An improved stochastic life-cycle cost analysis model for examining the impact of environmental policy instruments on construction equipment replacement

Abstract

Both contractors and governments are eager for a model that can assist them to examine the impact of environmental policy instruments (EPIs) on construction equipment replacement from a stochastic perspective. Therefore, this study introduces an improved stochastic life cycle cost (LCC) analysis model and designs eight scenarios in which different EPIs are considered for such examination. The limitation of the traditional LCC analysis model has been examined. The effectiveness of the improved LCC analysis model is demonstrated with its application in a 2002 Sterling LT9500 dump truck in the US market. The results show that: (1) The traditional LCC analysis model is not robust due to failing to consider costs incurred by EPIs and a lack of stochastic perspective. (2) Mandatory administration policy instruments (EPIA) can promote earlier replacement of construction equipment, but EPIA can put a heavy financial burden on contractors. (3) When economic incentive policy instruments such as grants or subsidies programs (EPIBGS) and tax credits programs (EPIBT) are not lucrative enough, it is very hard to involve contractors in these programs, which will hardly motivate them to replace their construction equipment earlier. (4) A combination of EPIA, EPIBGS and EPIBT can work better, which can motive contractors to earlier replace existing equipment, and reduce the financial burden of contractors to some extent.