Building Sustainably: Annualized Cost of Ownership, Externalities, and the Electrification of Construction Machinery

As climate change intensifies, transitioning the construction sector away from fossil fuels is vital to reducing global greenhouse gas emissions and localized urban pollution. This paper assesses the economic feasibility of electrifying construction machinery by developing an Annualized Cost of Ownership framework that incorporates mobile charging solutions, internalizes environmental and public health operational externalities (CO2, PM2.5, NOx, and SO2), and relies on Monte Carlo simulation with Cholesky decomposition to capture the interdependencies among cost drivers. We analyze twenty distinct models of excavators and wheel loaders—the two largest contributors to construction-machinery emissions—comprising functionally equivalent diesel and battery-electric variants. Our results show that several compact electric models are already cost-competitive even without internalizing environmental and public health operational externalities. When these are accounted for, the economic advantage of electric machinery increases, particularly in denser urban areas where local air pollution damages are severe. While projected battery cost reductions further lower electric ownership costs, the magnitude of this effect is modest. However, the weak penetration of electric construction equipment in the US underscores that targeted policy interventions—such as point-of-sale rebates, green procurement mandates, tax credits, charging infrastructure subsidies, or the creation of low-emission zones and noise ordinances that advantage electric construction machinery—are needed to accelerate market adoption. These measures are particularly critical in densely populated urban areas, where internalizing local air pollution and public health externalities significantly amplifies the economic value of zero-emission machinery.