The incentive effects of different government subsidy policies on green buildings

Abstract

This study aimed to examine the incentive effects of government subsidy policies to promote the development of green buildings. In particular, four different designs of subsidy policy were investigated: a) subsidies paid to developers alone, b) subsidies paid to consumers alone, c) subsidies paid to both, and d) no subsidy. Two-stage models involving developers, consumers, and the government were constructed to examine the effects of the different subsidy policies. In the models, developers supply and sell buildings with different green effort levels; consumers purchase the buildings according to their green preferences. The results of the numerical analysis indicated that the subsidies were a positive incentive for the development of green buildings. Simultaneously subsidizing both developers and consumers resulted in the greatest profits for developers and the highest social welfare. The incentive effect of subsidies on consumers was superior to that of subsidies on developers, revealing the increasingly important role of consumer behavior in the green building market. Furthermore, the incentive effects of the four subsidy policies were significantly enhanced with the improvement of consumers' green preferences and the unit potential benefit for developers.