Life Cycle Cost Analysis of Conventional versus Green Buildings

Abstract

Buildings account for a large and growing share of global energy consumption, resource use, and greenhouse gas emissions, which has made the economic comparison of conventional and green construction a central question for owners, investors, and policymakers. This paper reviews and synthesises published literature on Life Cycle Cost Analysis (LCCA) as applied to conventional and green buildings, using the net-present-value framework codified in ISO 15686-5 to structure the comparison across capital, operating, maintenance, and end-of-life cost stages. Evidence from case studies, hedonic real-estate models, and large-sample energy-benchmarking studies is synthesised to show that green buildings generally carry a modest capital cost premium, most often reported between roughly 0 and 12 percent, but tend to deliver lower operating, maintenance, and disposal costs over the building life cycle, together with rent and sale-price premiums in commercial markets. At the same time, the review highlights substantial heterogeneity: several large empirical studies find that measured energy savings fall well short of design projections, and that a meaningful minority of certified buildings perform no better than conventional stock. The paper concludes that life cycle cost analysis, rather than first-cost comparison, is the appropriate basis for green-building investment decisions, and it proposes practical recommendations for improving the reliability of LCCA in the construction sector, particularly in developing-country contexts such as Pakistan.