Inflation and Reinforced Concrete Materials: An Investigation of Economic and Environmental Effects

Abstract

Focusing on Reinforced Concrete (RC), the main building material worldwide, inflation and CO2 emissions negatively impact the economic and environmental sustainability of the construction industry and the environment, respectively. Therefore, it is important to investigate the economic and environmental correlations and effects of RC in view of the inflation–CO2 emissions nexus. Previous literature did not sufficiently scrutinize this issue, leaving behind huge knowledge gaps for understanding (1) the inflation–RC material prices nexus, (2) the inflation–RC cost relationship, and (3) the inflation–RC material CO2 emissions correlation. The knowledge body, additionally, suffers from the controversial conclusion of prior literature that countering inflation reduces building material prices; however, it does not reduce their associated CO2 emissions. To address these loopholes, Spearman correlation test was employed to analyze data from Egypt’s construction market on inflation, RC material prices, RC cost, and RC material CO2 emissions from 2011 to 2019. Spearman test yielded that RC material prices and RC cost are directly correlated with inflation. In addition, steel reinforcement prices are more sensitive to inflation than the prices of other RC materials. By analyzing these outputs, using the Deviation Percentage approach, it has been found that 1% increase in inflation drives up the prices of steel reinforcement and RC cost by 1.568% and 1.548%, respectively. Further, increasing inflation by 1% increases RC material CO2 emissions, particularly steel reinforcement by 15.968%. This implies that the inflation–construction material CO2 emissions nexus has a direct correlation, not an inverse relationship, as mentioned in the archival literature. These results guide contractors to define an accurate percentage-based risk margin against the effects of inflation on overrunning their projects budgets. Importantly, they add to the knowledge body the precise description of the inflation–building materials nexus, whether economically in terms of construction material prices, or environmentally in light of building material CO2 emissions.