Green Performance Bond : Managing Greenhouse Gas ( GHG ) Emissions in Construction Projects

With growing concern about global warming and climate change, the construction industry, as a major contributor to greenhouse gas (GHG) emissions, has begun to realize its essential role in improving the environment by reducing emissions through the life cycle of buildings and infrastructures. While a considerable amount of prior research has been devoted to assess the environmental impacts of sustainable design alternatives and post-construction operations, there is an increased awareness of, and demand for managing greenhouse gas (GHG) emissions during the building process. One approach suggested by previous researchers is to adopt an innovative competitive bidding system called A+B+C which includes the estimated environmental cost incurred during the construction phase as one of the evaluation criteria in addition to cost and schedule. The main problem with this practice, however, is that there are no enforcement mechanisms to evaluate and guarantee the actual performance of GHG emissions control, as compared to project schedule and quality. As a result, it may induce contractor's opportunistic bidding behavior which could lead to many issues such as abnormal low bids and poor environmental performance. To address this problem, this research proposed a framework which adds another dimension to the traditional project management structure and investigates the possibility of applying a green performance bond to insure against the risk of discrepancy between the actual and expected GHG emissions during construction. Drawing an analogy from the construction performance bond, a conceptual model is presented to illustrate how to utilize this innovative surety product, along with the A+B+C bidding method, to manage embodied carbon in the building process. The result shows that from the owner's perspective, it is a way to encourage contractors to improve their environmental performance through financial means.