The value of green building and its spillover effects

Daniel Matisoff

Green buildings provide a wide range of external benefits to society at-large. Among them are reduced waste, environmentally friendly materials, more natural landsapes and, of course, a reliance on cleaner and less energy.

But what are the internal motivations for an organization to build and certify a green building? And are there significant benefits for participants in such projects, including designers, builders, subcontractors and the construction industry as a whole?

Daniel Matisoff, Kendeda Building
Daniel Matisoff, associate professor at the Georgia Tech School of Public Policy

The Kendeda Building for Sustainable Innovative Design — which recently began construction on the Georgia Tech campus — provides a real-world laboratory to find answers to such questions. But we already can summarize the ways in which such an ambitious project may benefit the owner, the project team and even the construction industry.

The U.S. Green Building Council’s LEED program and the Living Building Challenge, along with other green-building certification platforms, incentivize the private production of public goods. These programs work by supplying a marketing benefit in exchange for investing in additional building upgrades that may not have been cost-effective without the marketing benefit gained by certification.

Investments in a Living Building (such as the Kendeda Building) also provide a number of direct benefits to the building owner, benefits associated with certification and positive spillover effects for future builders. First, there are the direct benefits of the building technologies. The Living Building is expected to be net energy and water positive – that is, it will produce more electricity and treat more water than it uses. By using sustainable materials and through innovative design, it is expected to be a place people want to work and that inspires creativity and productivity.

Second, there are benefits associated with certification. Certification allows organizations to signal to stakeholders that they have certain characteristics and qualities. And research suggests that certified buildings secure a market premium in the commercial real estate market. While Georgia Tech will not lease space to customers or clients, the Institute experiences a number of reputational benefits associated with certification. Certification communicates to stakeholders, such as students, employees, potential donors, and the Atlanta and Georgia communities, that Georgia Tech is an innovative, sustainable institution, dedicated to being a leader in the sustainable community movement.

Third, by becoming an early adopter of the advanced energy and environmental technologies that are incorporated into the Living Building, Georgia Tech can potentially the costs for future adoption of similar technologies and practices. Information costs associated with green building procurement, including the poor understanding of the potential costs and benefits associated with the technologies themselves, deters builders and contractors from investing in green building practices and technologies.

By building a demonstration project, Georgia Tech incurs costs associated with implementation of a new program, including establishing new supply chains and overcoming procurement difficulties. A new certification program inevitably involves increased challenges and costs associated with documentation and verification of performance. Significant investments in human knowledge and know-how need to occur in order to reach certification. By laying out a path to achieve Living Building certification, Georgia Tech can reduce costs for future adopters and increases the probability that other organizations undertake similar efforts. Georgia Tech’s investments in advanced energy and environmental technologies also allow potential future adopters to have a better understanding of the costs and benefits associated with these technologies. By sharing information with interested parties, either through workshops, seminars, or conferences, stakeholders involved with the Living Building are able to directly convey valuable information on specific implementation and operational strategies for success.

Based on past research and theory, we ought to expect a Living Building at Georgia Tech to have multiple pathways to effectiveness. We should expect it to reduce energy and water impacts at Georgia Tech. It is expected to be a desirable place to occupy, with potential creativity and productivity benefits. We should expect it to increase Georgia Tech’s reputation as an innovative and sustainable place to live, work and learn. And finally, we should expect that it increases the probability that others pursue Living Building certification in the Atlanta region in the future, as this project should reduce costs associated with pursuing certification while improving the understanding of the benefits of technologies and practices in the building. These spillover benefits of green building are difficult to measure.

My current research is aimed at shedding light on the pathways and magnitude of these effects, with results from research in progress confirming that a demonstration project increases the probability of regional market uptake of certified buildings by at least 12 percent, with additional benefits accruing from market development and economies of scale. Extensions of this research will highlight the mechanisms that these effects occur.

Daniel Matisoff is an associate professor at the Georgia Institute of Technology.


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