Z E M C H 2 0 1 2 I n t e r n a t i o n a l C o n f e r e n c e
122
value of green buildings must therefore be measured based on the value of the
externality of the buildings themselves.
Attention should be paid to the fact that this externality is basically negative, not
positive. “Green” merely refers to a relatively small impact on the environment and does
not mean that the building itself has positive externality. In the environmental market,
buildings basically offer high levels of negative externality, and green buildings are called
“green” simply because their negative externality is relatively small.
In other words, the amount of greenery can be increased to build up social
accumulations of positive externality, whereas green buildings, if increased, still place a
burden on the environment. This issue could safely be compared to a social problem
caused by a factory that discharged air pollutants and impaired the health of community
residents; for the issue under review, the “air pollutants” are carbon compounds and the
“community residents,” or the health victims, are the earth, but the overall structure is the
same. Taken this way, it would be easy to imagine there is a need for social responses
to buildings that discharge carbon compounds.
Given the above points, how much value, if any, does the market place on green
buildings? And if the market does place value on green buildings, through what
mechanism are they differentiated?
This paper is intended to provide a review of the economic value of green buildings
and analyze how much value the concept of environmental friendliness actually adds to
buildings.
2. How green buildings produce economic value
How real estate prices are determined
While outlining the determining mechanism of property value, I shall outline what
kind of mechanism enables green buildings to have a premium.
The determining mechanism of property value may be formulated using a durable
goods economic value model framework.
Here,
t
v
V
expresses the property value for a building aged
v
years in the period
t
.
t
v
y
is the income generated from the corresponding property aged
v
years in the
period
t
, and
t
v
O
is the expenses corresponding to this income.
t
r
is the discount
rate for the period
t
. All of the respective variables are predicted at the beginning of the
period
t
.
Here, the income generated from the property is considered to be the amount received
at the end of a given year. And the property's lifespan shall be taken to be
m
years. This
being the case, the property's present value may be defined as in (Formula
（
1
）
).
) 1(
)
1)(
1(
1
) 1(
)
1)(
1(
1
1
1
1
1
1
1
1
1
1
1
1
1
i
vmt
t i
vmt
m
t
t
t
v
t
t
v
i
vmt
t i
vmt
m
t
t
t
v
t
t
v
t
v
r
O
r
r
O
r
O
r
y
r
r
y
r
y
V
+
Π
− −
+ +
−
+
−
+
Π
+ +
+ +
+
+
=
−−+
=
−−+
−
+
+
+
−−+
=
−−+
−
+
+
+
(1)
In addition, the discount rate
r
for the property is determined as the result of
comparison with investments in stocks, bonds, etc. (asset choice), and may be strictly
defined as (
g R R
pt
ft
− +
). Taking the return on safe investments (
ft
R
) on
