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.

The paper, through a “regenerative” lens, has focused upon a new conceptual game system involving transaction costs (TCs) for creating a more accessible green buildings (GB) market. Individual stakeholders steadfastly guard their own interests in any investment decision, which seldom considers any positive gains to society. Green buildings, branded as partial public goods, involve rational and irrational factors, incurring extra transaction costs (TCs) and affecting the willingness of the stakeholders to take part. This paper examines how to reduce the TCs incurred during the game played in the decision-making process with the ultimate aim of promoting GB. In the game model, the developers and end-users negotiate and bargain over the TCs caused by GB in comparison with its conventional counterpart. The findings are that 1) TCs are the overriding barriers impeding the development of the GB market. Reducing TCs will facilitate supply and demand in the GB market; 2) the equilibrium payoffs for the developer and the end-user are proportional to their bargaining powers (the higher the bargaining power is, the more benefit it will gain from the GB transaction); 3) strengthening the bargaining power of the developer can increase the expected utility of developing GB; and 4) more fake GB products or less credible developers will result in higher TCs for the end-users and therefore lower payoffs will be expected. The findings stress that the choice between developers & end-users over investing in GB is a complex game problem, where TCs could be conceptualized and showed their important role. By minimizing the TCs incurred in the complex decision of GB, it will not only benefit themselves but also bring net regenerative outcomes to society.