How Can Green Public Procurement Add Value to the European Green Deal Toolbox?

Public procurement amounts to around 14 per cent of the European Union GDP and, given this size, could well represent an important tool to foster the green transition. However, green public procurement continues to be underutilised in Europe, as several barriers to its application.

FREMONT, CA: The purchase of goods, services, and works by governments and public bodies is a significant component of the European economy, accounting for more than 14 per cent of its GDP. The figure differs from as low as four per cent in Portugal and as high as 18 per cent in Finland. These distinctions reflect variations in public procurement structures and portfolios of public services, for example, whether healthcare is delivered by private or public organisations. In theory, public procurement can help to green the economy through two channels: changing consumption patterns and production patterns.

Public procurement can directly reduce greenhouse gas emissions if the government replaces polluting goods and services with more environmentally friendly alternatives, i.e. changing public consumption behaviour. Meanwhile, public authorities can encourage the development of green technologies and products by actively promoting and utilising green public procurement. An outcome of the creation of lead markets, innovation, and example setting, can result in a spillover effect that increases demand for greener goods and services across the entire market. For example, public purchasing decisions can strongly encourage green innovation by providing start-ups with access to economies of scale. This is especially true in industries where public purchasers account for a large portion of the market, such as public transportation, construction, health care, and education. Consequently, public procurement has the potential to alter production patterns.

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Data are scarce on the extent of green public procurement in EU countries. The Tenders Electronic Daily (TED) database records all tenders exceeding EU thresholds, including whether environmental considerations were considered. However, due to a large number of missing values and the lack of a standard format, the figures are only estimates. The proportion varies greatly between countries, ranging from less than 0.5 per cent in Malta to more than 15 per cent in Denmark and France. Furthermore, most countries use GPP to procure less than five per cent of their contracts. Another method for estimating GPP size is to examine the award criteria used in public procurement tenders. Other procedures are awarded to the bidder with the lowest price who meets pre-specified technical requirements. Using the lowest-priced criterion, for example, the life cycle cost of purchased goods is not considered, limiting the possibility of green procurement. In this case, a low-cost product with high energy consumption would be preferred over a product that is more expensive up front but preferable on sustainability grounds because it consumes less energy. Thus, considering the life cycle cost would result in a preference for more environmentally friendly goods.

When the value of tenders exceeds a certain threshold and tenders are presumed to be of cross-border interest, public procurement in EU countries is only covered by the region’s procurement rules. The threshold value varies by sector and type of procuring authority. National procurement legislation applies to below-threshold tenders within the general EU regulatory framework. Public procurement by public bodies must follow World Trade Organization rules outlined in the Government Procurement Agreement, regardless of whether EU or national procurement legislation applies. The EU Public Procurement Directive acknowledges the need to enable procurers to better use public procurement in support of common societal goals. The Directive allows environmental considerations to be included at various stages of the public procurement procedure, such as technical specifications, contract awards, and the performance stage. However, it is ultimately up to EU countries and contracting authorities to decide whether or not to include environmental considerations. Because there are no comprehensive mandatory targets at the EU level, the amount of GPP that occurs in Europe is heavily reliant on decisions made by European countries and their public bodies. A comparison of national action plans in this field reveals significant differences. Some countries have no target at all or no national GPP plan,  whereas others aim for a certain percentage of all public procurement contracts to include green criteria. In the Netherlands, this proportion is one hundred per cent. These differences in national regulation, along with differences in the size and structure of the public sector, as well as barriers to GPP, account for the majority of the cross-country differences.

GPP's optional nature severely limits its uptake. For example, an impact assessment of the original Clean Vehicles Directive of 2009 concluded that a similar outcome could have been achieved by market participants even in the absence of the Directive due to the lack of clear minimum quantitative criteria for procurement of clean vehicles, among other reasons. How contracting authorities manage their budgets has an impact on green public procurement. According to research, incorporating sustainability into an organization's overall strategy increases the implementation of sustainable public procurement. As a result, politics enters the picture, as heads of public contracting agencies can be political appointments. Furthermore, due to politics' short-term bias, less expensive but less environmentally friendly products may be preferred over more expensive and greener alternatives that may be more cost-effective in the long run.