Incentivizing green building features through China certified emission reductions (CCER) system : a behavioral and feasibility study on building-integrated photovoltaics (BIPV) in Hong Kong

Abstract

 In “Hong Kong’s Climate Action Plan 2050” Hong Kong will cut its carbon intensity by 65% to 70% by 2030, becoming carbon neutral in 2050. In real estate aspect, one of the effective ways is to maximize the use of renewable energy by incorporating green features into buildings, to improve the energy efficiency of our buildings and infrastructure to strengthen the city's overall climate readiness. However, incorporating green features into a building can be very costly, and often requires a large initial investment that may be difficult to break-even and therefore infeasible. Under the China Certified Emission Reductions (CCER) system, companies can conduct emissions reduction activities, which are certified by the Chinese government, and trade the certificates in the open market. These tradable carbon credits can be used to offset emissions and meet environmental goals, as well as to achieve corporate social responsibility. Against these backgrounds, this study aims to investigate the viability of different institutional innovation arrangement, including local renewable energy certificate scheme and CCER in incentivizing green features in buildings through a case study of the BIPV deployment in Hong Kong. The case study comprises two parts, including a behavioral study and financial analyses. The behavioral study investigates the willingness-to-pay of carbon tokens in a voluntary carbon market through a 2-week experiment involving 25 participants, resulting in an average willingness-to-pay of $12.4 per carbon token. Results also show other factors like the introductions of investors and ESG requirements are highly correlated to the variations of market prices of the carbon tokens. As a “side product”, this experiment managed to cut one ton of carbon dioxide emission in total. The second part of the empirical study is to explore whether market driven approach may complement administrative carbon reduction programmes to make building green features viable in Hong Kong through a series of financial analyses. With reference to an empirical case of implementing a BIPV system in a school in Ma Wan which was plainly infeasible cost-benefit-analysis-wise, it could become viable by putting the Feed-in Tariff programme under China Light Power (CLP) Ltd. and the CCER system hand in hand. Revealed by the Discount Cash Flow analyses, the key factors enhancing the viability include reduction on investment costs as a result of technological improvement as well as growing carbon market size and maturity, which can be achieved through implementation of carbon trading policies. The concluding implication of this study is the need to develop an institutional system and market-based mechanism for encouraging low-carbon development and green features in buildings, to achieve carbon neutrality by 2050. This study has demonstrated that if corporations can participate in the voluntary carbon market, e.g. CCER, to offset their carbon emission commitments and in turn fulfil their ESG requirements, market-based approaches can be complementary to administrative ones to help achieve sustainability. Given the rapid increase in corporate voluntary net zero commitments, it is expected that the carbon credit demand grows rapidly, and the voluntary corporate commitment could be a major driver of the voluntary carbon market growth.