A Novel Quantitative Model for Determining Subsidy Levels to Accelerate the Replacement of In-Use Construction Equipment for Emissions Reduction

Subsidy incentive programs for accelerating the replacement of construction equipment are widely considered effective for reducing emissions from construction equipment. However, there are no known effective models for determining the optimal subsidy levels for voluntary early replacement of in-use high-emission construction equipment. In this study, a novel quantitative model is developed to address this problem by integrating emission reduction targets and life cycle cost of construction equipment to calculate the reduced service life of an item of construction for early replacement. The economic life of construction equipment and its corresponding equivalent uniform annual cost (EUAC) can be determined by using a traditional life cycle cost analysis model. Optimal subsidy levels are obtained on the basis that the subsidized EUAC of a piece of construction equipment over its shortened service life is not more than that over its normal economic life. The applicability of the proposed model is demonstrated through a case study of a crawler crane used in Hong Kong, whereby the subsidy levels for accelerating its replacement are determined. An interview with the contractor’s equipment manager responsible for the crawler crane is conducted to validate the findings of the model. It is found that the optimal subsidy levels determined by the model can accelerate the replacement of construction equipment and achieve the goal of reducing emissions from construction equipment. Replacing construction equipment earlier than its economic life is a plausible strategy for emissions reduction but places a heavy financial burden on contractors if there is no financial compensation. This study shows that the subsidy levels determined by the proposed model can adequately compensate for the extra costs incurred from early replacement and would therefore not financially discourage contractors. This model also shows that the cost-effectiveness of subsidies increases as emission reduction targets are set at higher levels.