Green Building Councils: Their Economic Role as Governance Institutions

Sabine Sedlacek and Gunther Maier

SRE-Disc from Institute for Multilevel Governance and Development, Department of Socioeconomics, Vienna University of Economics and Business

Abstract: Green Building Councils (GBCs) have been established in many different countries in recent years. This paper discusses the role such organizations can play in the respective construction and real estate industry and under what circumstances a GBC can contribute positively to the development of a ''greener'' or ''more sustainable'' stock of buildings. The paper investigates the main informational problem of the industry by looking at the relation between a developer and an investor from an economic point of view. We argue that the investor's uncertainty about the true quality of a building and the corresponding incentive for the developer to cheat may lock them into a prisoners' dilemma trap. The corresponding barriers for a transition toward a ''greener'' buildings market are analyzed. GBCs are described as institutions of economic governance that can assist the economy in overcoming these problems. They can act as third party institutions in transactions between developers and investors. By certifying the quality of a building, they can reduce the risk for the investor to be cheated by the developer and also increase the incentive to develop good quality buildings for the developer. This task, however, raises some severe management challenges for the GBCs.

Keywords: green building councils; circle of blame; prisoners' dilemma; economic governance; certification (search for similar items in EconPapers)
Pages: 26 pages
Date: 2012
New Economics Papers: this item is included in nep-cwa
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