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

Andrea Chegut, Piet Eichholtz and Nils Kok

Journal of Environmental Economics and Management, 2019, vol. 98, issue C

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: Environmental innovation; Technical change; Building codes; Energy efficiency; Carbon externality; Construction costs (search for similar items in EconPapers)
JEL-codes: O31 Q55 Q56 R33 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:98:y:2019:i:c:s0095069618304029

DOI: 10.1016/j.jeem.2019.07.003

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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