KIEAE Journal

Greenhouse gas emissions are a primary concern throughout the world. International pressure to reduce energy consumption has accelerated since the United Nations Framework Convention on Climate Change was established in 1992. Systematic policies have been established in many advanced countries to make these reductions.

The European Union (EU) has set a goal of increasing energy savings by 20% by 2020 [1] while the United States (US) legislated the Energy Independence & Security Act in 2007 to promote improved energy performance and reduced energy consumption by the Federal Government. However, even though energy use reductions in the building sector have been realized in many countries, reductions in this sector are often difficult, primarily because of inadequate or inefficient laws, incentives, implementation techniques, and available building materials and products [2].

Buyers of real estate are more inclined to concentrate on the upfront price of a property, which is perfectly visible [3]; however, there is no evidence that a significant relationship exists between environmental and/or energy performance and rental capital values [4]. Because executants will not keep investing in activities if the public benefit cannot be transferred to them [2], it is unlikely that business proprietors and owners will improve the energy efficiency of their buildings. In addition, many construction projects suffer from time delays, cost overruns, and quality defects [5]. Thus, incentives offered at the proper time, in the proper way, and to the proper people are critical for broadly improving energy efficiency in existing and new construction.

In general, energy policies are categorized into economic, administrative, and informative policy instruments [6]. In addition, energy subsidies can act as tools that have both direct impacts (e.g., grants and tax exemptions) and indirect impacts (e.g., regulations) on prices or costs [7]. In this study, we focus on economic energy policies and the direct and indirect impacts of these policies. Our overall objectives in this study are to better understand energy policies and incentive systems in the building sector in South Korea and to make suggestions for improving them. To do this, we investigate incentive systems used in key developed countries throughout the world.

These incentive systems fall into two categories: financial (direct) support and non-financial (indirect) support [8]. Financial support systems are directly connected to monetary value (e.g., initial construction cost, tax demanded before completion, and loans) and are typically related to the beginning of the building process. Non-financial support systems, on the other hand, are related to any non-monetary bonus or reward that encourages participation in a given program. Although non-financial support systems do not lead to a direct cost reduction, these bonuses or rewards often lead to a total cost reduction and determine market prices. Both types of incentive systems can be further categorized by time period within the building’s life cycle (i.e., initial cost of business, cost of construction, and running cost) and beneficiary type (i.e., business proprietor, owner, manager, and user). In addition to these case studies, we undertake a survey of experts in architecture-related fields in South Korea to gauge their opinions regarding the building certification rating system (BCRS) and how underlying incentive systems could be improved. Based on the study’s two approaches, we conclude with recommendations for how to improve South Korea’s policy and incentive systems for increasing the use of energy-efficient technologies.

In South Korea, the BCRS is a building performance measurement system and policy that offers business proprietors, owners, managers, and users objective building information (e.g., how much energy is consumed and the building’s monetary value). This system is based on the EU’s EPBD. Because the BCRS is strictly voluntary at this point in time, the South Korean government also provides financial incentives to encourage participation, increase interest in the policy, and reduce initial investment costs. Government -sponsored incentive programs can greatly increase the likelihood that an owner will incorporate energy efficient technologies into new and existing structures, and these programs have been regarded as the keystone for improving the energy efficiency of buildings [2].

The predominant energy policy in South Korea focuses on improving energy efficiency in buildings, making the BCRS one of the most important building-related policies. It has been amended four times since its initial implementation on 29 August 2001.

The amendment, in December 2009, expanded certification requirements to include new office buildings in addition to homes, and simultaneously consolidated evaluation standards. Although the BCRS is currently voluntary, some public institutions are obliged to follow its mandates and achieve a second grade BCRS rating.

The most recent amendment of the BCRS, in May 2013, included detailed certification criteria to encourage people to improve energy efficiency for existing structures. The BCRS has two phases: pre-certification and main certification. The main certification phase is used to estimate a building’s energy performance through field investigation after the completion of construction. Table 2 show the number of certifications within the three-grade framework of the BCRS in South Korea, which means the second grade accounted for 65.6% of pre-certification levels and 68.8% of main certification levels by December 2013.

This is likely because public institutions typically attempt to acquire a second grade or better in their new construction.

In addition, business proprietors are eligible for tax reductions in acquisition and registration fees when their buildings achieve a second grade or better, which provides strong incentives to reach this level.

Financial incentives for the BCRS program are available to individuals before and after they acquire EPCs. For example, the South Korean government offers programs such as low interest financing and matching grants to reduce initial building costs for individuals who plan to use energy efficient technologies in construction. New home owners are eligible to receive up to KRW200,000 (USD185) per unit area if the home earns a first or second grade within the BCRS program. In addition, the Renewable Portfolio Standard is a regulation that requires increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal. In addition, business proprietors can get initial tax reductions (e.g., Article 286, Local Taxes Act).

As well as direct financial support systems, indirect nonfinancial incentives are offered in South Korea to encourage individuals to construct energy efficient buildings under the BCRS program (Table 1). For example, density bonuses permit developers to increase the maximum allowable development on a property. Similarly, the government relaxes restrictions on maximum building height and extent of landscape architecture depending on the structure’s Energy Performance Index and BCRS grade.

Compared to incentive systems for energy efficiency used in other parts of the world (Table 1), South Korean incentive systems are relatively limited. Most financial support systems are run by the government, while there is limited use of many types of non-financial support systems (e.g., marketing for sale, logo certification, and free technical assistance). In addition, those support systems that are used typically focus on reducing initial costs (e.g., tax exemptions), which are primarily beneficial to business proprietors and owners. However, management and operational costs account for 83.5% of life cycle building costs [25], and additional support systems that reduce these costs are needed urgently.

We designed a survey for the purpose of gathering opinions on how the BCRS could be improved in the future [26]. The survey contains 23 questions in two main parts that require both objective and subjective answers. The parts are: (1) obligations of the BCRS and (2) the legal framework and operating system. The questions focus on the awareness, need, obligations, and legal framework of the BCRS, as well as incentive systems, EPC leasing, and trading.

Ideally, we would have liked to gather all types of beneficiaries (building proprietors, owners, managers, and users). However, BCRS is not yet an obligatory legislation for the public in South Korea and the public does not generally know about the system. Furthermore, in South Korea, legislation is enacted by parliaments, which commonly receive professional advice from experts. Therefore, we decided to disseminate our questionnaire via email [27, 28] to members of the Architectural Institute of South Korea who are major agents in the construction industry, employed by government-related organizations, or are researchers.

This is because we are of the view that the survey should be oriented toward informed people. Thus, we chose only experts for our sample rather than beneficiaries.

For these reasons, we targeted individuals based on their expert knowledge and motivation to improve existing policies. Two weeks after sending the questionnaires via email, we received responses from 114 individuals (Table 3).

As Table 3 shows, a significant proportion of respondents are employed by universities in architecture-related departments (43.9%) or architecture firms (34.2%) and have worked in their field for more than 20 years (41.2%).

The educational backgrounds of respondents are primarily in planning and design (53.5%) and energy (17.5%), and most have earned a graduate degree (PhD: 50.9%; Master’s: 35.1%).

In South Korea, the Presidential Committee on Green Growth set a target of reaching full zero energy for all buildings by 2025, that is, 100% of all buildings’ energy should come from renewable sources. In addition, the government has mandated that, from 2017, EPCs must be provided for any building sold or rented (Presidential Committee of South Korea, 2011).

To accomplish these goals and mandates, we conclude that the BCRS must transition from a voluntary to a mandatory program. In addition, stronger alternative incentives are needed to encourage people to build with energy efficient technologies.

In this study, we found that South Korea’s current incentivesystems are limited compared to other countries and non-financial incentives are rarely used. Based on the responses of experts in the fields of architecture, planning and design, and engineering, we recommend that existing incentives in South Korea (e.g., tax exemptions and density bonuses) be expanded to include application range, application ratio, and cost. The experts in our survey especially recommend that direct benefits (e.g., marketing for sale and regular technical assistance) should be offered to users. Incentives of this type can be important in a voluntary program to ensure that users become active supporters.

In addition, we expect that reductions in electricity/gas utility fees and fast track permitting would be strong direct financial benefits for users. Finally, we recommend implementing new incentive programs, including cost benefits after completion of buildings (e.g., repair cost, maintenance cost, and low interest financing for reconstruction).