Optimizing green finance policies to promote the diffusion of prefabricated construction technology: an agent-based and exploratory scenario simulation

Purpose The diffusion of prefabricated construction (PC) technology is crucial for mitigating climate change. It remains at a low level in many developing countries due to financial constraints. Green finance is a promising solution, but research on how to leverage it to accelerate the diffusion of PC technology is limited. This study aims to propose more targeted green finance policies to promote the diffusion of PC technology. Design/methodology/approach This study developed an agent-based model to reveal the mechanisms by which green finance supports the diffusion of PC technology. Two types of incentive policies were considered: financial discount to construction enterprises and government reward to financial agencies. Exploratory scenario analysis was used to simulate the effects of these green finance policies and optimize their combinations. Findings The proposed methodology was applied to China. The results show that green finance incentive policies will play a significant role in the next decade, potentially increasing the diffusion rate to approximately 50%–70%. Considering both the policy effect and feasibility, achieving a 60% diffusion rate by 2035 is appropriate, and the corresponding policy mix consists of a no less than 9% financial discount rate and a no less than 0.04% fiscal reward rate. Within this policy mix, financial discount has a stronger effect on the diffusion of PC technology than government reward, and their simultaneous implementation generates additional positive effects. Originality/value Theoretically, this study compensates for the lack of green finance analysis in existing PC technology diffusion research. Practically, this study demonstrates the effects of green finance policy mixes in promoting the diffusion of PC technology, providing decision-makers with new insights. The proposed model serves as a general policy tool that can be adapted to different countries for their policy making to accelerate the diffusion of PC technology.