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Pitch

Creating Demand for Green Buildings through fiscal incentives, changes in policies and regulatory measures.


Description

Summary

In Bangladesh, construction sector specially the building construction is increasing remarkably but no green building has yet been constructed here. The people along with the developers of this country are not aware of the reimbursement of green buildings and thus they are not enthusiastic to construct them. But the urbanization level is increasing at an alarming rate in Bangladesh which is resulting in high demand of energy supply for residential sectors. Green buildings can significantly reduce the amount of energy required for residences and at the same time, lessen GHG emission. Creating public demand for green buildings in Bangladesh is a challenging job as the advantages of these buildings are achieved in long run what cannot be perceived by both developers and users. Some actions regarding demand side policies, fiscal incentives and regulatory measures have been proposed here involving all possible stakeholders. As the advantages of green buildings can easily not be perceived by mass people; academics, professionals should come forward to promote this type of buildings while it is the sole responsibility of government authorities to collaborate them. 


Category of the action

Mitigation/Adaptation, Changing public attitudes about climate change


What actions do you propose?

Demand Side Policies

The measures that can be taken for motivating people towards green building involve subsidizing initially through housing coupons or vouchers, allowances or rent certificates:

  • Housing voucher program: In this program, vouchers will be given to households who will be primarily interested to consume green building. The face value of housing vouchers would be the difference between fair market rent and the willingness of tenant or buyer to pay for the tenement. Preferably the face value of voucher= Fair market rent-0.3 * household income. As the voucher is equivalent to a cash transfer, the voucher program induces people to go for green building as the equivalent cash transfer can be used both for housing consumption and also on other goods. It is a more effective tool because people get more induced to a program when it gives them the scope to spend on both housing and other goods rather than the rigidity of spending solely on housing. The initial face value of voucher in the program might be greater which can be decreased later when the awareness is spread among the mass people regarding the better utility of green building form the initial voucher holders of the program.

 

  • Housing allowance program: Under this program, those who are interested in consuming green buildings, can be provided with cash payment which equals the gap between the fair market rent and a given fraction of household rent.

 

  • Rent certificates: Rent certificates can be issued by government for the consumer of green buildings which would provide the users a subsidy equals the gap between actual rent and a certain fraction of household income.

 

  • Public housing of green buildings: Government can build and provide green building through public housing as a measure of supply side policy at a reduced price than the fair market value. But this should be done at smaller scale and the consumers have to be selected carefully because a large scale public housing provision project requires greater cost incurrence and it is less effective than the measures equivalent to cash transfer or demand side policies.

 

Fiscal and Other Incentives

The state and local governments can choose a range of inducements context wise for promoting green building based on the fiscal outlook, the current level of developments activity, and the scope of the green building program.

The following incentives can be offered by jurisdictions to motivate people towards green building:

  • Tax incentives:Tax incentives are one of the robust and widely used forms of incentives to promote green building. These incentives can be offered in any of the following areas- Corporate tax, gross recipients’ tax, Income tax, Property tax or Ad valorem tax, Sales tax etc.
  • Tax abatement in accordance with the existing law of Bangladesh can be the most flexible incentive because municipalities have the opportunity to approve a number of green performance standards and allocate the abatement to any tax jurisdiction.
  • Incremental tax rebates, which would be offered at different levels of development, have also been suggested as a means to encourage all parties involved in the development or ownership process to build green. In Bangladesh, amount of allowable investment equals actual investment or 20% of total income or Tk. 100,00,000/; whichever is less. Tax rebate amounts to 10% of allowable investment.

 

  • Grants:Grant programs can be efficient in a developing country like Bangladesh and it can be considered in fiscal policy, which can offset some of the increased development costs that arise from a green building project. Grants can be used to subsidize the cost of certification or as lump sum amounts applied to the total cost of the building.

 

  •  Loans:States and municipalities can establish a loan fund to be used specifically for green improvements. Bangladesh House Building Finance Corporation (BHBFC) provides credit facilities for construction, repair and remodeling of dwelling house which can also provide financing on green building.  Jurisdictions can use performance contracting to provide loans at reduced interest rates to developers that agree to build to specified green standards. National Housing Finance and Investments Ltd (NHFIL) can also provide loans in this regard.

       

  • Technical and Educational Assistance:Government of People’s Republic of Bangladesh can arrange workshops for the academics as well as for the professionals to make sure that green buildings are constructed in proper way as in that case, they buildings will perform effectively resulting in higher demand. Government can fund the green building projects to make it popular among the developers.

 

  • Leasing assistance: Jurisdictions can lease energy efficient equipment to businesses and residents so that the initial cost of purchasing and/or installing the equipment is passed on to the state or local government. Since a city or state has significant purchasing power, it can pass the savings of buying in bulk on to citizens by leasing this equipment.

 

  • Bonus Density: Jurisdictions can offer developers height bonuses, floor/area ratio (FAR) bonuses, reductions in landscaping requirements, and the counting of green roof space as landscaping/open space in return for achieving levels of green building ratings.

 

  • Incentive for green building neighborhood: If a green community or neighborhood program is given greater incentives than a single building, green building would be encouraged at a larger scale.

 

Regulatory Measures for Policy Engagement

The standards of green buildings need to be incorporated in Bangladesh National Building Code (BNBC). An energy efficiency obligation (EEO) can be introduced to meet quantitative energy saving targets by delivering or procuring eligible energy savings produced by implementing approved measures. EEOs should achieve cost effective energy efficiency, reduce energy bills, and stimulate the development of cleaner energy. Besides, these obligations can be incorporated in BNBC like Energy Conservation Building Code in India.

 

  • The voluntary building tool following the LEED Green Building Standards, much suited to the socio-economic conditions of the country and relevant to its building environment, should be strictly maintained and should be responsible for green building rating system, certifying LEED-New Constructions, LEED-Core and Shell buildings and providing LEED based education and research programs.
  • Bangladesh Green Building Council (BGBC) can arrange incentives for the companies which will construct green buildings. A small portion of the revenue from the private housing sector can easily arrange inceptives. Each year, one company which will contribute the most in promoting green buildings may be awarded as the “BEST GREEN COMPANY”.
  • BGBC should also include certification of energy and resource efficiency, post construction monitoring and introduce regulations to improve energy efficiency of equipment and appliances and regulations for member states. Mandatory audit and energy management in commercial, industrial or private buildings can help improve the scenario.
  • The government can provide financial incentives, e.g. allowing companies to recover revenues lost to reduced energy consumption and this should be specified in policies. Successful Demand Side Management (DSM) programs combining levers like rates, incentives, access to information, utility controls, education and marketing, and customer insight and verification needs to be included in government’s long term strategy.
  • Integrated Project Delivery (IPD) that allows the LEED AP to manage a high performance project successfully, to achieve goals in a cost effective manner, to assess real and quantifiable building performance data can be made mandatory in housing policies.
  • Consequences or punishments for real estate developers for not complying with standards for green building needs to be specified in legislations after getting into contract of erecting green building.

 

According to Say’s law, “Supply creates its own demand”. The following are some ways to develop and increase the supply of Green Buildings in Bangladesh which will consequently increase the public demand:

  • Private Sector Agreements: At present almost 1500 companies are active in the real estate sector in Bangladesh and among them almost 1081 companies are working under Real Estate and Housing Association in Bangladesh (REHAB). In the last four years, private developers have supplied more than 125000 units of apartments throughout the nation (Seraj, 2012). Unfortunately none of the buildings fulfil the green building criteria. The first challenge is to make it acquaintance with people. REHAB can take initiatives to introduce green buildings and make campaigns to advertise the benefits from the perspective of both developers and users as its beneficial role to the climate may seen non-appealing to people. If all the companies acting under REHAB agree to promote green buildings, the outcome will be tremendous.

 

  • Contribution from Public Housing Sector: The scope to promote green buildings is huge for the public housing projects. The allocation of land is more for the public houses; especially for the defense and government housing projects and the budget allocated for these projects is also very high. So it would be easy to promote green buildings in the public housing sectors which can further encourage private sectors as well.

 

  • Public-Private Partnership: Bangladesh Green Building Council can arrange public private partnerships which will be supported by developed policies and regulations to promote green buildings. 


Who will take these actions?

National Housing Authority (NHA) which is the sole authority for providing housing in Bangladesh can promote green buildings. Real Estate and Housing Association in Bangladesh (REHAB) which is comprised of almost 1081 companies will promote green buildings in private sector. House Building Research Institute (HBRI) is now carrying out feasibility and suitability analysis to upgrade Bangladesh National Building Code (BNBC) promoting green buildings. National Housing Finance and Investments Limited (NHFIL) and Bangladesh House Building Finance Corporation will provide loans on low interest rates. NHA and REHAB may collaborate with World Green Building Council (WGBC) to take assistance for the required technology and expertise. 


Where will these actions be taken?

These actions will take place in Bangladesh which is a developing country in South-Asia. Existing high-rise buildings of Dhaka (the capital of Bangladesh) can be transformed into sustainable buildings through a campaign. Green buildings can be promoted towards the suburbs where vacant land is available and satellite towns are going to develop. Green buildings can also be promoted in potential urban centers throughout the country where development is going to take place. Green buildings can also be considered while designing industry and shopping centres. Emphasize should be given to promote communities and neighbourhoods with green buildings rather than single buildings. 


How much will emissions be reduced or sequestered vs. business as usual levels?

Green Buildings have significant environmental impacts on natural resources. According to a survey in 2002, it has been observed that green buildings accounts for 39.4% of total energy consumption and 67.9% of total electricity consumption and 12.2% of the total water consumed. Green buildings also reduce emission of fossil foil like oil, natural gas and coal which generates large amount of carbon dioxide, the main element of greenhouse gases. Green Buildings can reduce 40% of the emission of carbon dioxide gas. Therefore these efforts can be fundamental to slow the pace of global climate change (USEPA, 2012).


What are other key benefits?

Environmental benefits

Green building techniques reduce harmful emissions, waste, pollution and environmental degradation. Recycling rainwater and grey water for other purposes yield water savings. Storm water management is helpful in controlling overflow. Temperature regulation can be compensated by more green areas around the buildings.

Economic benefits

Green buildings reduce demand on electric, gas and water utilities which exert less demand on the local power grid and water supply, stretching the capacity of local infrastructure and reducing municipality utility cost. The resource efficiency leads to reductions in operation costs and offer long-term saving. Employee productivity has been positively correlated to indoor environmental conditions.

Social benefits

Green buildings create healthier atmosphere which promote occupants' health and productivity. If a green neighborhood program is planned, it promotes a better community interaction and optimizes life cycle economic performance. 


What are the proposal’s costs?

The additional cost of constructing green building is projected depending upon the size and extent of project and the amount is USD 5800 to USD 9500.

Green buildings are primarily expensive to build compared to the traditional buildings. Most green buildings result in 2% losses. But in the long run it yields 10 times benefit over the entire life of the building (Kats, 2008). In green buildings, energy improvements are involved, so the costs are really investments. It has been estimated for green buildings that the financial payback typically exceeds the additional cost of green building by 4-5 times over 20 years. The savings in money come from the efficient use of utilities which result in decreased energy bills and the projected savings in different sectors is USD 130 billion on energy bills (Fedrizzi & Rick, 2009). 


Time line

1.      At first we have to calculate the value of green building from the construction outlook on the basis of LEED standard

2.      To assess the impact of the construction of green building on national economy and evaluate the impact on residents health

3.      Assessment of cost benefit ratio and determine the effectiveness of the project

4.      Construction period

5.      Creating market demand simultaneously through different policy, incentives, campaign, awareness message about health

Total 3.5- 5 months to assess the fitness of green building to create market demand.

Complete green globes survey (4-6 weeks)

1.      Gather data and documentation

2.      Input building data into survey

3.      Receive preliminary and non -binding score

Third party assessment process (4-6 weeks)

1.      Purchase green globe assessment

2.      Prepare documentation for assessor

3.      Assessor review survey and documents

4.      Complete third party on-site assessment

Post assessment action and rating (6-8 weeks)


Related proposals


References

IGBC. (2008). IGBC New Green Building Rating System. Retrieved from Indian Green Building Council: igbc.in/site/igbc/igbcarticle.jsp?artid=452675

USEPA. (2012, December 19). Green Building. Retrieved from U.S. Environmental Protection Agency :www.epa.gov/greenbuilding/plubs/faqs.htm

Wikipedia. (2014, April 29). Bangladesh Green Building Council. Retrieved from Wikipedia: en.wikipedia.org/wiki/Bangladesh_Green_Building_Council