Greening Our Built World: Costs, Benefits, and Strategies

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“Green” buildings—buildings that use fewer resources to build and to sustain—are commonly thought to be too expensive to attract builders and buyers. But are they? The answer to this question has enormous consequences, since residential and commercial buildings together account for nearly 50% of American energy consumption—including at least 75% of electricity usage—according to recent government statistics.
This eye-opening book reports the results of a large-scale study based on extensive financial and technical analyses of more than 150 green buildings in the U.S. and ten other countries. It provides detailed findings on the costs and financial benefits of building green. According to the study, green buildings cost roughly 2% more to build than conventional buildings—far less than previously assumed—and provide a wide range of financial, health and social benefits. In addition, green buildings reduce energy use by an average of 33%, resulting in significant cost savings.
Greening Our Built World also evaluates the cost effectiveness of “green community development” and presents the results of the first-ever survey of green buildings constructed by faith-based organizations. Throughout the book, leading practitioners in green design—including architects, developers, and property owners—share their own experiences in building green. A compelling combination of rock-solid facts and specific examples, this book proves that green design is both cost-effective and earth-friendly.

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Editorial Reviews

President and CEO, USGBC - Rick Fedrizzi
"By every measure, green building is an idea whose time is now. Kats' ongoing work in this area is part of the reason, and this book will be an invaluable resource to builders, cities and companies on why and how to cost-effectively green their own built worlds."
Director, National Center for ENV Health/ ATSTR, CDC - Howard Frumkin
"Building green offers the potential for important health and economic benefits. As our nation faces the twin mandates to improve health and control costs, analyses such as this one— including full benefit accounting— are indispensable."
president emeritus, Stanford University; Bing Professor of EnvScience and Policy - Don Kennedy
"Everyone who is serious about climate change should get this book. Greg Kats brings a deep knowledge of energy and construction to show that the benefits of green construction outweigh the costs and could jump-start a national revolution toward the use of renewable energy sources."
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Product Details

  • ISBN-13: 9781597266673
  • Publisher: Island Press
  • Publication date: 11/6/2009
  • Pages: 206
  • Product dimensions: 8.20 (w) x 10.60 (h) x 0.90 (d)

Meet the Author

Gregory Kats is a managing director of the investment firm Good Energies. He was formerly a managing principal of Capital E, a national clean energy technology consulting firm. Previously he was Director of Financing for Energy Efficiency and Renewable Energy at the U.S. Department of Energy. He is a member of the LEED Steering Committee and serves as Chair of the Energy and Atmosphere Technical Advisory Group for LEED. In 2003 he wrote the first in-depth study of the long-term economic benefits of green buildings, The Costs and Financial Benefits of Green Buildings.

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Read an Excerpt

Greening Our Built Environment

Costs, Benefits, and Strategies

By Greg Kats


Copyright © 2010 Gregory Kats
All rights reserved.
ISBN: 978-1-61091-079-8



Perhaps because we spend the vast majority of our lives in buildings or traveling between them, we often overlook the scale of building energy use and the associated impact on climate change. For example, in a 2007 national survey of 1,000 homeowners, almost 75% said that they believed their homes had no adverse environmental impact. The reality is quite different. According to the Energy Information Agency, residential and commercial buildings together consume 41% of the energy, including 74% of the electricity, used in the United States—a figure that does not include energy use in industrial office buildings. And of course, it also takes energy to make the materials necessary to construct and operate buildings (e.g., bricks, concrete, mechanical systems); to transport the materials; and to actually construct buildings. Despite widespread misperception, at least 45% of all energy used in the United States and Europe is consumed directly in buildings. The level of energy use and the resulting CO2 emissions associated with buildings are almost as high as that from transportation and industry combined. Thus, the built environment provides a powerful and necessary lever for fundamentally changing our patterns of resource and energy use and responding to the grave reality of climate change.

1.1. Methodology

Over a 20-month period beginning in 2007, working with over 100 architects, developers, green building consultants, and building owners, we surveyed over 300 buildings and gathered detailed data on 170 green buildings, including the costs of going green; energy and water savings; and health, productivity, and other benefits. We then synthesized the results of our survey with findings from other studies, to develop estimates of the present value of costs and benefits. The other studies took a number of forms and addressed a range of issues; they included large-scale building-performance surveys, health research, case studies, market studies, policy research, economic modeling efforts, and detailed analyses of the costs of green and nongreen buildings. To accompany this data and analysis, we solicited the perspectives of leading practitioners in the field: architects; academics; and corporate, nonprofit, and community leaders.

We sought examples of green buildings, primarily in the United States, that were either completed or under construction, and that were certified or anticipating certification through the U.S. Green Building Council's (USGBC's) Leadership in Energy and Environmental Design (LEED) rating system or other similar system. Another criterion for inclusion was the availability of data on cost and performance that could be compared to data for a conventional version of the same building. Data were gathered directly from building owners, architects, and developers. (Appendix A describes the data-gathering methodology in detail.)

The 170 buildings for which the data sources (e.g., the architect or the developer) were able to provide information on the green premium—that is, the incremental cost of green building—make up the final data set used for cost-benefit modeling. (Appendix C lists the major data points for each building.) To allow comparability of financial impacts over time, costs and benefits are expressed in terms of dollars per square foot ($/sf).

We looked at a wide range of building types, including schools, owner-occupied offices, offices built on spec, health care facilities, multifamily residential buildings, theaters, places of worship, college and university facilities, and laboratories (see figure 1.1). Because the buildings achieved LEED or equivalent certifications and a range of energy and water-use savings, we were able to evaluate the cost-effectiveness of different levels of performance and benefits. The data set includes buildings in 33 states and eight countries, completed between 1998 and 2009 (see figure 1.2), with from 2,400 to 2 million square feet.


We developed net-present-value (NPV) and simple payback models to compare life-cycle benefits (including energy and water savings; emissions reductions; and increases in job creation, health, and productivity) with the initial cost of going green. Modeling requires assumptions, which are described in the relevant sections and in the appendixes. The general assumptions used in all of our present-value calculations are described in this section.

NPV calculations allow cost premiums to be compared with a subsequent stream of financial benefits. NPV represents the present value of an investment's discounted future benefits, minus any initial investment. Modeling NPV on a $/sf basis allowed us to compare initial building costs with a future stream of benefits.

Building benefits were calculated assuming a 20-year period—which tends to underestimate benefits, because 20 years is substantially shorter than the useful life of most buildings.

Present-value calculations of future benefits were based on a 7% discount rate. This rate is equal to or higher than the rate at which states, the federal government, and many corporations have historically borrowed money, and thus provides a reasonable basis for calculating the current value of future benefits. Unless otherwise noted, we assumed 2% annual inflation.

One of the primary challenges of any cost-benefit analysis is defining the baselines for the measurement of cost and performance. In the case of energy and water savings, the contacts for each building (typically the building architect or engineer) relied on industry standards to create a baseline for conventional buildings, against which green building savings could be measured. The building architect also provided the cost premiums, to allow a comparison between green building costs and the baseline. Standards and considerations that determined the selection of baselines and helped define our survey questions are addressed in detail in the other sections of the book and summarized in appendix E.


For over two-thirds of the buildings in our study, we were able to obtain information on energy and water savings, and for over one-third, data on construction-waste recycling and the use of recycled and local materials. Modeled benefits from energy and water savings and emissions reductions are based on building performance or attributes documented in this study, using appropriate assumptions. Estimated employment impacts are based on macroeconomic simulations run using data inputs from buildings in the data set.

To obtain credits, most LEED-certified buildings must undertake detailed modeling of energy and water savings and track the recycling of construction waste and the use of recycled and local materials. Impacts on health, productivity, and property values are relatively difficult to quantify, however, and are not required to be measured for green certification. Information on health and productivity effects in the data set is therefore sparse. Additionally, a majority of our data sources were architects, who generally did not have access to information about ongoing effects on occupants. Thus, we used a synthesis of relevant literature and widely referenced models to quantify health, productivity, property value, and employment effects. We drew on a range of research, including surveys of occupants in green buildings, statistical analysis of real estate data from green buildings, and macroeconomic models of green building costs and energy expenditures.


The study models benefits that accrue in two distinct ways: (1) directly to building occupants and owners, and (2) indirectly to the surrounding communities and society at large. Both categories of benefits are described and presented in the models because both are substantial. Reductions in energy and water use and changes in operations and maintenance requirements commonly have direct financial consequences for building owners and occupants, as well as indirect impacts on society (e.g., decreased need for investment in expanding public water-treatment facilities).

Occupants experience direct health and productivity benefits, and employers and society experience indirect benefits. Reductions in emissions and storm-water flow, changes in employment brought about by new technologies, and changes in energy demand, for example, have financial consequences for state and local governments. The magnitude of these benefits is often hard to calculate precisely, but is generally significant. These benefits, therefore, should be material factors in developing green building projects, initiatives, regulations, requirements, and incentives.


The broad approach taken here has some limitations that readers should bear in mind. Soliciting voluntary study participants and requiring that sources share certain types of data create a potential for bias in the selection of firms and projects. One might, for example, expect this data set to represent a generally more successful pool of projects than green buildings in general. In terms of cost premiums, however, it is not clear that the selection process would skew the data in only one direction; while some sources might want to share a cost-effective project, others appear eager to publicize buildings that showcase a large financial commitment to green goals.

Although the data set captures much of the diversity of the green building market in terms of geography, performance, and building type, the data set is not precisely representative of the actual national population of green buildings. For example, a comparison to the USGBC's records on certified and registered projects reveals that the buildings in the data set tend to be greener than average (e.g., greater reported reductions in energy use, a higher percentage of Platinum buildings). As a consequence, buildings in the data set would be expected to have slightly higher energy and water savings and reported green premiums than those associated with "average" green buildings built in the past decade (see appendix D). The bias toward greener buildings in this data set, which consists of buildings constructed over the past decade, coincides with the continuing trend toward greener buildings over time, suggesting that the data set provides a reasonable basis for anticipating the performance of new green buildings.

Finally, this book does not compare actual to projected performance; the primary focus is on the financial costs and benefits of green versus conventional buildings, given the best currently available information. In estimating long-term costs and benefits, we have used modeled costs and projected energy and water savings data where actual data were not available. For more information about measured performance of green buildings, see appendix I.

1.2. The Cost of Building Green

Question: How much does it cost to build a green building compared with a conventional building?

Evidence: The 170 (U.S.) buildings and 10 non-U.S. buildings in the data set reported green premiums ranging from 0% to 18%, with a median of 1.5%; the large majority reported premiums between 0% and 4%. Different approaches to researching the cost of going green yield similar results.

Bottom line: Most green buildings cost slightly more than similar conventional buildings to construct: the typical added cost of building a green building is $3/sf to $9/sf. Generally, the greener the building, the greater the cost premium, but all LEED levels can be achieved for minimal additional cost.

National and international surveys continue to reveal a widespread perception that green buildings cost substantially more to construct than conventional buildings. Recent surveys also find that concern over first costs remains the primary barrier to green building. For example, Global Green Building Trends, released in 2008, reports that of the over 700 construction professionals who responded to the survey, 80% cited "higher first costs" as an obstacle to green building .

Some green architects and other experts believe that green buildings cost substantially more, while others emphatically believe that green design does not, or need not, cost more than conventional buildings. This discrepancy was evident during a single day of research for this book. Nick Berg, a partner in the development of Avanyu, a proposed mixed-use sustainable community and resort in Utah, reported his expectation for the green premium on the project: "This is our first green project and we don't know the premium yet, but anticipate with good planning no more than 20%." In response to our inquiry on the green premium for two completed LEED apartment buildings, Michelle Rosenberger, of GGLO Architects, wrote as follows: "Shame on you for perpetuating this myth that green design costs more even if integrated properly. LEED certification does, but green design need not. I assume you are making that kind of distinction."

A 2007 survey by the World Business Council for Sustainable Development found that business leaders believe that green building is, on average, 17% more expensive than conventional design. Figure 1.3 illustrates this perception and compares it to the actual green premiums found in our study. Strikingly, the public also appears to underestimate the environmental impacts of buildings: the same international survey showed a public perception that buildings produce roughly 20% of CO2 emissions, when in reality they account for almost half. And, as noted in the introduction to this volume, a recent survey of U.S. homeowners found that nearly three-quarters believe that their homes have no adverse environmental impacts.

Developing green, walkable neighborhoods and communities is also commonly thought to be more expensive than conventional sprawl, but additional cost has not been clearly documented, and some green community-development techniques have been shown to result in substantial first-cost savings (see section 2.3, "Financial Impacts of Green Community Design").


In collecting data on the cost of green buildings compared with conventional design, we defined the green premium as the cost difference between green and nongreen (conventionally constructed) versions of the same building. All costs (e.g., construction, design, modeling, certification, etc.), except the cost of land, are included—an approach that permitted full comparability between green and conventional construction, and that took into account the characteristics of the particular project. Appendix F describes in greater detail some of the challenges of researching and defining the green premium.


The 170 U.S. buildings that make up the data set report cost differentials ranging from slight cost savings to 18% additional cost (see figure 1.4). More than three- quarters of the buildings in the data set have green premiums between 0% and 4%; the largest concentration (69 buildings) is between 0% and 1%. The median cost increase was 1.5%, and the mean cost increase was 2.8% before incentives. These figures translate into a typical cost premium of about $3/sf to $9/sf.

At the other end of the spectrum, nine green buildings in the data set reported a green premium of 10% or more; these include one Silver, four Gold, and four Platinum buildings. Thus, in this data set, there are more Platinum buildings with little or no green premium (0% to 2%) than with a large (10% or more) premium—suggesting that the cost premium depends more on the skill and experience of the design and construction team and on the choice of green strategies than on the level of greenness. Architects, engineers, contractors, and owners of green buildings almost universally report that early integration of green goals into the design process is crucial for achieving cost-effective designs.

Of the 170 buildings in the data set, 125 reported total project costs and premiums in terms of dollars per square foot. As shown in figure 1.4, absolute green premiums ranged from $0/sf to $71/sf, with a median of $3.40/sf.

Our findings are in keeping with those of our previous studies, which have found that green buildings cost approximately 2% more to construct than conventional buildings. Two previous Capital E assessments, led by Greg Kats, used a similarly inclusive definition of green premium. "Costs and Financial Benefits of Green Buildings" and "Greening America's Schools: Costs and Benefits" surveyed 58 green offices and schools (40 of these buildings, with updated data, are included in the data set for the study on which this book is based). The surveys found that green buildings cost between 0% and 7% more than conventional buildings, with an average cost premium of slightly less than 2%. Many of the buildings included in these studies were early adopters of green building strategies.


Excerpted from Greening Our Built Environment by Greg Kats. Copyright © 2010 Gregory Kats. Excerpted by permission of ISLAND PRESS.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents


About Island Press,
Title Page,
Copyright Page,
1.1. Methodology,
1.2. The Cost of Building Green,
1.3. Energy-Use Reductions,
1.4. Advanced Energy-Use Reductions,
1.5. Water-Related Savings,
1.6. Green Affordable Housing: Enterprise's Green Communities Initiative,
1.7. Health and Productivity Benefits of Green Buildings,
1.8. Green Health Care: Assessing Costs and Benefits,
1.9. Employment Benefits of Green Buildings,
1.10. Property Value Impacts of Building Green,
1.11. Net Financial Impacts of Green Buildings for Owners and Occupants,
2.1. What Is a Green Community?,
2.2. Setting the Stage for Sustainable Urbanism,
2.3. Financial Impacts of Green Community Design,
2.4. Transportation and Health Impacts of Green Community Design,
2.5. Property Value and Market Impacts,
2.6. The Market Rediscovers Walkable Urbanism,
2.7. Social Impacts of Green Communities,
2.8. Cost Savings in Ecologically Designed Conservation Developments,
2.9. International Green Building,
2.10. Financial Impact of Green Communities,
3.1. Faith Groups in the Green Vanguard,
3.2. Methodology and Findings,
3.3. Motivation,
3.4. Impact of Green Buildings in Faith Communities,
3.5. Financial Stewardship,
3.6. Conclusion,
4.1. Energy Consumption,
4.2. Renewable Energy,
4.3. Carbon Dioxide Emissions,
4.4. Financial Impact,
Island Press, | Board of Directors,

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