Proactive Decarbonization in Projects - At What Price? : A Qualitative Study of Life-cycle Cost Analysis and Shadow Pricing of Carbon as Decision-making Tools

Abstract: As we move towards a low-carbon economy, environmental sustainability drives corporate performance and strategy to a greater extent than a decade ago. Hence, there is a growing importance among actors with long-term ownership interests to recognize climate-related issues in investment decisions. Meanwhile, the real estate and construction industry account for approximately one fifth of the territorial greenhouse gas emissions in Sweden. In endorsement of national and international climate policies, many companies have developed climate strategies and targets focusing on dramatically reducing their carbon footprint within the next couple of years. However, previous research shows that there are significant challenges to reach these goals, which is also confirmed by a focus group discussion that was carried out as a pre-study for this thesis. A literature review shows that life-cycle cost analysis (LCCA) and shadow pricing of carbon (SPoC), are two tools that can support increased decarbonization and thus reduce negative climate impact from construction corporations. LCCA aims to take into account investments from a life-cycle perspective, which in combination with SPoC can facilitate identification of decisions that are the most beneficial from both an economic and environmental perspective. However, there is currently a research gap on how these tools are used in a Swedish context. Therefore, the aim of this study is to investigate how these tools, as innovative means for more climate oriented decision-making, are used in the Swedish context. By applying a qualitative research method in the form of semi-structured interviews with ten of the leading companies in the real estate sector, this study complements previous research through more in-depth insights into decision-makers’ attitude towards these tools. The research design is inspired by the Technology Acceptance Model, which is a theoretical framework that suggests a positive attitude towards perceived usefulness and ease of use as fundamental variables for an innovation to be applied in practice. The results of the study show a generally positive attitude among the surveyed companies, both in terms of usefulness and ease of use of these tools. Through the theoretical framework, it is shown that there is a high level of user acceptance within the Swedish real estate sector, which is also confirmed by the current degree of implementation. All surveyed companies use some type of LCCA, with some difference in terminology, while eight out of ten companies use some type of SPoC or intend to implement it within the near future. The study concludes that the use of LCCA and SPoC as support for decision-making in early project stages contribute to achieving corporate climate targets, and constitute support for decision-makers in dialogue with both internal and external stakeholders. In light of this conclusion, there is a probability that this may become a new industry standard, which may affect property valuation principles, rental levels and financing conditions in the longer term.