The price of innovation: An analysis of the marginal cost of green buildings

Andrea Chegut; Piet Eichholtz; Nils Kok

doi:10.1016/j.jeem.2019.07.003

The price of innovation: An analysis of the marginal cost of green buildings

Andrea Chegut, Piet Eichholtz, Nils Kok^*

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › Academic › peer-review

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Abstract

Energy efficiency plays an important role in reducing the carbon externality from buildings, but economic analyses of more efficient, green building have thus far ignored input costs. This paper finds that the average marginal cost of green-labeled construction projects is smaller than the value premiums documented in the literature. However, design fees, representing just a fraction of development costs but paid largely up-front, are significantly higher for green construction projects. These projects also take longer to complete. The results provide some insight into the market barriers and market failures that may explain the relatively slow adoption of otherwise economically rational green construction practices.

Original language	English
Article number	102248
Number of pages	18
Journal	Journal of Environmental Economics and Management
Volume	98
DOIs	https://doi.org/10.1016/j.jeem.2019.07.003
Publication status	Published - Nov 2019

JEL classifications

q56 - "Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth"
r33 - Nonagricultural and Nonresidential Real Estate Markets
q55 - Environmental Economics: Technological Innovation
o31 - Innovation and Invention: Processes and Incentives

Keywords

Carbon externality
building codes
construction costs
energy efficiency
environmental innovation
technical change
ENERGY-EFFICIENCY
Construction costs
Environmental innovation
Technical change
Building codes
Energy efficiency
ECONOMICS
INVESTMENTS

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10.1016/j.jeem.2019.07.003

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Cite this

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title = "The price of innovation: An analysis of the marginal cost of green buildings",

abstract = "Energy efficiency plays an important role in reducing the carbon externality from buildings, but economic analyses of more efficient, green building have thus far ignored input costs. This paper finds that the average marginal cost of green-labeled construction projects is smaller than the value premiums documented in the literature. However, design fees, representing just a fraction of development costs but paid largely up-front, are significantly higher for green construction projects. These projects also take longer to complete. The results provide some insight into the market barriers and market failures that may explain the relatively slow adoption of otherwise economically rational green construction practices.",

keywords = "Carbon externality, building codes, construction costs, energy efficiency, environmental innovation, technical change, ENERGY-EFFICIENCY, Construction costs, Environmental innovation, Technical change, Building codes, Energy efficiency, ECONOMICS, INVESTMENTS",

author = "Andrea Chegut and Piet Eichholtz and Nils Kok",

note = "Data source: The Royal Institution of Chartered Surveyor{\textquoteright}s BCIS database.",

year = "2019",

month = nov,

doi = "10.1016/j.jeem.2019.07.003",

language = "English",

volume = "98",

journal = "Journal of Environmental Economics and Management",

issn = "0095-0696",

publisher = "Academic Press Inc.",

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T1 - The price of innovation: An analysis of the marginal cost of green buildings

AU - Chegut, Andrea

AU - Eichholtz, Piet

AU - Kok, Nils

N1 - Data source: The Royal Institution of Chartered Surveyor’s BCIS database.

PY - 2019/11

Y1 - 2019/11

N2 - Energy efficiency plays an important role in reducing the carbon externality from buildings, but economic analyses of more efficient, green building have thus far ignored input costs. This paper finds that the average marginal cost of green-labeled construction projects is smaller than the value premiums documented in the literature. However, design fees, representing just a fraction of development costs but paid largely up-front, are significantly higher for green construction projects. These projects also take longer to complete. The results provide some insight into the market barriers and market failures that may explain the relatively slow adoption of otherwise economically rational green construction practices.

AB - Energy efficiency plays an important role in reducing the carbon externality from buildings, but economic analyses of more efficient, green building have thus far ignored input costs. This paper finds that the average marginal cost of green-labeled construction projects is smaller than the value premiums documented in the literature. However, design fees, representing just a fraction of development costs but paid largely up-front, are significantly higher for green construction projects. These projects also take longer to complete. The results provide some insight into the market barriers and market failures that may explain the relatively slow adoption of otherwise economically rational green construction practices.

KW - Carbon externality

KW - building codes

KW - construction costs

KW - energy efficiency

KW - environmental innovation

KW - technical change

KW - ENERGY-EFFICIENCY

KW - Construction costs

KW - Environmental innovation

KW - Technical change

KW - Building codes

KW - Energy efficiency

KW - ECONOMICS

KW - INVESTMENTS

U2 - 10.1016/j.jeem.2019.07.003

DO - 10.1016/j.jeem.2019.07.003

M3 - Article

SN - 0095-0696

VL - 98

JO - Journal of Environmental Economics and Management

JF - Journal of Environmental Economics and Management

M1 - 102248

ER -