Building a small house is almost always worth some points in a green building Program. Energy Star homes has a complex formula to calculate the size adjustment factor,SFA. ( http://1.usa.gov/Vnm48p ) In the Green Built NC program, which is the program we certify in, you need a minimum of 105 points and by building small you can get a big head start.
This makes sense, as smaller homes need fewer materials to produce and take less energy to operate all things being equal. It seems good to encourage the not so big houses or houses that are big enough and not bigger is better. Our company has usually been building in the 1100-1500 square foot range figuring to hit the largest segment of the market with 3 bedrooms. At that size we usually have been including 2 baths or a bath and a half when we are nearer 1000 square feet.
One added benefit of working the small end of the housing market is that you are challenged to design carefully. There is little room to waste so hallways are minimized, stairs are carefully planned when needed, doors may slide instead of hinge, tables may be expandable to take up more room only when needed and desks may be tucked into corners or even on stair landings. I see the challenge as a good thing. It keeps the work interesting.
The other advantage of smaller is affordability, at least up to a point. Smaller is cheaper but not proportionately. The square foot price is typically higher for smaller homes as there are many fixed costs that do not change with size. Hooking up to water and sewer in Asheville, for instance cost the same regardless of size or number of bedrooms. Septic systems cost more depending on the number of bedrooms though wells are a fixed cost for houses not within a municipal system. There are also fixed costs for driveways, kitchens and bathrooms.
There is a theoretical optimum for each project where the needs and comfort are accommodated without adding unnecessary space and the size is efficient for the use. A house occupied by a single person clearly has different needs than a family of four with accessibility concerns but within each project there is a point of diminishing returns both in terms of cost savings and size savings. Reducing the size from a 3 bedroom 1200 sq ft to a 900 sq ft 2 bedroom may make only a small cost difference and accommodate fewer people. The increased energy demands will be minimal especially in a well-oriented house with an efficient building envelope.
Where you add square feet is also a factor. Is it daylight basement or built into the attic space or does it increase the exterior wall area significantly? When can you use unheated storage space instead of interior closet space?
Building small and green is greener than big and green but often requires more planning and innovation to get more efficient use of space. It also has some limits that should be acknowledged in the search for the optimum size/cost/efficiency balance.