Conceptual Development of Cost Benefit Analysis based on Regional, Knowledge, and Economic Aspects of Green Building

Economic, social, and environmental sustainability comprise the general motivations in most green building developments. Deciding to spend additional costs on the optimum benefit results generally applies the cost-benefit analysis (CBA) method to evaluate green building implementation. However, previous studies have not investigated the general aspects affecting green building achievements in CBA. This article proposes the development of a CBA method for evaluating building aspects to define the goals of green building indicators. Disaggregating of the building development attributes and indicators through literature review showed that the CBA in green building implementation measured by several aspects such as regional, knowledge-based, and economic. The research method used a simple flow diagram to classify the building development attributes and indicators. This flow process aggregates attributes and indicators based on the CBA aspects in green building implementation. In-depth interviews with several building development experts are carried out to ensure this conceptual development implemented. This work confirmed that efficiency achievement, financial evaluation, and national economic evaluation measured the feasibility of investment in green building development. Incentive schemes were expected as the financial breakthrough to enhance green building investment feasibility.

Cost benefits analysis; Economic; Green buildings; Knowledge; Regional

Constructing commercial buildings is a strategic way to support the development of a country and the welfare of its people (Firmawan et al., 2016). The United States (US), one of the “big five” countries in sheer quantity of commercial buildings, built 4,462 commercial buildings, the total value of which reached US $17.418 trillion in the country’s gross domestic product (GDP). Furthermore, the European Union (EU) and China built 3,657 and 2,525 commercial buildings; the total value thereof in each country’s respective GDP was US $16,242 trillion and US $11,212 trillion (Damassa et al., 2015). Unfortunately, this development has caused these countries to become  the world’s highest-emission nations, with the  EU producing 22.3 percent of the world’s total emission amount and the USA and China ranking at 13.4 percent and 9.3 percent (Darko et al., 2017a). Moreover, building construction and operation uses 40 percent of global energy, 12 percent of the total clean water supply, and 30 percent of the world’s resources (Dwaikat & Ali, 2016; Zhang et al., 2017; Latief et al., 2017a; Nguyen et al., 2017). Now, stakeholders of building construction must not only develop sustainable building concepts based on economic, social, and environmental aspects, but also meet the demands for resource conservation, health, comfort, and safety during the building’s life cycle, collectively known as the green building concept (Soleri, 1969; Li et al., 2014). As a result, this commitment has proven successful in increasing buildings’ energy efficiency by about 30 to 50 percent, using up to 80 percent recycled materials, decreasing water use by 40 percent, and reducing greenhouse gas emissions by about 30 to 40 percent in some developed countries (He et al., 2018; Onuoha et al., 2018). Finally, many countries issue standards or rating tools for green buildings to make green buildings easy to implement and to create high-performance buildings. 

Many green building implementation concepts already provide a wide range of benefits in developed countries, but the implementation is still not largely merit in developing countries, including Indonesia (Qian et al., 2013). Shafii and Othman (2005) stated some of the obstacles to green building implementation in developing countries, especially in Southeast Asia, such as lack of awareness (in people), lack of training in and education about green building concepts, higher costs, special materials and technologies, rules and regulations, and lack of demand. In Indonesia, the growth in the number of buildings reached 116 percent until 2011, but the number of buildings that implemented the green building concept until 2015 was only 23. The Green Building Council Indonesia (GBCI), the founder of the Indonesian chapters of greenship rating tools, was established in 2009. If the number of implementation periods after the year GBCI was established remained steady until 2015, the average growth of green building in Indonesia was three buildings per year. This number is relatively low for the largest country in Southeast Asia when compared to Singapore and Malaysia, which built 170 buildings and 48 buildings per year, respectively.

Wimala et al. (2016) recommended some ways to resolve the problem of the low number of green building implementation concepts in Indonesia, such as comprehensive education programs, incorporating green building practices in school curricula, providing grants or rewards, reducing green building premium costs, and regulation detailing. Therefore, this study continued the previous research by developing a decision-making method to facilitate the solving of these inhibiting factors. At present, there are many studies concerning green building evaluation meant to convince building stakeholders, especially about the costs and benefits of green building features that should be applied in their respective buildings for optimal results (Preciado-Pérez & Fotios, 2017). In brief, the success factors in sustainable building development are the ability in detailing in attributes and indicators of CBA aspect in green building concept implementation (Bakar & Cheen, 2011). Therefore, this research integrates this three aspects such as knowledge-based, economics, and regional conditions (Araújo et al., 2016).

The purposes of this work are to classify the factors that influence a developing country’s decisions about green building concept implementation and to create an appropriate decision-making process using the CBA method framework. This process should be accurate in estimating green buildings’ cost and benefit components to accelerate building stakeholders’ understanding of the concept and its appeal to them. This study limits the development of the CBA framework for making decisions about the implementation of the green building concept as it pertains to aspects of the office building. This priority is a response to the office building’s highest potential for resource efficiency not only in the planning but also in the operating stage (Shao et al., 2014). Therefore, the literature study in this research not only proves the magnitude of the potential benefits of the cost of new green building implementation but also that of existing buildings. Finally, using the CBA framework as the decision-making tool can integrate the feasibility of new green building rating tools and existing green building rating tools.

The lack of comprehensive reviews of aspects that influence the success of green building concept implementation in previous studies results in the decision-making in which the CBA method was not feasible when viewed from investment costs and payback periods (Khoshbakht et al., 2017). Therefore, the development of CBA aspect in green building concept implementation is needed because it can simplify the implementation process and it can also convince building stakeholders that the green building development is possible to do in developing country. This study enriches the CBA framework in evaluating green building implementation by integrated aspects such as regional, knowledge-based, and understanding of the economic climate aspects. In addition, this study will stimulate the potential benefits of building improvement by considering the green building indicator. The result of this work is the development of a conceptual CBA framework for the decision-making process surrounding green building as a roadmap to achieve the optimum benefits of the cost of a building’s life cycle. Because this study is only a conceptual development, this study provides an opportunity for further research to test this concept empirically.

The sustainability concept in building development is the right step for advancing all regions of the world without neglecting the needs of the future. The concept of sustainability in buildings by way of the green building concept shows economic, social and environmental relationships. Basically, there are other aspects concerning the building development process, such as regional and knowledge aspects. The integration between green building concept needs and the building development concept in developing countries is an effort to increase the attractiveness of this concept.

Decision-making in the implementation of green building concept is not easy, especially in developing countries because of the relatively large number of stakeholders' buildings. This research has succeeded in developing a decision-making process for green building concept implementation through a CBA framework to conduct the evaluation of the feasibility of green building in both the private sector and the public sector. The framework reviews the development of green building through three aspects: regional, knowledge-based, and economic factors. Then, assessing the feasibility of green building investment, this study describes the indicators of building development based on attributes and definitions. This study shows the aggregation process of green building aspects as those aspects pertain to the initiative of green building experts in developing countries, particularly in Indonesia. The development of a CBA method framework shows the integration of building aspects that evaluate the building development needs of both the private sector—namely, financial evaluation—and the public sector—namely, national economic evaluation.

This research validated the framework through in-depth interviews with some green building experts in finalizing the CBA framework for green building concept implementation. They agree with this model because of its comprehensive evaluation of green building life cycles based on building development aspects and attributes. In addition, the government could control the green building achievement with this integrated system on a consistent basis. For future work, the research may enrich other building aspects. Furthermore, some of the combination incentives can be modeled in the real case study to evaluate this formulation.

The authors wish to acknowledge the green building networking by Green Building Council Indonesia and the government of Indonesia, as well as the financial support from the Sandwich-Like 2017 Program in Enhancing International Publication of Indonesian Ministry of Research, Technology, and Higher Education no. 1583/ D3.2/ PG/2017.

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