BOT for Green Buildings: a Decision-making Model for Government

The proportion of energy consumption in construction industry is considerable and therefore more and more attention has to be paid to the development of green buildings. Green buildings have significant environmental and social benefits but the incremental cost becomes one of the major obstacles that hinder their development. Based on the externality theory and Coase Theorem, this paper establishes a utility function of three participants (consumers, enterprises and governments) in green buildings, and derives a decision-making model for government. The model could explain the influence mechanism about how the incremental cost restricts the development of green buildings with full market regulation. Decision-making process of green buildings is also proposed, which indicates that related policies, such as government subsidies, tax exemptions, carbon emissions trading in some developed countries, could regulate the market and achieve more efficient allocation of external benefits of green buildings. Finally this paper, taking into account the fact that the development of green buildings in developing countries like China is in its infancy, proposes a BOT (Build-Operate-Transfer) scheme for green buildings, which could internalize the external benefits by utilizing enterprises' professional services and high efficiency. It is hoped that the conclusions would be useful for the development and promotion of green buildings.