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

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  • Chegut, Andrea
  • Eichholtz, Piet
  • Kok, Nils

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.

Suggested Citation

  • Chegut, Andrea & Eichholtz, Piet & Kok, Nils, 2019. "The price of innovation: An analysis of the marginal cost of green buildings," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:jeeman:v:98:y:2019:i:c:s0095069618304029
    DOI: 10.1016/j.jeem.2019.07.003
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    References listed on IDEAS

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    Cited by:

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    3. Wenfei Xia & Baizhou Li & Shi Yin, 2020. "A Prescription for Urban Sustainability Transitions in China: Innovative Partner Selection Management of Green Building Materials Industry in an Integrated Supply Chain," Sustainability, MDPI, vol. 12(7), pages 1-25, March.
    4. Ionel-Sorinel Vasilca & Madlena Nen & Oana Chivu & Valentin Radu & Cezar-Petre Simion & Nicolae Marinescu, 2021. "The Management of Environmental Resources in the Construction Sector: An Empirical Model," Energies, MDPI, vol. 14(9), pages 1-19, April.
    5. Yu Cao & Cong Xu & Syahrul Nizam Kamaruzzaman & Nur Mardhiyah Aziz, 2022. "A Systematic Review of Green Building Development in China: Advantages, Challenges and Future Directions," Sustainability, MDPI, vol. 14(19), pages 1-29, September.
    6. Prescott C. Ensign & Shawn Roy & Tom Brzustowski, 2021. "Decisions by Key Office Building Stakeholders to Build or Retrofit Green in Toronto’s Urban Core," Sustainability, MDPI, vol. 13(12), pages 1-31, June.
    7. Armin Jeddi Yeganeh & Andrew Patton McCoy & Steve Hankey, 2019. "Green Affordable Housing: Cost-Benefit Analysis for Zoning Incentives," Sustainability, MDPI, vol. 11(22), pages 1-24, November.

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    More about this item

    Keywords

    Environmental innovation; Technical change; Building codes; Energy efficiency; Carbon externality; Construction costs;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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