Sustainable procurement for carbon neutrality of buildings: A Life Cycle Assessment (LCA)-based bonus/malus system to consider external cost in the bid price

Abstract

In order to exploit the existing GHG emissions reduction potential of a building in the early design phase, approaches and incentives are needed to promote sustainable procurement already in the tendering and awarding phase. The objective of this study is to develop a Life Cycle Assessment (LCA)-based bonus/malus system for the public procurement of buildings and provide a step-by-step guideline for practical application. GHG emissions are monetized and added to the bid price by using shadow prices to calculate external cost and a results-based climate finance (RBCF) approach to determine a GHG emissions bonus/malus. The results show that under the assumptions of the validation example, a 38 percent reduction in GHG emissions can be achieved at only a 10 percent increase in cost. It can be concluded that the application of the LCA-based bonus/malus system leads to a reduction in GHG emissions and thus combats progressive climate change.

Keywords

• Life cycle assessment
• External cost
• Shadow price
• Results-based climate finance
• Carbon pricing
• Sustainable procurement