Dr Kirsi-Maria Halonen has just published in advanced open access her new paper ‘Is public procurement fit for reaching sustainability goals? A law and economics approach to green public procurement’ (2021) Maastricht Journal of European and Comparative Law.
This is a very interesting paper that takes a law and economics approach to assess recent proposals to make some aspects of green public procurement mandatory, in particular in the context of the EU Green Deal and its expected implementing measures. The discussion relies on European examples and data, but the insights offered by the paper are relevant to all jurisdictions considering using public procurement to tackle the climate emergency.
The paper is well worth reading in full and, to my mind, makes two main original contributions that should be stressed, as they should carefully be taken into account by anyone seeking to leverage public procurement for environmental goals (or sustainability, more generally) by means of a ‘hardening’ of current soft law approaches—that is, via the imposition of procurement-specific mandatory (green) legal requirements. The following is my understanding of those two main points, which Kirsi presents slightly differently in her paper.
First, the paper warns against blanket approaches that would apply across all areas of public expenditure or, relatedly, across types of procurement specified by reference to relatively random administration-based criteria (eg tenders of a value above a certain amount). The paper evidences how the effectiveness of mandatory requirements will vary by industry and, consequently, how the design of mandatory requirements should not be based on demand-side considerations, but rather on supply-side analysis.
More than ever, the need for sophisticated market intelligence to underpin the design of green procurement requirements comes to the fore. Relatedly, the paper shows that, for some industries (or more generally), it is possible (or likely) that regulatory measures other than mandatory public procurement requirements are more effective in promoting the desired green transition. Consequently, an analysis of alternative policy interventions should be carried out ahead of the imposition of such mandatory requirements.
Second, and more originally, the paper shows that one of the key considerations in assessing the effectiveness of mandatory green public procurement requirements has to be their knock-on effect on private consumption patterns. Relying on substitution policy analysis, the paper makes it plainly clear that changes in public demand for green (or sustainable) products will create a mix of incentives that can well result in the increased consumption of dirty (or unsustainable) goods and services by private consumers (both corporate and individual) as a result of rigidities in the supply side of the relevant markets—which, at best, can be resolved as the green transition advances and, at worse, could be structurally resistant.
This shows how, despite public procurement representing anything between 10% and 20% of most economies, policy interventions that are procurement centric can generate net negative environmental (or social) effects if the remainder of the economy (or rather, part of the rest of the economy) is displaced towards goods and services that do not meet the required standards. This once again brings home the message that procurement-specific interventions may not be the preferable (or even desirable) way to try to tackle the climate emergency and that a broader, supply (or industry)- based assessment of alternative regulatory interventions is necessary.
Taken all insights together, I would read Kirsi’s paper as making a very strong argument that green (or sustainable) public procurement must not be seen as a goal in itself, or as intrinsically desirable, and that a broader embedding of procurement within larger legislative initiatives (eg economy-wide minimum requirements, or the imposition of consumption taxes regardless of the public or private nature of the buyer) is likely to be a better way forward.
I also read the paper as offering a persuasive argument against claims that ‘mandating green procurement is better than doing nothing’, or that ‘green procurement is a low-hanging fruit that should be collected before reaching for more difficult targets like individual consumer behaviour’. Without proper analysis of the substitution effects that mandatory green public procurement requirements can generate, none of that should be taken at face value. Which is interesting because it is exactly the same way broader market dynamics operate in public procurement, and precisely the reason why the desirability of the exercise of public buying power needs to be assessed with caution, regardless of the policy goal it seeks to achieve.