Public Procurement: Buying Green? [Archived]
The EU is promoting the use of public procurement in its member states as a means of kick-starting the market for eco-innovative goods and services and achieving its environmental goals in a cost-efficient manner.
Public procurement refers to the purchase by public authorities of goods, services or works. Such activities are governed by a series of national and European rules with a view to making sure that taxpayers' money is well spent, preventing fraud and discrimination and ensuring equal treatment of bidders.
Green public procurement (GPP) takes place when contracting authorities also use environmental criteria to decide who to buy goods or services from. Examples include energy-efficient computers or hydrogen buses for public transport.
Public authority spending in the EU is worth around 16% of EU GDP or about €2,000 billion. Greening public procurement rules at EU and national level is seen as a means of substantially reducing unsustainable production and consumption patterns and could serve to place new environmental technologies on the market.
EU policy developments:
- On the basis of an interpretative communication from the Commission in July 2001 and two important cases before the Court of Justice (the 'Helsinki bus case' and the 'Wienstrom case'), it came to be accepted that ecological criteria could be used for public procurement.
- A 2003 Communication on Integrated Product Policy encouraged member states to adopt national action plans on Green Public Procurement (GPP) by the end of 2006. To date, only 14 countries have done so.
- In March 2004, the EU adopted two new public procurement directives, which included provisions regarding integration of environmental considerations into public procurement strategies.
- In June 2006, the EU adopted a renewed Sustainable Development Strategy, including the goal of bringing the average level of EU GPP up to the standard currently achieved by the best-performing member states by 2010.
- On 16 July 2008, the Commission presented a proposal to set ambitious targets for green public procurement as part of a broader action plan for 'sustainable consumption and production'.
50% green procurement by 2010
According to research carried out for the European Commission, only seven EU countries currently manage a large amount of Green Public Procurement (GPP). These are the 'Green 7': namely Austria, Denmark, Finland, Germany, Netherlands, Sweden and the UK. Other EU countries lag way behind and sometimes do not practise any GPP at all.
A communication presented by the Commission in July 2008 calls on governments to make sure that half of all their tendering procedures comply with a set of common green criteria by 2010.
The proposed 50% target would be indicative only. It received the endorsement of EU competitiveness, industry and energy ministers in September. But they also stressed that member states should remain free to set their own sectoral targets and to adopt more ambitious environmental criteria should they so desire.
Moreover, they called on the EU executive to develop a methodology to evaluate progress made by EU states by 2010 and beyond.
Hurdles to be overcome
According to the study, a number of barriers are preventing more widespread take-up of green public procurement across Europe, including:
- A perception that green products are more expensive and a lack of awareness of the benefits;
- lack of knowledge about how to develop green criteria, lack of information on the practical tools for GPP, and lack of training for officers dealing with these public purchases;
- lack of targets and of political and managerial support;
- lack of harmonised GPP procedures and criteria across the EU, which also results in increased administrative costs for businesses and hinders the internal market.
The Commission communication aims to address these obstacles by setting common GPP criteria and giving legal and operational guidance, as well as providing information on products' lifecycle costs. The 50% target is also intended to raise political support for GPP.
The Commission wants to develop common criteria to help avert distortions of the single market and reduce the administrative burden for economic operators and for public administrations implementing GPP. The criteria would be formulated as minimum technical specifications with which all bids must comply.
They would be based on consultations with industry and civil society as well as on existing European and national standards such as the eco-label criteria (a voluntary scheme to encourage businesses to market products and services that are kinder to the environment by awarding them a logo that allows consumers to easily identify them), the Energy Labelling Directive or the Eco-design Directive. The latter sets binding labelling rules for energy-using products only, but the Commission wants to expand it to include non energy-using items like clothing and footwear, furniture, cleaning products, windows, doors, insulation materials, irrigation equipment, concrete products and plasterboard.
The idea would then be to establish a labelling standard below which public authorities would not be allowed to procure.
Ten priority sectors
The draft law also identifies ten priority sectors for the introduction of green public procurement on the basis of their importance in terms of the scope for environmental improvement, public expenditure, potential impact on the supply side, existence of relevant and easy-to-use criteria, market availability and economic efficiency. These are: construction, food and catering services, transport and transport services, energy, office machinery and computers, clothing, uniforms and other textiles, paper and printing services, furniture, cleaning products and services and health sector equipment.
Clean vehicle procurement plans
In September 2007, the Commission had already proposed legislation to make it mandatory for government authorities to ensure their public transport fleets and other utility vehicles, such as buses, rubbish collection lorries or delivery vans, are clean and energy efficient. Under the plans, public authorities will be obliged to take into account lifecycle costs relating to fuel consumption, CO2 emissions and air pollution when acquiring any kind of road vehicle after 2012.
A similar proposal, tabled by the EU executive back in 2005, was thrown out by the European Parliament for being too weak. It had proposed that just 25% of heavy-duty vehicles (weighing over 3.5 tonnes) purchased or leased by public bodies meet an EU "enhanced environmentally friendly" standard.
The Commission says the new plans will affect the purchases of roughly 110,000 passenger cars, 110,000 light commercial vehicles, 35,000 lorries and 17,000 buses. It further estimates that the inclusion of lifetime costs for fuel, CO2, NOx, non-methane hydrocarbons and particulate matter (PM) would, for example, push the overall price of a normal bus up from around €150,000 to €594,030 – making it more worthwhile to pay a higher price upfront for a cleaner and more fuel-efficient vehicle with lower fuel energy consumption and emissions.
However, MEPs are already pushing for costs related to CO2 emissions to be factored in at a price of at least €30 per tonne, rather than the €20 per tonne proposed by the Commission (EurActiv 20/12/07).
They also want the green criteria to enter into force as early as January 2010, and say these should also apply when public authorities purchase replacement parts or engines for retrofitting older vehicles. On the other hand, they say second-hand vehicles, emergency vehicles and those used to provide "operational support" or maintain infrastructure should be exempted from the provisions.
Kick-starting new markets
Because 'green goods' are relatively new on the market, they do not enjoy economies of scale. It is hoped that the pull of public procurement will increase demand sufficiently to allow them to expand and lower their unit costs, helping technologies that are currently not commercially viable, such as biofuels, hydrogen, natural gas or LPG, electric or hybrid vehicles to move into mainstream markets.
In turn, it is hoped that faster adoption of resource-saving products across the economy will help to reduce energy consumption and energy imports, while boosting the EU industry's ability to compete in global environmental product markets.
The European Commission's environment director-general Mogens Peter Carl points to the numerous benefits of Green Public Procurement procedures. These include helping the EU to achieve its environmental goals "more cheaply than other available policy instruments," cutting costs for users by introducing more resource-efficient products and stimulating innovation, thereby helping to consolidate the international position of EU industry. "Europe's public authorities are influential consumers. There are many areas with major environmental impacts where public authorities, because of their relatively large spending power, have the capacity to trigger the supply of greener products and reduce their own environmental impact," he stresses.
However, while the EU employers' lobby BusinessEurope believes public procurement can be used to meet certain environmental policy goals, it does not see the need for any new legislation specifically on GPP and insists that environmental benefits should be weighed against overall effects on the economy. Notably, "if there are higher standards in the EU than in non-EU countries as regards the environment, this could impact seriously on the cost of EU products," explained BusinessEurope's environmental affairs advisor, Alexandre Affre. "The adoption of the new public procurement directives in 2004 provides sufficient legal certainty on how to use GPP and allows for a wide range of environmental aspects to be considered. Therefore, further legislation on GPP is unnecessary and would even be counterproductive," the association concludes.
BusinessEurope is also concerned about the suggested targets for GPP: "Crude targets that are to be applied indiscriminately are at best useless and at worst damaging to the economy. Some procurements will have major environmental effects which, if well handled, can be beneficial; others will have no such effect at all." In particular, it warns against including delivery transport under the scope of GPP, saying this would "discriminate against more distant suppliers" and "be harmful to the operation of the single market".
UEAPME, which represents European craft, small and medium-sized enterprises, also cautioned against introducing any requirements that go beyond the specific subject of a tender and are related to production processes: "The risk of excluding companies from the whole procurement procedure, especially SMEs, is very high. In fact, "SMEs do not often have the resources or possibilities to provide complex and costly lifecycle calculations or expensive certificates," the association warned. "Thus, there may be possible conflict between the interest of achieving 'greener' public procurement and the interest of SMEs to participate in public procurements, especially if the proof of 'being greener' creates serious bureaucratic and administrative burdens," it concluded, calling for specific measures to increase SME participation in public procurement.
Orgalime, the association of European engineering industries, welcomed the proposal on GPP, saying that the existing eco-label scheme and Eco-design Directive were insufficient on their own and needed to be linked to incentives and public procurement. "We note reluctance of public procurement managers to purchase better performing products. We therefore generally support the action plan's objective to improve public procurement rules and establish minimum harmonised criteria to the extent possible," it stated. However, it cautioned that any minimum harmonised base for public procurement rules should "be sufficiently wide to guarantee the possibility of reaching the critical mass necessary for changing current energy consumption levels".
The International Association for Public Transport (UITP) also warned that "green public procurement will impose higher costs onto the system" in terms of buying, maintenance and operation and argues that "higher ecological standards for public transport vehicles should be financed from different sources than the existing public transport budget". This is particularly true as public budgets to support public transport services are falling, claims the association, adding that the necessary additional financial resources "could come from revenues from the internalisation of external costs".
Green NGO Friends of the Earth on the other hand believes the initiative will not achieve much if it retains its non-compulsory approach. "We would support compulsory green public procurement," it says, adding that such a scheme "would provide substantial markets for green products". This, it notes, could be partially achieved through stronger reporting requirements, for example an obligation to report on procurement policy.
- 2003: A Communication on Integrated Product Policy called on member states to adopt national action plans on Green Public Procurement (GPP) by the end of 2006. To date, only 14 countries have done so.
- June 2006: The EU Sustainable Development Strategy set the goal of bringing the average level of EU GPP up to the standard currently achieved by the best performing member states by 2010.
- 16 July 2008: The Commission presented a proposal to set ambitious targets for green public procurement as part of a broader action plan for 'sustainable consumption and production'.
- 26 Sept. 2008: The Council adopted conclusions on the Commission's proposal.