Journal of Cleaner Production 137(2016)1300-1312 Contents lists available at ScienceDirect Cleaner Production Journal of Cleaner Production ELSEVIER journal homepage:www.elsevier.com/locate/jclepro A game theory based analysis of decision making for green retrofit CrossMark under different occupancy types Xin Liang Yi Peng,Geoffrey Qiping Shen . School of International and Public Affairs,Shanghai Jiao Tong University.Shanghai.China bDepartment of Building and Real Estate.Hong Kong Polytechnic University.Hong Kong China School of Public Administration,Zhejiang University of Finance Economics,Hangzhou,China ARTICLE INFO ABSTRACT Article history: Buildings are responsible for almost half of all the energy consumption and greenhouse gas(GHG) Received 13 October 2014 emissions in the world.This situation highlights the importance of the green retrofit for existing Received in revised form buildings in reducing the energy consumption and GHG emissions,as emphasized by the academia and 5 April 2016 Accepted 28 July 2016 improved by the government.Although relevant stakeholders are interested in implementing green Available online 3 August 2016 retrofit projects,this approach has not been widely pursued by the industry.the reasons of which remain unclear.Therefore,this study aims to reveal the underlying logic by analyzing the behaviors of the Keywords: building owners and occupiers,who are the direct decision makers in initiating green retrofit at the Green retrofit initial intention phase.Three occupancy scenarios,namely,owner-occupied(baseline scenario),single- Decision making occupied,and multi-occupied buildings,are used for the game analysis.The Nash Equilibrium of the Game theory game is used to analyze the probable decisions of the owners and occupiers under the last two occu- Owner pancy scenarios.Results demonstrate that both owners and occupiers are reluctant to retrofit under both Occupier scenarios.Nevertheless,the reasons vary under the two scenarios despite the same results obtained.This study clarifies the reasons for the reluctance of the direct decision makers to participate in green retrofit projects.The main reasons include the split incentives between the owners and occupiers,the complex coordination,and the uncertainty of green retrofit.The identified reasons are also beneficial to the policy makers,particularly in their effort to promote green retrofit by considering the requirements of owners and occupiers under the different occupancy types. 2016 Elsevier Ltd.All rights reserved. 1.Introduction and economy (Menassa and Baer.2014).In the life cycle of a building,more than 80%of the energy consumption occurs during Buildings are responsible for the majority of the energy con- the actual occupancy operation stage rather than during the con- sumption and greenhouse gas(GHG)emissions around the world. struction stage (UNEP,2007). In the United States(US).buildings consume approximately 50%of Owing to its essential influence on energy consumption and the total energy(ElA,2010),while in Europe,the ratio is approxi- GHG emission,the green retrofit for existing buildings should be mately 40%(Kashif et al.,2011).In the last few decades,the building given due attention in relation to sustainable development."Green energy consumption has continuously increased,particularly in retrofit"can be defined as the incremental improvement of the developing countries.In China,the building energy consumption fabric and systems of a building with the primary intention of increased by more than 10%annually(Xu et al.,2011).Buildings are improving energy efficiency and reducing carbon emissions.It can also considered responsible for a quarter of the total global carbon likewise refer to other terms in literature,such as refurbishment. dioxide (CO2)emissions (Hong et al.,2015).which consequently rehabilitation,modernization,renovation,improvements,adapta- increase the adverse impact on the global environment,healthcare, tion,additions,repairs and renewal on existing buildings(Ali and Rahmat,2009).However,routine maintenance and cleaning work are excluded (Quah,1988). Green retrofit for existing buildings is emphasized by govern- Corresponding author. E-mail addresses:liangxinpku@gmail.com (X.Liang).pengyihz@gmail.com ments all over the world.The US government passed the Energy (Y.Peng).geoffrey.shen@polyu.edu.hk(G.QShen) Policy Act (EPA)of 2005 and the Executive Order 13423,which http://dx.doi.org/10.1016/j.jclepro.2016.07.200 0959-6526/0 2016 Elsevier Ltd.All rights reservedA game theory based analysis of decision making for green retrofit under different occupancy types Xin Liang a, b , Yi Peng c , Geoffrey Qiping Shen b, * a School of International and Public Affairs, Shanghai Jiao Tong University, Shanghai, China b Department of Building and Real Estate, Hong Kong Polytechnic University, Hong Kong, China c School of Public Administration, Zhejiang University of Finance & Economics, Hangzhou, China article info Article history: Received 13 October 2014 Received in revised form 5 April 2016 Accepted 28 July 2016 Available online 3 August 2016 Keywords: Green retrofit Decision making Game theory Owner Occupier abstract Buildings are responsible for almost half of all the energy consumption and greenhouse gas (GHG) emissions in the world. This situation highlights the importance of the green retrofit for existing buildings in reducing the energy consumption and GHG emissions, as emphasized by the academia and improved by the government. Although relevant stakeholders are interested in implementing green retrofit projects, this approach has not been widely pursued by the industry, the reasons of which remain unclear. Therefore, this study aims to reveal the underlying logic by analyzing the behaviors of the building owners and occupiers, who are the direct decision makers in initiating green retrofit at the initial intention phase. Three occupancy scenarios, namely, owner-occupied (baseline scenario), single￾occupied, and multi-occupied buildings, are used for the game analysis. The Nash Equilibrium of the game is used to analyze the probable decisions of the owners and occupiers under the last two occu￾pancy scenarios. Results demonstrate that both owners and occupiers are reluctant to retrofit under both scenarios. Nevertheless, the reasons vary under the two scenarios despite the same results obtained. This study clarifies the reasons for the reluctance of the direct decision makers to participate in green retrofit projects. The main reasons include the split incentives between the owners and occupiers, the complex coordination, and the uncertainty of green retrofit. The identified reasons are also beneficial to the policy makers, particularly in their effort to promote green retrofit by considering the requirements of owners and occupiers under the different occupancy types. © 2016 Elsevier Ltd. All rights reserved. 1. Introduction Buildings are responsible for the majority of the energy con￾sumption and greenhouse gas (GHG) emissions around the world. In the United States (US), buildings consume approximately 50% of the total energy (EIA, 2010), while in Europe, the ratio is approxi￾mately 40% (Kashif et al., 2011). In the last few decades, the building energy consumption has continuously increased, particularly in developing countries. In China, the building energy consumption increased by more than 10% annually (Xu et al., 2011). Buildings are also considered responsible for a quarter of the total global carbon dioxide (CO2) emissions (Hong et al., 2015), which consequently increase the adverse impact on the global environment, healthcare, and economy (Menassa and Baer, 2014). In the life cycle of a building, more than 80% of the energy consumption occurs during the actual occupancy operation stage rather than during the con￾struction stage (UNEP, 2007). Owing to its essential influence on energy consumption and GHG emission, the green retrofit for existing buildings should be given due attention in relation to sustainable development. “Green retrofit” can be defined as the incremental improvement of the fabric and systems of a building with the primary intention of improving energy efficiency and reducing carbon emissions. It can likewise refer to other terms in literature, such as refurbishment, rehabilitation, modernization, renovation, improvements, adapta￾tion, additions, repairs and renewal on existing buildings (Ali and Rahmat, 2009). However, routine maintenance and cleaning work are excluded (Quah, 1988). Green retrofit for existing buildings is emphasized by govern￾ments all over the world. The US government passed the Energy Policy Act (EPA) of 2005 and the Executive Order 13423, which * Corresponding author. E-mail addresses: liangxinpku@gmail.com (X. Liang), pengyihz@gmail.com (Y. Peng), geoffrey.shen@polyu.edu.hk (G.Q. Shen). Contents lists available at ScienceDirect Journal of Cleaner Production journal homepage: www.elsevier.com/locate/jclepro http://dx.doi.org/10.1016/j.jclepro.2016.07.200 0959-6526/© 2016 Elsevier Ltd. All rights reserved. Journal of Cleaner Production 137 (2016) 1300e1312