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7 Opportunities for Green Buildings in China, According to Developers

by CC Huang and Hallie Kennan

China's low-carbon future depends on green buildings. With nearly 2 billion square meters of new floor space added each year, China's building sector offers tremendous opportunities for the country to move toward a cleaner economy. These recommendations are based on a comprehensive literature review and a number of interviews that the author had with green building developers in China.  

Shenzhen Institute for Building Research

China's government has announced a goal to increase construction of green buildings, and plans to adopt new measures to promote the effort. But to truly advance green buildings, China must make them desirable for developers to construct and for consumers to purchase.  

Below are seven opportunities to advance low-carbon, sustainable buildings in China, based on some of the key characteristics of the country's green building market. 

1.    Developers in China vary greatly, so NGOs and the government should start refining their strategies to incent different types of developers.  

Developers vary from one another in the projects they work on as well as how they run their companies. Some developers focus on commercial and office space, while others work on residential developments. Some target a smaller, high-end customer pool by constructing more expensive developments and also taking on property management, while others target a larger pool in second- or third-tier cities with more affordable developments.

NGOs especially should take note of these differences, and provide various forms of support to advance the development of green buildings. For example, some developers might need more technical assistance with optimizing a better supply chain for green building materials, while others might need assistance in planning and integrating green building technologies to reduce costs.

 2.    Increasing the number of trained professionals who can audit and monitor green buildings can ensure efficiency gains are actually captured.

There is still a shortage of professionals who are trained to monitor and audit green buildings. Unlike LEED's AP (accredited professionals) program, the Ministry of Housing and Urban-Rural Development's (MOHURD) three-star system still has a lack of professionals who can properly audit and monitor green buildings after they are built. This means that while many buildings are accredited as green in advance of their construction, their post-construction operations and management might not be done correctly, thereby losing the efficiency gains they were intended attain.

3.    The cost premium for green buildings is decreasing, providing momentum for NGOs, developers, and the government to build on.

In a study on green building economics sponsored by MOHURD and the Center for Urban Planning and Design at Peking University, Stanley Yip found that achieving a one-star rating in MOHURD's three-star system for green building often has a negligible cost premium. This means that the supply chain for building materials is improving and that the cost of green building materials is generally getting cheaper. Developers are also better optimizing their planning of green buildings to reduce costs.

 4.    Optimized planning can make a sizeable impact on the cost of green building construction and operation. 

Studying 30 different green buildings in China, Yip found that the cost premium for even three-star buildings can be as low as RMB 11 per square meter and as high as RMB 157 per square meter. Yip argues that building developers can more strategically select technologies with shorter payback periods.

Shenzhen Institute for Building Research

Central building systems can improve the economic case for green buildings by allowing property managers to capture the cost savings from energy efficiency features they implement.

Building users have less of an incentive to factor in clean energy or efficiency features of a building in their purchasing decisions when energy consumption is already low, especially if the energy that is used is relatively inexpensive. For individual residents, who often occupy less than 90 square meters of floor space (the typical size of a two bedroom apartment in Beijing), lower rates of energy consumption may make a building's "greenness" less of a priority. This means that if developers can work with or become property managers it is much easier to recover the energy and water savings from green buildings.  

6.    Green building markets vary greatly by city, which means the central and local governments have the opportunity to tailor policies that better suit local market conditions.

More affluent cities like Beijing and Shanghai are easy markets for green buildings, where branding for green offices is more important, and price premiums for green buildings make less of an impact on the consumer. Alternatively, second- or third-tier cities tend to have lower average income levels and fewer local incentives for efficiency, thus making green buildings a less attractive option. The additional cost for more efficient buildings, even when a small fraction of the total cost, is often enough to deter interest among consumers in second- and third- tier cities. Developers are thus less likely to start green development projects in these cities, which widens the "green gap" between the less affluent, developing cities and their wealthier, more established counterparts.

Beyond direct subsidies, the Chinese government can give green building developers a competitive edge in the market, such as providing them first access to desirable development locations or allowing them to sell earlier by having an expedited approval process to start earning back their interest. In Xiamen, one local policy gives green building subsidies to consumers rather than developers, which has been helpful in advancing the green building market there.

 7. The air quality crisis in China means that green buildings are more important than ever; developers must capitalize on this opportunity.

High-quality building envelopes, a feature often incorporated in green building construction, can improve air quality inside the building. Consumers, especially in China, care greatly about air quality, and the marketing potential of using improved indoor air quality to sell green buildings is still under explored.

The benefits of green buildings in China are undeniable, and the potential for a cleaner, more energy-efficient building sector is enormous. The IPCC's Fourth Assessment Report concluded that buildings have the largest and cheapest energy savings potential of any economic sector, particularly in countries such as China that are still developing infrastructure at a rapid rate.

Expanding developer and consumer interest in green buildings, through the right policy measures and incentives, has the opportunity to drastically improve the quality-of-life of China's billion-plus people.

(Photos taken by CC Huang)