Go to content

3. Financial barrier

Cost is often seen as a major barrier to decarbonisation in the construction industry. Several different companies and stakeholders are involved in construction projects, and they all need to make the business case for investing in resources to make construction sites emissions-free.
Zimm, Malin, Åkerman, Angelica, Martigny Modvig, Pernille, and Bojesen, Dorte Bo, Building within the Safe Operating Space: Nordic Insights on Sustainable Construction. Oslo: Nordic Innovation, 2024. [Online]. Available: https://pub.norden.org/us2024-440/
M. Mahmoodi, E. Rasheed, and A. Le, ‘Systematic Review on the Barriers and Challenges of Organisations in Delivering New Net Zero Emissions Buildings’, Buildings, vol. 14, no. 6, p. 1829, Jun. 2024, doi: 10.3390/buildings14061829.
The need for upfront investment and the availability of machinery and vehicles powered by clean energy sources are often the first obstacles. Once this equipment is obtained, there can be additional barriers that prolong project duration and increase complexity, which also translate into higher costs. Additionally, the lack of access to finance can hinder progress on emissions-free construction since financial institutions often prioritise financial gain over environmental performance, and project tenders may reward the bidder with the lowest costs. Often, there is an absence of incentives to invest in emissions-free equipment, practices and projects, and emissions-free ambitions are not integrated into business models.
“...construction companies are not going to make the move unless their customers require it.” – Building owner-operator
This chapter will explore the barriers related to higher costs for stakeholders, including the costs due to low-emission machinery and vehicles, waste management, and longer project durations, as well as barriers related to finance, increased risk, and the role of procurement agencies.

3.1 Initial cost of machinery and vehicles

There is an additional cost when purchasing new low-carbon equipment, such as battery electric machinery, clean fuels for diesel machinery, or retrofitting machinery to use low-carbon fuels. The high cost of emission-free machinery and vehicles is frequently cited as one of the top barriers to emission-free construction sites.
D. de Weger, B. Semeijn, and M. Bollen, ‘Leap To Zero conference report’, Rijkswaterstaat, Utrecht, 2024. [Online]. Available: https://www.nordicsustainableconstruction.com/knowledge/2024/may/leap-to-zero-2024-report
M. P. Aragonés, I. Vafiadis, and C. Eriksen, ‘Zero Emission Construction Sites: Status 2019’, Bellona, Brussels. Accessed: Oct. 04, 2022. [Online]. Available: https://bellona.org/publication/zero-emission-construction-sites-status-2019
R. Stokke, X. Qiu, M. Sparrevik, S. Truloff, I. Borge, and L. de Boer, ‘Procurement for zero-emission construction sites: a comparative study of four European cities’, Environ. Syst. Decis., Sep. 2022, doi: 10.1007/s10669-022-09879-7.
New emission-free equipment may cost 20% to 30% more than conventional equipment, and retrofitting existing equipment could cost three times as much. Fossil-free fuels, such as HVO, are often expensive compared to conventional diesel and may be limited in supply.
Not only is there a higher cost for the contractor when buying or retrofitting machinery and equipment, but it will also cost local, regional, and national governments more due to the infrastructure improvements needed to support the initiatives necessary to implement emission-free construction sites.
D. de Weger, B. Semeijn, and M. Bollen, ‘Leap To Zero conference report’, Rijkswaterstaat, Utrecht, 2024. [Online]. Available: https://www.nordicsustainableconstruction.com/knowledge/2024/may/leap-to-zero-2024-report
Infrastructure for charging vehicles will need to be developed regionally, and the electricity supply and grid will also need to be improved.
This was highlighted in an interview with staff from companies in the energy sector:
“There are already subsidies for the purchase of equipment, but there is a lack of subsidies for infrastructure development, e.g. to strengthen the electric lines in the town.”
Although low-emission construction machinery and heavy-duty vehicles are more expensive than conventional diesel machinery and vehicles, over time the running costs of electric machinery can be less than diesel in terms of fuel and maintenance costs. Some studies have found that the cost is currently not that much more than for conventional projects. For example, the additional costs for low-emission construction sites in Helsinki between 2020 and 2022 were around 0.53% more (EUR 230,000).
Big Buyers Initiative, ‘Public Procurement of Zero-Emission Construction Sites’, Big Buyers Initiative, 2022. Accessed: Jan. 19, 2023. [Online]. Available: https://bigbuyers.eu/fileadmin/user_upload/Materials/BBI-ZEMCONS-lessons-learned.pdf
A study in 2020 by CE Delft in The Netherlands found that it would cost around 5% more if all of the vehicles and tools on a construction site were battery-electric powered. Moreover, they predicted that the total costs of a zero-emissions construction site would be comparable to a conventional site using diesel by 2030.
Matthijs Otten, Joeri Vendrik, Eric Tol, and Paul van de Lande, ‘Zero-emission construction site. Development and additional costs’, CE Delft - EN.
Solutions/successful examples:  
  • As part of its Clean and Emissions-Free Covenant, the Dutch government offers subsidies for buying emissions-free equipment, retrofitting existing equipment, and for innovative and experimental projects.
    ‘Schoon en Emissieloos Bouwen (SEB) voor bedrijven SEB | Routekaart schoon en emissieloos bouwen’. Accessed: Nov. 19, 2024. [Online]. Available: https://opwegnaarseb.nl/marktpartijen

3.2 Project duration

The machinery and methods currently used to reduce emissions on construction sites may prolong the construction time and, therefore, cost more. Limited availability and longer delivery times for both emission-free construction machinery and heavy-duty vehicles are often noted as some of the top barriers to emissions-free construction.
D. de Weger, B. Semeijn, and M. Bollen, ‘Leap To Zero conference report’, Rijkswaterstaat, Utrecht, 2024. [Online]. Available: https://www.nordicsustainableconstruction.com/knowledge/2024/may/leap-to-zero-2024-report
Longer lead times when ordering electric vehicles and equipment can significantly delay projects. For example, it could take up to 18 months to fulfil an order for an electric vehicle or piece of equipment compared to 6 months to fulfil an order for the same type of vehicle or piece of equipment with a diesel engine.
J. Borrás, ‘Volvo CE opens new facility to support production of electric wheel loaders’, Electrek. Accessed: Nov. 19, 2024. [Online]. Available: https://electrek.co/2024/09/08/volvo-ce-opens-new-facility-to-support-production-of-electric-wheel-loaders/
The limited supply of biofuels and delivery logistics may also lead to delays. Electrical equipment and vehicles do not have enough power to last all day, which has been cited as a significant barrier by construction professionals, and one which can lead to the use of fossil fuels to complete projects. Technical malfunctions with new equipment can also cause delays. There may be a learning curve for workers when using new equipment and following new workflows, which can also prolong a project. The infrastructure necessary to support the electrification of both transport and machinery will take time to develop and depends on interactions between the sector and many different stakeholders.
R. Høyli, M. K. Wiik, S. Homaei, and S. M. Fufa, ‘Towards emission free construction sites in Northern Norway: Results from a regional survey’, J. Phys. Conf. Ser., vol. 2600, no. 20, p. 202003, Nov. 2023, doi: 10.1088/1742-6596/2600/20/202003.
Constraints in the charging grid can increase charging times, again prolonging the duration of projects. A limited choice of local suppliers can increase the need to import materials, which extends a project’s timeline and increases cost and risk.
M. Mahmoodi, E. Rasheed, and A. Le, ‘Systematic Review on the Barriers and Challenges of Organisations in Delivering New Net Zero Emissions Buildings’, Buildings, vol. 14, no. 6, p. 1829, Jun. 2024, doi: 10.3390/buildings14061829.
R. Stokke, X. Qiu, M. Sparrevik, S. Truloff, I. Borge, and L. de Boer, ‘Procurement for zero-emission construction sites: a comparative study of four European cities’, Environ. Syst. Decis., Sep. 2022, doi: 10.1007/s10669-022-09879-7.
M. K. Wiik, S. M. Fufa, S. Homaei, and K. Fjellheim, ‘A chronological development of a framework for emission free construction sites in Norway’, J. Phys. Conf. Ser., vol. 2654, no. 1, p. 012130, Dec. 2023, doi: 10.1088/1742-6596/2654/1/012130.

3.3. Reducing waste

Although reducing waste on the construction site can decrease overall costs for construction projects, there may be some upfront expenses associated with waste management techniques. Beginning at the design stage, there may be higher fees for designing a project to have less waste. Using prefabricated or modular components has been shown to reduce waste compared to conventional building techniques. For example, there is less potential for mistakes such as cutting materials to the wrong dimensions, which reduces both waste and material costs. However, there can be higher costs associated with purchasing these units and more cost and complexity related to the transport of these units. Workers also need to be skilled in this type of construction, but although an initial investment in training may be necessary, this type of construction is often quicker which can save on labour costs in the long run. The availability of modular and prefabricated units may also be a barrier since manufacturing plants that produce these units require higher initial capital investment, and regional suppliers may be unable to fulfil orders for large projects, which could lead to delays or hybrid construction techniques. Clients and financial institutions may be less familiar with modular and prefabricated components and, therefore, less willing to purchase or finance these projects.
I. M. C. S. Illankoon and W. Lu, ‘Cost implications of obtaining construction waste management-related credits in green building’, Waste Manag., vol. 102, pp. 722–731, Feb. 2020, doi: 10.1016/j.wasman.2019.11.024.
S. Karthik, K. Sharareh, and R. Behzad, ‘Modular Construction vs. Traditional Construction: Advantages and Limitations: A Comparative Study’, in Proceedings of the Creative Construction e-Conference 2020, Online: Budapest University of Technology and Economics, 2020, pp. 11–19. doi: 10.3311/CCC2020-012.
W. Ferdous, Y. Bai, T. D. Ngo, A. Manalo, and P. Mendis, ‘New advancements, challenges and opportunities of multi-storey modular buildings – A state-of-the-art review’, Eng. Struct., vol. 183, pp. 883–893, Mar. 2019, doi: 10.1016/j.engstruct.2019.01.061.
Geno Armstrong, Clay Gilge, Kevin Max, and Suneel Vora, ‘Familiar challenges—new solutions’, KPMG, 2023. [Online]. Available: https://assets.kpmg.com/content/dam/kpmg/be/pdf/2023/BE-2023-Global-Construction-survey.pdf
On the worksite, other upfront costs associated with proper waste management techniques include providing an adequate sorting area, training staff to sort waste, and having proper storage facilities for materials to reduce loss. Although both EU and national legislation and targets seek to reduce construction waste, many of the Nordic countries have yet to meet these targets when it comes to the rates of reuse, recovery, or recycling of construction and demolition waste. Cost can be a major driving force when it comes to recycling or reusing materials on the construction site as landfilling, backfilling, or energy recovery can work out cheaper than recycling. Moreover, the availability of inexpensive raw materials hinders reuse since it is often cheaper to buy new materials over recycled ones, and the market for recycled materials is not yet well-developed. The cost of selective demolition and preparing materials for reuse can be higher than that of conventional methods, and there can be additional costs for storing materials. However, it has to be noted that there are projects in the Nordic countries proving the contrary.  Some consider separating waste to be time-consuming and are reluctant to separate materials with low economic value. Transportation costs for waste management can be high in areas where recycling plants are located far from construction sites and where landfill costs are low.
K. Svedmyr et al., Reuse, recycling and recovery of construction and demolition waste in the Nordic countries. in TemaNord. Nordic Council of Ministers, 2023. doi: 10.6027/temanord2023-544.
L. Abarca-Guerrero, S. Lobo-Ugalde, N. Méndez-Carpio, R. Rodríguez-Leandro, and V. Rudin-Vega, ‘Zero Waste Systems: Barriers and Measures to Recycling of Construction and Demolition Waste’, Sustainability, vol. 14, no. 22, p. 15265, Nov. 2022, doi: 10.3390/su142215265.

3.4 Finance

Access to finance and financial support is a key factor on the path to implementing emission-free construction sites. Incentives and requirements to reduce emissions on construction sites are necessary to ensure that stakeholders act on this goal.
Roland Hunziker and Sarah Dominey, ‘The finance sector can accelerate the transformation to a net-zero built environment – Here’s how’, WBCSD. Accessed: Nov. 20, 2024. [Online]. Available: https://www.wbcsd.org/news/finance-sector-can-accelerate-transformation-to-net-zero-built-environment/
M. Mahmoodi, E. Rasheed, and A. Le, ‘Systematic Review on the Barriers and Challenges of Organisations in Delivering New Net Zero Emissions Buildings’, Buildings, vol. 14, no. 6, p. 1829, Jun. 2024, doi: 10.3390/buildings14061829.
Financiers need to prioritise environmental performance over financial gains and provide access to financing for low-emissions projects and equipment. Difficulties in accessing finance are a major barrier to emission-free construction. Financiers provide loans and investments directly to construction projects and indirectly through loans and investments in the supply chain, so there is great potential to support emission-free construction projects. Although financial institutions can set lending criteria requiring low-carbon construction practices, the financial sector mainly prioritises short-term monetary gains over the environmental performance of projects. The lack of collaboration between the financial sector and the construction sector results in a lack of data, standardisation in reporting, and standard value appraisal for sustainable buildings, which makes it difficult for financiers to assess a project’s environmental performance.
“In the finance sector, there is a lack of the knowledge and skills needed to understand sustainability disclosures and reporting related to the built environment and on how to use these results to drive investment, promote low-carbon construction, and create a business case while building trust within the market. Also, the culture and mindset of the finance sector create a barrier to zero-emission construction sites since this sector has mostly solely focused on a strong monetary return on investment over environmental performance.”
Roland Hunziker and Sarah Dominey, ‘The finance sector can accelerate the transformation to a net-zero built environment – Here’s how’, WBCSD. Accessed: Nov. 20, 2024. [Online]. Available: https://www.wbcsd.org/news/finance-sector-can-accelerate-transformation-to-net-zero-built-environment/

3.5 Risk

Innovation, such as the implementation of emission reductions in any form, is inherently risky. This is especially negative for the financing of construction projects.
Big Buyers Initiative, ‘Public Procurement of Zero-Emission Construction Sites’, Big Buyers Initiative, 2022. Accessed: Jan. 19, 2023. [Online]. Available: https://bigbuyers.eu/fileadmin/user_upload/Materials/BBI-ZEMCONS-lessons-learned.pdf
New methods in construction pose an added risk. There is an increased risk of delays or unforeseen costs. The availability of low-carbon or electrical equipment varies across Europe, which increases both prices and risk. There is also the unknown potential of hydrogen. The uncertain investment perspective results in contractors hesitating to invest due to the lack of certainty for future projects using zero-emission equipment.
D. de Weger, B. Semeijn, and M. Bollen, ‘Leap To Zero conference report’, Rijkswaterstaat, Utrecht, 2024. [Online]. Available: https://www.nordicsustainableconstruction.com/knowledge/2024/may/leap-to-zero-2024-report
Geno Armstrong, Clay Gilge, Kevin Max, and Suneel Vora, ‘Familiar challenges—new solutions’, KPMG, 2023. [Online]. Available: https://assets.kpmg.com/content/dam/kpmg/be/pdf/2023/BE-2023-Global-Construction-survey.pdf
Financial institutions may be tentative about the risk of financing new equipment or projects using non-traditional methods. Although not a new method, modular construction projects which can reduce onsite emissions may be able only to achieve project financing for 40% to 50% of the project with a higher upfront payment required. In traditional construction projects, however, developers may be able to obtain financing for up to 80% of the project.
“It’s quite normal to be sceptical of new technologies, and economics is one of the big concerns.” – Gabriel Wergeland Krog, Project Manager, Fossil-free Machines Norway
Ástrós Steingrímsdóttir, Emission-free Construction Sites in the Nordics, (2023). [Online Video]. Available: https://www.youtube.com/watch?v=Gcmasl3ObuI
The lack of trust and collaboration between stakeholders to take on the increased risk associated with sustainable construction practices is a barrier to emissions-free construction.
The impact of climate change also poses an increased risk for insurance providers, who could instead base their risk assessments on the positive impact of reduced emissions.
To combat the lack of hybrid and electric vehicles and machinery available in the market, incentives and requirements throughout the supply chain could reassure contractors that the higher upfront investment will pay off. The public sector can use its status as a major buyer to reward sustainable construction practices, increase market demand for emission-free equipment, and take on the additional risk and cost of emission-free equipment.
M. P. Aragonés, I. Vafiadis, and C. Eriksen, ‘Zero Emission Construction Sites: Status 2019’, Bellona, Brussels. Accessed: Oct. 04, 2022. [Online]. Available: https://bellona.org/publication/zero-emission-construction-sites-status-2019

3.6 Procurement

To support the green transition, authorities have financial schemes such as green public procurement and grants for low-emission equipment and projects. Procurement agencies must balance setting the requirements for emissions reductions neither too high nor too low, since setting requirements too high may push smaller companies out of the market or increase the risk of failed bids. Setting the requirements too low risks not achieving the significant reductions in emissions required and could lead to only incremental changes and lock-in effects.
I. Karlsson, J. Rootzén, and F. Johnsson, ‘Reaching net-zero carbon emissions in construction supply chains – Analysis of a Swedish road construction project’, Renew. Sustain. Energy Rev., vol. 120, p. 109651, Mar. 2020, doi: 10.1016/j.rser.2019.109651.
The Netherlands and other countries such as Denmark and Belgium have established subsidy schemes to promote the adoption of zero-emission equipment. However, these subsidies alone are not enough without clear, binding regulations to push the sector towards quicker adoption.
D. de Weger, B. Semeijn, and M. Bollen, ‘Leap To Zero conference report’, Rijkswaterstaat, Utrecht, 2024. [Online]. Available: https://www.nordicsustainableconstruction.com/knowledge/2024/may/leap-to-zero-2024-report
More private sector-driven construction projects than public sector-driven construction are contributing to this prioritisation of financial gain over sustainable construction practices. Procurement requirements are not harmonised throughout the Nordic countries, which could be a barrier for companies that work across this region. The inconsistencies in tender requirements between institutions and municipalities within the same country can also be an obstacle.
Stakeholders have pointed out that systems for awarding contracts based on low emissions must not be tailored to one technology, such as battery electric machinery, since that could hinder development beyond what is currently available. Relating criteria to specific technology can also be problematic when projects span many years due to the fast pace of development. Flexible procurement strategies can allow for innovation and help prevent technological lock-in. Depending on the context (i.e. access to renewable energy, proximity to waste disposal) of construction project’s location, different solutions may be more or less applicable.
Procurers can address the apprehension that companies or other stakeholders may have about investing in emission-free construction equipment by creating predictable demand and aligning procurement strategies with a timeline for the transition to emission-free practices.