This report examines how to design effective carbon pricing mechanisms (CPMs) for the construction industry. It specifically explores how CPMs can be designed better to more effectively account for emissions from the construction value chain (CVC). To date, carbon pricing has tended to apply to carbon-intensive production activities. In the CVC, this commonly includes raw material extraction, product manufacture, and energy generation. However, this is ineffective at influencing construction design, where carbon emissions are locked in for the duration of an asset’s life. The study used scenario modelling of four case studies to examine the impacts of CPMs on different life-cycle stages, asset classes, construction delivery methods, and market contexts. The strengths and deficiencies of each CPM were analyzed, and ideas for refinement and improvement were explored.

Key findings

The study findings suggest that there is no single fix. If carbon prices were increased to “midpoint” levels of $25/tCO2e used for this analysis (with a lower limit of $10/tCO2e and an upper limit of $53/tCO2e), then project costs could potentially change the behaviour of both polluters and downstream CVC actors, including clients, designers, and users. This indicates that simply raising carbon prices within existing CPMs may bring about the refocus needed to change behaviours. Whether or not this is possible in political and practical terms depends very much on the context.