• Vol 9, No 8 (2018)
  • Architecture

Literature Review on Green Cost Premium of Sustainable Building Construction

Nazirah Mat Russ, Mahanim Hamid, Kho Mei Ye

Cite this article as:
Russ, N.M., Hanid, M., Ye, K.M., 2018. Literature Review on Green Cost Premium of Sustainable Building Construction. International Journal of Technology. Volume 9(8), pp. 1715-1725
Nazirah Mat Russ Architecture and Environmental Design Department, Centre for Foundation Studies, International Islamic University Malaysia, Office of Campus Director, Kuantan Campus,
Mahanim Hamid Department of Quantity Surveying, Faculty of Built Environment, University of Malaya, 50603 Kuala Lumpur, Malaysia
Kho Mei Ye Department of Quantity Surveying, Faculty of Built Environment, University of Malaya, 50603 Kuala Lumpur, Malaysia
Email to Corresponding Author


Despite evidence that sustainable construction practice has numerous environmental, economy and societal benefits, many construction practitioners have failed to support sustainable construction practice due to perceive higher initial cost known as “green cost premium” when compared to traditional construction practice. Hence, the factors of green cost premium that are commonly cited as a crucial barrier toward sustainable construction practice must be investigated. Based on the analysis of the existing literature (e.g.: conference paper, journal article), there are 27 factors, that classified into seven elements, that contribute to the cost differential. However, few studies have been conducted on green cost premium in developing countries. Therefore, this study attempts to fill this gap and is expected to contribute to the discussion on green cost premium to improve sustainable construction implementation.  

Building construction cost; Green cost premium; Sustainable building construction; Sustainable building construction cost


Today, people has become more aware of the negative impacts of unsustainable economic growth, rapid development, the industrial revolution, and increased natural resource consumption (Whang & Kim, 2015; UNDP, 2017). The importance of sustainable development to protect the environment and to ensure peace and prosperity has been gaining recognition around the world (UNDP, 2017). The construction industry is one of the biggest contributors to environmental problems due to improper construction activities (Afzan, 2016), which lead to increased carbon emissions, climate change, resource scarcity, and waste generation (Dadhich et al., 2015). Wu et al. (2014) found the building sector could help in minimizing the environmental impact if appropriate construction practice, sustainable materials, and sustainable technologies were used. Therefore, sustainable construction has been introduced to mitigate these issues (Afzan, 2016; CIDB, 2016), and it is considered one of the most important factors to attain sustainable development (Whang & Kim, 2015).

However, even though numerous researches have highlighted the benefits of sustainable construction practice (Abidin, 2010; Sundayi et al., 2015; Whang & Kim, 2015; Afzan, 2016; Meron & Meir, 2017), construction practitioners seem to have little interest in adopting sustainable construction practice (Yahya & Abidin, 2013; Brennan & Cotgrave, 2014; Rostami et al., 2015; Afzan, 2016; Darko et al., 2017). Surveys have indicated this lack of support is due to the higher initial cost of sustainable building construction, which is termed “green cost premium” (Ahn et al., 2013; Bahaudin et al., 2013; Hwang & Ng, 2013; Brennan & Cotgrave, 2014; Shang & Peng, 2014; Qian et al., 2015; Sundayi et al., 2015; Afzan, 2016; Dodge Data & Analytics, 2016; Dwaikat & Ali, 2016; Mao et al., 2016; Amiril et al., 2017; Hwang et al., 2017).  The following are several examples explaining the current problem regarding sustainable building construction and its higher initial cost:

·   A study conducted on various types of sustainable buildings, such as residential, educational, office, commercial, public buildings, and health facilities, showed that the additional cost to construct such buildings is up to 12.5% (WorldGBC, 2013) and 5% to 10% (Hwang et.al, 2017) of the total construction budget. 

·    To construct sustainable schools, there were additional construction costs of 2% (Kats, 2014), 2.5% to 2.7% (ILGBC, 2014), and an average of 14.5% (Meron & Meir, 2017), as compared to traditional school construction. 

·    Suruhanjaya Tenaga, with a platinum certificate, and the First Avenue office building, with a gold certificate, incurred green cost premiums of 6% and 9%, respectively (GBI, 2017).

·    Based on a case study analysis of 10 sustainable office buildings, additional construction cost is found to be 5% to 8% (Halim, 2012). 

·    To provide environmentally sustainable buildings and development, the cost was about 10% to 15% higher than traditional building construction (Shari & Soerbarto, 2012).

As higher cost is widely being acquainted with sustainable building construction, this study will extensively review the literature on sustainable construction cost. This study hopes to solve the issue of higher initial cost through viable strategies and to increase construction practitioners’ interest and commitment to invest in sustainable building construction.


This paper found that green cost premium is being widely associated with sustainable construction and is a crucial barrier toward sustainable construction practice implementation. The objective of this study was achieved, as it identified 27 green cost premium factors classified them into seven elements. 

However, some limitations emerged that will be the basis for further study. First, most of the studies only identified the factors that contribute to green cost premium but did not address the interrelationship among the factors nor their significance levels. Second, the solutions to minimize the green cost premium were suggested without identifying the root causes. Therefore, future research must analyze the interaction between green cost premium factors and rank them according to their significance. Furthermore, future research must identify the root causes of green cost premium factors, as well as possible strategies to minimize the sustainable building construction project cost, with the expectation to improve sustainable construction implementation in Malaysia.


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