Publication tax shift for circular construction

Circular construction and demolition can contribute to achieving both climate targets and circularity ambitions. After all, the construction sector in the Netherlands is responsible for nearly half of all raw material consumption and approximately 35% of CO₂ emissions.

However, circular construction and demolition are not yet common practice. In many cases, this circular way of working in the construction sector results in additional costs. This is partly because circular strategies involving (facilitating) reuse require more craftsmanship and labor. In this project, we investigated how a tax shift – reducing labor costs while increasing the costs of using primary and polluting materials – impacts the investment costs of circular construction and demolition. Four projects were examined:

• Two construction projects: BlueCity in Rotterdam and Kuilsenhofweg in Amsterdam;
• Two demolition projects: The Gallery in Rotterdam and the Temporary Court in Amsterdam.

Although the number and type of projects make it difficult to draw generic conclusions about the effects of a tax shift for the entire sector, several interesting insights have emerged:

• The investment costs of circular construction and demolition are higher than those of linear construction and demolition. Based on three projects, we estimate that the additional costs range between 1.7–7%;
• The environmental impact of circular construction and demolition is lower than that of linear approaches. Based on the four projects studied, we observe a total emission reduction of 1,150 tons of CO₂‑eq, equivalent to €145,000 in environmental cost savings;
• Circular construction and demolition generate labor demand. Together, the four projects result in an increased labor demand equal to ten full‑time jobs;
• Implementing current environmental pricing alone is insufficient. When only existing environmental prices are applied, this does not make the circular business case competitive;
• A tax shift makes circular construction and demolition more competitive. We see that shifting taxes from labor to materials leads to competitive investment costs for circular construction and demolition compared to linear investment costs.

This project was made possible thanks to the contribution of the following partners:

• Ex’Tax, Het Groene Brein, and Superuse, who co‑initiated this research;
• Arcadis, which invested valuable time;
• Superuse, DOOR architects, New Horizon, and Lagemaat Circular / Torque Innovation for contributing their cases;
• The Ministry of the Interior and Kingdom Relations, the Municipality of Amsterdam, the Municipality of Rotterdam, ROM Regio Utrecht, and ABN AMRO for their financial and substantive contributions.

*Please note that the publication is only available in Dutch.