Transaction Costs (TCs) in Building Regulations and Control for Green Buildings

Abstract

About 40% of global energy consumption and nearly one-third of global CO2 emissions are on account of buildings. In Hong Kong, buildings consume up to 90% of electricity during construction and operation, where all the design and construction of private developments is subject to control under the Buildings
Ordinance. The way building regulations are applied and the arrangement of supporting systems can affect the effectiveness of building energy consumptions and the corresponding costs induced. Among all the incentives and regulatory instruments, Gross Floor Area (GFA) concession becomes a popular scheme to promote green building (GB), which grant bonus GFA to the developers who comply with the Sustainable Building Design Guidelines (SBDGs) and achieving at least the minimum level of BEAM Plus certification. Transaction costs (TCs) have been debated over the past decades that affect the effectiveness of the policy implementation. This study applies the lens of transaction costs theory to explore the TCs inventories of implementing GFA concession practice in Hong Kong. This paper aims to analyze how the GFA Concession Scheme induces TCs among various stakeholders in practice, and how in turn it affects the effectiveness of building control for GB. Interviews are conducted to identify the TCs determinants regarding the GFA Concession Scheme. Examples are provided from the real practice to illustrate the nature of TCs. Policy implications to reduce TCs are proposed accordingly.