air brings with it a paradox – cooling creates heat. Locally, air conditioning units in urban areas have been found to raise the street temperature by as much as 1 degree Celsius5. And globally, with air conditioning often powered by electricity generated from fossil fuels, the cooling boom is fuelling climate change with vast emissions of greenhouse gases (GHGs) – if unmitigated, it is estimated that air conditioning alone will be responsible for a 1.5 billion tonne annual rise in CO2 emissions by 2030, more than three times the emissions of the UK or Brazil6.
Powered by the tropics
By 2050, two thirds of all households may own at least one air conditioning unit. While uptake will be seen across the globe, according to Radhika Khosla, Associate Professor at the Smith School of Enterprise and the Environment, “the biggest absolute rise in cooling will be around the equator.”7
Four key factors are converging to drive this.
1) Over the next several decades, the tropical regions of Africa, South America, southern and eastern Asia, and parts of the Middle East will see the most climate warming8.
2) Many populations in these regions are becoming more affluent – according to the IEA, “AC ownership and use is rising rapidly in…hot and humid countries as incomes rise, access to electricity improves and prosperity becomes more widespread. In short, air conditioning is becoming affordable for more and more people.”9
3) Populations are growing fastest in hot, humid regions10, further expanding the potential air conditioning market.
4) By 2050, it is anticipated that 68% of the world’s population will live in urban areas11, up from 56% today12, with much of this increase taking place in Africa and Asia. As the world urbanises, the city “heat island effect”13 will add to the need for air conditioning.
In emerging markets, the upfront cost of air conditioning adds an extra sustainability challenge. Old, energy-inefficient second-hand AC units, or new but lower efficiency units, are likely to make up the majority of purchases. In India, for instance, 37% of buyers opt for mid-range efficiency units, while just 20% are able to pay the higher price for the most efficient ‘5-star’ rated units14.
For governments, the rise in air conditioning creates another problem. According to research from the University of Birmingham, in many developing nations power grids “cannot cope with daily demand peaks that are largely driven by air conditioning.” As a result, commercial customers often install highly polluting diesel generators to power air conditioning systems when the grid is down.15
Read also: Building the economy of tomorrow: clean energy brings exponential growth
The natural solution
One solution is to reduce the need for cooling in the first place. Inspired by the structure of termite mounds, Zimbabwe’s Eastgate Development slashed its need for active ventilation and cooling, cutting its energy use by 90%. Other simple solutions include adding internal or external shades over windows – the US department of energy estimates that window awnings can reduce internal heat gain from sunlight by up to 77%16.
Natural cooling can also be achieved from above. In the US, painting roofs white has been found to reduce roof temperatures by up to 30 degrees Celsius17, while in China, an experiment with the widespread installation of “green roofs” (where roofs are covered with living vegetation) reduced not only the need for cooling within buildings, but also cut the average land surface temperature across the project zone by 0.91 degrees Celsius18.
At the city-level, the simple act of planting trees can reduce the heat island effect. One study in Europe found that tree cover can lower the land surface temperature of cities by up to 12 degrees Celsius during summer19. While in the US, separate research showed that where tree cover reaches 40%, temperatures at ground level were reduced by nearly 6 degrees Celsius.
Read also: Architects take inspiration from nature to build a sustainable future
Technology and policy
As our economy electrifies, much of our growing electricity demand will be met by renewables. For air conditioning, which will be needed most on the sunniest days, solar photovoltaic panels provide the most obvious carbon-free power solution. However, with our nights warming faster than our days20, cooling is increasingly required after the sun has gone down.
In areas where wind turbines are not viable, innovations in district cooling may have a role to play. Here, renewable energy is used to cool water during the day, which is then distributed to homes for underfloor cooling systems at night.
Policy will also play its part, pushing manufacturers to cut the direct emissions caused by the refrigeration chemicals used in AC systems. In 2019, the Kigali Amendment to the Montreal Protocol entered into force, mandating the phase-out of refrigerating hydrofluorocarbons (HFCs), a potent greenhouse gas.21
International rules on air conditioning energy efficiency standards are less well-coordinated. While most developed nations have strictly enforced minimum standards, in many developing nations, efficiency regulations are either ill-enforced or absent altogether. Here, the UN’s “model guidelines for air conditioners” aims to plug the gap, offering guidance to governments on how to create voluntary or regulatory frameworks. It is estimated that take-up of the guidelines across Africa alone could reduce CO2 emissions by 28 million tonnes22, saving the output of 20 large power stations. As demand for air conditioning grows, global calls for increased cooling efficiency are likely to grow with it.
Read also: From landfill to a new life: dealing with wind turbines’ little-known problem
More than a luxury
For businesses and investors this presents an opportunity. By embracing the transition to more sustainable buildings operations, firms like Carrier and Japanese-based Daikin, two of the world’s leading providers of ventilation, air conditioning and refrigeration systems, can take advantage of both the growth in AC demand and the push for energy efficiency. Opportunities will arise in the traditional revenue streams of product manufacture and maintenance, and also in new subscription-based digital smart-home solutions, designed to eliminate energy waste. Government policies will act as a catalyst – in the US, where the Inflation Reduction Act offers tax credits to encourage residential energy efficiency upgrades, Carrier is targeting expanded revenue from sales of its most efficient AC units.
Much of the debate concerning our changing climate focusses on the risk to life and health – deaths due to heat exposure have risen every year since 202023. However, rising temperatures also threaten productivity and economic growth. The thinktank The Atlantic Council estimates that heat already costs the US economy USD 100 billion each year, and that this figure could increase 5-fold by 2050 if adaptation measures are not put in place.
In many emerging economies, air conditioning could make the difference between economic success and failure. According to Singapore’s first prime minister Lee Kuan Yew, “Air conditioning…changed the nature of civilisation by making development possible in the tropics. The first thing I did upon becoming prime minister was to install air conditioners in buildings where the civil service worked. This was key to public efficiency.”24
Increasingly, the availability of air conditioning is becoming essential to every one of the United Nations seventeen Sustainable Development Goals.25 As we face the growing threat of a warming world, economic development, health, and even social cohesion could soon hinge on our ability to keep ourselves cool.
1 Chart: Air Conditioning Biggest Factor in Growing Electricity Demand | Statista
2 The Future of Cooling – Analysis - IEA
3 July 2023 set to be world's hottest month on record | Reuters
4 Ocean surface hits highest ever recorded temperature and set to rise further | Oceans | The Guardian
5 Anthropogenic heating of the urban environment due to air conditioning - Salamanca - 2014 - Journal of Geophysical Research: Atmospheres - Wiley Online Library
6 doing-cold-smarter-report.pdf (birmingham.ac.uk)
7 Dr Radhika Khosla interview with BBC Newsnight | Oxford Energy
8 The Future of Cooling (windows.net)
9 The Future of Cooling (windows.net)
10 The Future of Cooling (windows.net)
11 68% of the world population projected to live in urban areas by 2050, says UN | UN DESA | United Nations Department of Economic and Social Affairs
12 Urban Development Overview (worldbank.org)
13 Reduce Urban Heat Island Effect | US EPA
14 How energy demand for cooling in India’s cities is changing | World Economic Forum (weforum.org)
15 doing-cold-smarter-report.pdf (birmingham.ac.uk)
16 Energy Efficient Window Coverings | Department of Energy
17 Cool Roofs Might Be Enough to Save Cities from Climate Overheating - Scientific American
18 Quantitative study on the cooling effect of green roofs in a high-density urban Area—A case study of Xiamen, China - ScienceDirect
19 The role of urban trees in reducing land surface temperatures in European cities | Nature Communications
20 Nights warming faster than days across much of the planet -- ScienceDaily
21 Climate change: Is air conditioning bad for the environment? | World Economic Forum (weforum.org)
22 New guidelines for air conditioners and refrigerators set to tackle climate change (unep.org)
23 World’s largest study of global climate related mortality links 5 million deaths a year to abnormal temperatures - Medicine, Nursing and Health Sciences (monash.edu)
24 NPQ (digitalnpq.org
25 Climate change: Is air conditioning bad for the environment? | World Economic Forum (weforum.org)
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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