Public Procurement As A Green Investment Incentive In EU Member States

On 18 January 2012, the Irish Government announced its first Green Public Procurement Action Plan. And while there is already some criticism of the “Green Tenders” in cash-strapped Ireland, the action plan is a reminder that public procurement has an environmental side as well since it is a way to promote environmentally friendly enterprises and stimulate more sustainable production. And, according to the EU Environmental Commissioner, green public procurement (GPP) also plays an important role in EU efforts to become a more resource-efficient economy.

Generally, GPP refers to the selection of products, works and services with a reduced environmental impact throughout their lifecycle. GPP is usually applied due to environmental considerations such as the reduction of greenhouse gas emissions; however, in some cases GPP can also have an economic slant, since some green products and services are less costly in terms of maintenance and disposal.

In the case of Ireland, the purpose of the “Green Tenders” action plan is to assist the Irish public authorities to implement GPP. According to the website of the Irish Department of the Environment, Community and Local Government, public authorities in Ireland spend approximately €14 billion annually on goods, services and works. The idea of the Green Tenders is to use this purchasing power to stimulate the green economy in the country. Among the priority sectors for the Irish GPP action plan are construction, energy, food and catering services as well as ICT. In consequence, companies working in those sectors will have an added incentive for investment in green technologies, so that they qualify to participate in public tenders.

Despite the positive influence that the Irish GPP plan is expected to have as regards resource efficiency and the promotion of eco-friendly products and services, the Irish initiative has received a mixe! d reacti on. As an example, according to Independent.ie, the Irish Bioenergy Association (IRBEA) complained that the plan did not outline the role of the public sector in meeting Ireland’s renewable energy targets. Nevertheless, the plan is likely to boost green investment enterprises in the country by promoting eco-innovation.

In addition, on a European level, GPP is considered to be an important voluntary instrument for ensuring sustainable consumption and production. Indeed, the European Commission is itself promoting GPP practices, with the current Procurement Directives offering a number of opportunities for the implementation of GPP.

Naturally, the benefits of GPP are more visible from the broader EU perspective. According to the European Commission’s handbook “Buying green! A Handbook on green public procurement”, public authorities in Europe spend some €2 trillion each year, which is equivalent to 19 percent of the EU’s GDP. With public expenditure of that magnitude, GPP compliance has the potential to make an impressive impact. Among the green contract examples provided in the Commission handbook are energy efficient computers, office furniture from sustainable timber and electricity from renewable energy sources. The Commission also views GPP as a driver for eco-innovation, especially in those sectors of the economy where public purchasers represent a large share of the market, such as construction and health services.

In order for GPP to be really effective, the criteria that apply to the selection of the relevant goods and service providers need to be developed very carefully. The EU has already set out GPP criteria for a number of different product and service groups, with those criteria now being reviewed and updated on a regular basis. The objective is for the EU Member States to be able to insert the criteria directly into tender documents. Besides the importance of GPP criteria with regards to tender procedures, they can also be used as workflo! w guidel ines by green investment companies.

The United Nations has a somewhat different procurement approach to that applied across the EU. The UN has adopted Sustainable Public Procurement (SPP), which addresses the three pillars of sustainable development – economic, social and environmental – whereas the EU Member States seem to focus mostly on the environmental aspect of SPP. Nevertheless, there are some public authorities in the EU which try to implement GPP as a part of a broader sustainable procurement strategy.

In any case, with GPP, governments in the EU Member States are in effect using market power to promote cleaner technologies and green investment enterprises. In addition, when paying for goods and services produced in an environmentally friendly manner, public institutions also raise environmental awareness and provide a valuable example to other consumers.