This chapter develops the economics theory of demonstration projects and then investigates the role of one demonstration project – the Kendeda Building for Innovative Sustainable Design – at lowering information barriers for the adoption of innovative energy and environmental technologies. The KBISD demonstration project allows us to observe the formation of a network around a demonstration project and how attitudes and behaviors relating to environmental technologies permeate and disseminate throughout the network. This section presents results from an industry-wide survey as well as several dozen semi-structured interviews related to the KBISD. The interviews reveal motivations, challenges, innovations, costs, and risks associated with participation in a demonstration project, as well as key differences between this living building approach and design–bid–build approaches often employed in traditional buildings.It finds that, while working on the building was not affiliated with increased levels of technology familiarity prior to building construction, being affiliated with the US Green Building Council is highly correlated with increased knowledge of emergent technologies. This points to professional knowledge networks as having a key role in disseminating information regarding emergent technologies.

This chapter develops a theory to explain how demonstration projects can help facilitate transformation in the marketplace. This theory is based primarily on a single economic concept: The costs of acquiring and utilizing new information. Understanding the role that pilot and demonstration projects can play in disseminating information is crucial to understanding the prospects for market transformation. These information flows occur both on the supply side and demand side of the (building) technologies market. This chapter details how information flows across supply networks and throughout markets can eventually shift standard operating practices, though these results are hardly guaranteed. We speculate that geographic networks and communities of practice are largely responsible for leveraging information spillovers, lowering costs, and facilitating dissemination of innovative technologies.

This chapter organizes the review of our perspectives on Green Market Transformation into factors that predict and explain Green Market Transformation.First, we describe the conditions associated with this transformation.These are factors that supports the transformation occurring. To transform markets through voluntary mechanisms requires the strong rule of law, institutions to curtail fraud and to support property rights to encourage long-term investments. These boundary conditions become assumptions about the context that can help enable Green Market Transformation. Next, the catalysts are reviewed – those causal mechanisms that actually bring about the deep greening of the building sector markets – that previous chapters detail.Our theory of Green Market Transformation argues that the dissemination of information through voluntary mechanisms can help address the barriers and market failures that produce the Valley of Death. It is hypothesized that these mechanisms include, though are not limited to, well-designed ecolabels and iterative demonstration projects that overcome market barriers by disseminating information about the cost and performance of nascent technologies to the marketplace, lowering costs and risks associated with the adoption of greener technologies.These predictive conditions and causal mechanisms form the blueprint for those seeking to engineer green market transformation.

Ecolabeled green buildings can have a diverse array of characteristics. Their superior environmental performance can include things like energy efficiency or water efficiency; using cleaner and lower carbon energy sources; sourcing construction materials with sustainable practices; or site selection for the buildings so as to reuse and rehabilitate brownfields or encourage use of public transportation or bicycles. The multidimensional nature of “greenness” for green building is an essential feature of these ecolabels and the Green Building Movement more broadly. The holistic approach to greener buildings embraces flexibility, diversity, and innovation over strictly prescriptive or one-size-fits-all approaches. In this chapter we unpack the diversity of green buildings using attributes such as the publicness and the private marketing benefits of an organization’s ecolabeling strategy to provide improved understanding of the manner in which firms certify green. Green building strategies are classified as altruist, pragmatist, green club, and greenwash. By providing better understanding of green building strategies, our understanding of sustainability strategies by firms and organizations is enhanced.

This chapter surveys the landscape of 14 of the best-known green building labels and some of their attributes. These labels include LEED, BREEAM, WELL, Green Star Australia, Green Mark Singapore, Green Globes, DGNB, BEAM, Three Star China, HQE, Green Star South Africa, CASBEE, EDGE, and the Living Building Challenge. It engages in an in-depth investigation of LEED.Common categories in these programs include energy efficiency, water efficiency, and materials and resource use. While the building owners and occupants may also benefit from having more efficient energy and water systems or more safe materials, these categories also convey some greater environmental benefit to the public. Therefore, it classifies the standards in these categories as intended for public benefit. While most systems prioritize environmental protection above all else at least, three systems have multiple or competing aims. The traits of these labels are related to the framework for ecolabels developed in Chapter 3 and the role that the structure of the labels plays in facilitating peer effects and other competitive drivers of Green Market Transformation is examined.

This chapter argues that participation in voluntary programs can facilitate ongoing quality competition, enabling a race. It advances a theory of self-regulatory competition that may sustain this race. From this perspective, programs can be designed to facilitate a race to the top despite tendencies for label managers to compete for the lowest common denominator or for firms to greenwash and strategically overrepresent their environmental performance. Building on the premise underpinning demonstration projects improving supply chains and facilitating uptake of new technologies, it highlights how ecolabel programs can help transform markets. Once a market becomes crowded, new standards can be set, raising the bar for building performance. Data from the LEED program demonstrate that, over time, organizations and especially private firms invest additional resources to attain higher certification tiers, becoming greener as part of a race to the top in a voluntary, green building certification program.

This chapter takes stock of Green Market Transformation in the built environment and explores the potential to replicate this model. It notes that market-based solutions, while canonical in policy spheres, have failed to solve the climate problem. Instead, by drawing upon Elinor Ostrom’s work, opportunities for institutions and polycentric solutions as well as to leverage voluntary actions are observed. Rather than frame the problem of markets versus regulation, the limits of both are recognized and a way to harmonize them sought. When ecological crises require massive solutions, we look to harness the power of market forces rather than sideline one of our most effective institutions. A vital role is seen for policy to guide and foster markets to find and implement solutions. The scale of the problems facing us demands a grassroots, bottom-up approach that enlists the efforts of households, workers, and firms around the planet. The challenge for policy-makers is in facilitating that and in devising and supporting mechanisms so that voluntary action also serves the greater public benefit.

This chapter reviews potential concerns of green building, including the environmental impact of the buildings, equity impacts, and environmental justice implications of ecolabeled buildings. These concerns typically revolve around the ultimate environmental impacts of green buildings and the equity implications of how we transition to a greener built environment. Green buildings may not be as green as we expect or want, and price premiums for green buildings work against affordability. Our green market transformation story is not a naïve, romantic, idealized story of perfectly sustainable practices overtaking our foolish old ways. This transformation story is messy, fraught with imperfections, and leaves ample room for improvement. In fact, that is part of the essence of this story: Iterative, ongoing improvements, building momentum toward a more sustainable system. Openly drawing our attention to these concerns and shortcomings can help us turn them into opportunities for continued gain and building on that momentum. Market transformation does not happen overnight, and it does not stop after a singular change. It is an ongoing evolution. This chapter reviews some of the shortcomings and concerns about this otherwise positive evolutionary path for green buildings.

This preface discusses the motivation of the book and provides an outline of the chapters. They discuss the need to assess the LEED program and its progress in stimulating Green Market Transformation in the built environment. They include acknowledgements to a number of co-authors on work that contributed to the book.

This chapter introduces a theory of Green Market Transformation, where emergent energy and environmental technologies gain widespread adoption in the marketplace. It articulatea a number of mechanisms that reduce transaction costs and disseminate information across the marketplace, such as building supply chains and improving demand for nascent technologies. Further, it reviews the global, European, and US uptake of ecolabeled buildings, providing evidence of the impact of the Green Building Movement. By providing examples of prominent ecolabeled buildings, it explores the motivations for ecolabel adoption and argues that firms and organizations compete to build ever-greener buildings. This competitive dynamic is evident across sports stadiums, where the authors detail a series of incremental improvements to stadiums over time.

This chapter defines green buildings as a holistic concept and as promoted by the Green Building Movement. It reviewa the theory and empirical evidence of market failures and various barriers that have shaped the Green Building Movement, which aims to improve environmental footprints in a way that is profitable to participants. It draws upon the market for lemons and signaling theory to explain the role of ecolabeled buildings in overcoming information barriers. To the scholar, this mission seeks to align public and private benefits through reduction of information asymmetries and externalities of building practices. It then characterizes the scope of green building policy initiatives across the United States and across the globe. It also shows the prevalence of the Green Building Movement around the globe.

This chapter offers a theoretical framework to understand the variation of ecolabel design based on the content, governance, and context of the label.Drawing upon green clubs and signaling theories, we suggest that ecolabels vary based on the stringency of the certification program, measured by the number and criticality of required standards, and the extent to which the requirements of these certifications incentivize the provision of public goods. We characterize important dimensions of ecolabels such as their impact, the value of the signal, and the extent to which they address externalities and information asymmetries. To illustrate these concepts, we take a closer look at GreenCo, a business sustainability rating system in India, and a sample of over 50 different agricultural ecolabels. This examination shows the important variation in factors like types of requirements, stringency, and institutional processes that govern the labels. Perhaps unsurprisingly, broader stakeholder engagement is associated with more emphasis on public benefits, while more surprisingly industry sponsorship does not tend to be found among the more lax labels with less public benefit.