Study on the Economics of Green Buildings in China

Study on the Economics of Green Buildings in China

Publish Date:
Dec 5, 2012

Green Building projects may need additional investments, but they will also generate benefits. The difference between cost and benefits are the economic profits. However, for Green Buildings of different uses, and constructed at different times, the respective costs and the benefits would vary significantly. It is important to study the cost and benefits of Green Buildings from an economics perspective and assess their economic efficiency. Through a study on selected sample projects which have attained the different "Star" Grades under the China‟s Evaluation Standard for Green Buildings, this research project looks into the economics of Green Buildings in China, provides an overall framework for the assessment of the cost and benefits associated with these projects, and proposes directions for future policy development.

A study on the geographical distribution of Green Buildings in China and a correlation analysis between the amounts of gross floor area (GFA) with the economic conditions of the cities were undertaken. This report finds that the GFA of Green Building projects in a city correlates strongly with the macro-economic conditions of the city. These macro-economic drivers include a series of economic factors, but the most significant two are the annual level of GDP and the total gross floor area constructed in the same year. Green Building development is a market decision undertaken under the overall influence of the total economic conditions of the cities. Factors such as the scale of the economy and the level of activities of the local real estate markets are all considerations undertaken by the investors and development companies.

This research project selected 55 Green Building projects for detailed cost and benefits analysis. Based on the information submitted by these certified Star Grade projects, the research examined the choices of evaluation indices and items by the projects, as well as the pattern of their adoption of different design approaches and green technologies. The research findings point out that there are significant differences in the choice of evaluation indices and items in the application submissions for the Green Building status by different projects. At the same time, the success rates of different projects in terms of scoring the points under each specific item during evaluation also vary greatly. These inconsistencies suggest that at the current status of the market, the levels of design knowledge, experience, cost control and management expertise, cost awareness and knowledge acquired are still all in a developmental stage, and that the market is yet to achieve a fully informed and matured status.

This report emphasizes the concept of “incremental cost” for the assessment of the cost of Green Buildings. Based on the analysis of the selected projects (including 30 Residential buildings projects and 25 Public buildings projects; ranging from One Star to Three Star Grades), this study explains the current incremental cost incurred by the projects. Generally speaking, the higher the Star Grade a project has achieved, the higher the incremental cost incurred. Nevertheless, this relationship is definitely not a pre-condition. The research finds out that many projects have comfortably attained a higher Star Grade but at a lower incremental cost than the average. Different Green Building projects with the same Star Grade would have incurred significantly different levels of incremental cost. This has strongly affirmed that fact that high Star Grade projects do not need to be associated with high cost.

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