Press Release of December 12, 2017
Public purchases can make a valuable contribution to decarbonizing the economy – Despite an upward trend, only 2.4 percent of public contracts in Germany include green criteria – Policy action is needed in order to fully exploit the potential
Green public procurement, by which public authorities choose their suppliers of goods and services not only based on price but also according to environmentally friendly criteria, is still very much underused in Germany, a study by the German Institute for Economic Research (DIW Berlin) shows. Though the practice has been on the rise these past years, its use remains marginal: an analysis of public contract data shows that in 2015, only 2.4 percent of all public contracts awarded in Germany used green criteria.
“The trend is encouraging, but the potential for green public procurement remains largely untapped,” says Olga Chiappinelli, one of the study’s authors. “And yet, buying green is a promising way for public authorities to contribute to the decarbonization of the economy: it allows them to reduce the environmental impact of their purchases; to create favorable market conditions for green technologies, products, and services; and to set a good example.”
In Germany, government purchases account for 18 percent of total consumption and 11 percent of total investment, and, in some sectors, such as the transport sector, public authorities command an overwhelming share of the market. Public procurement can therefore be exploited to drive the economy towards more sustainability – the more so as the country struggles to meet its 2020 greenhouse gas emission reduction targets.
About half of the public tenders in Germany still use price as the sole criterion for selecting offers, meaning the cheapest offer is chosen. For the other half, purchasing authorities are taking other quality-related criteria into account. Considering more criteria reduces the weight given to the purchase price and consequently, can put green options at an advantage in the competition. Green public procurement can thus favor products that, for instance, last longer, can be easily recycled, or consume less energy, over standard ones – even if their purchase price might be higher, such as LED bulbs as opposed to standard lightbulbs. A promising implementation option of green public procurement comes from the Netherlands. There, when reviewing offers for construction works, the Public Infrastructure Authority “corrects” bidding prices by awarding discounts to proposals that display the highest overall environmental performance – for instance, by considering the environmental impact of material use and disposal. The contract is then awarded not to the bidder with the lowest bidding price, but to the one whose offer is cheaper once the environmental impact is accounted for at all stages.
“There are best-practice examples Germany can use as inspiration,” says Vera Zipperer, the study’s other author. “But to push green public procurement and be able to fully exploit its potential, the main requirement would be a clear political commitment, preferably at the federal level.” About 80 percent of procurement takes place at the local level, where budgets are often tight, and therefore a clear political mandate to implement green public procurement would have to go hand-in-hand with earmarked financial transfers. Dedicated technical and legal training for procurement officers, as well as standard measurement and reporting practices, would also foster a broader use of green procurement.