Buildings account for 40% of global energy consumption and nearly one-third of global CO 2 emissions; and the resulting carbon footprint significantly exceeds that of all forms of transportation combined. Attractive opportunities exist to reduce buildings' energy use at lower costs and higher returns than in other sectors. This paper analyzes the concerns of uncertainty, in terms of transaction costs, to the real estate developers when they make decisions about investing in Building Energy Efficiency (BEE). To solicit views of developers regarding BEE investment, in-depth interviews were conducted with 15 executives and architects who work in big real estate development firms covering 80% of real estate activities in Hong Kong. This research applies transaction cost economics (TCE) to study the underlying reasons resulting from uncertainty that cause market reluctance to accept BEE by choice. It provides a detailed analysis of the current situation and future prospects for BEE adoption through studying the impacts from three aspects: economic, market and policy uncertainties. It delineates the market and suggests possible policy solutions to overcome the uncertainties and to attain the large-scale deployment of energy-efficient building techniques. The findings establish the groundwork for future studies on how to choose a particular policy package and what roles government should play to solve the existing problems in BEE development.