What is Public Procurement?

• Public procurement refers to the process by which public authorities, such as government departments or local authorities, purchase work, goods or services from companies. [source]
• Public procurement can play a critical role in accelerating the transition towards a low-carbon economy.
• In the EU, public procurement represents 15% of the EU’s GDP, totalling €2.5 trillion, with approximately 1.4% of total GDP allocated to the construction sector.

What is Green Public Procurement?

With their large purchasing power, public authorities have the potential to create lead markets for products with a lower carbon footprint, via tools like Green Public Procurement (GPP).

• GPP is the process of procuring goods or services that have a reduced environmental impact through their lice cycle. [source]
• Despite the EU’s efforts to harmonise procurement processes and enabling green procurement, several barriers impede the effective implementation of GPP at various governance levels.
• The EU and its Member States have a significant role to play in promoting GPP practices that include environmental considerations in public tenders, which can accelerate decarbonisation significantly.

GPP as an effective climate solution for steel & cement

GPP has huge potential in the EU to drive decarbonisation in emission-intensive industries like cement and steel. With these industries accounting for roughly 10% of the EU’s emissions, transitioning to low-carbon materials is critical, and the public sector has a significant role in facilitating this shift.

• 21% of the EU’s cement sector emissions could be lowered through GPP implementation.
• 18% of the EU’s steel sector emissions could be lowered through GPP implementation.

Bellona’s Recommendations on GPP

• Since the voluntary uptake of environmental criteria for tenders has failed to drive sufficient uptake, we call for the introduction of mandatory environmental criteria that should simplify processes, increase transparency, and reduce the risk of litigation.
• Prohibit price-only approaches and account for environmental and social factors as well.
• Prioritise the implementation of sectoral legislation related to cement and steel in order to establish the ground for lead market creation and provide certainty to industries.
• Harmonise the procurement process to improve cross-border collaboration and consistency while reducing the existing fragmentation that hinders GPP adoption at large scale. Rules and procedures should be standardised to help data collection and reduce administrative burdens for the public authorities, as well as for bidders.
• Provide support for capacity building and training of procurement officials.
• Increase data availability to procurement authorities.
• Introduce monitoring and compliance mechanisms to promote accountability and transparency.
  

FAQ

How can Public Procurement be used to support material demand reduction through material efficiency design?

Efficiency should indeed be one of the focal points of designing buildings and infrastructures as it allows to reduce demand for raw materials and, subsequently, costs and emissions. Even though it is complicated to mandate efficiency design from a legislative point of view, it is possible to introduce policies that would push for efficient designs, both for materials and energy efficiency.  

For example, introducing Whole Life Carbon thresholds would reduce the use materials with high emissions such as cement and steel, favouring efficient designs. This is included in the Energy Performance of Buildings Directive (EPBD), though it could potentially be expanded into other infrastructure projects. 

An alternative is the introduction of a carbon shadow price which attributes a price to each tonne of CO2 resulting from the Whole Life Carbon analysis of the project, which again would favour more efficient designs.  

Finally, public authorities could promote a “sufficiency first” approach, prioritising the renovation and adaptation of existing buildings and infrastructures over the construction of new ones. 

What is the difference between supply and demand-side initiatives? Which role does Public Procurement play in this?

Supply-side initiatives are directed towards manufacturers, with the aim to modify in one way or another the supply of products, by e.g. offering fiscal advantages, incentives, or imposing design requirements.  Demand-side initiative focus on the market, providing incentives for certain goods and services to become more attractive. Introducing green criteria into the Public Procurement Directives is a demand-side initiative, as it would boost the demand for green and low-carbon products in different sectors. This, paired with supply-side measures (like the carbon price of the ETS, which is directly linked to emissions from the production process), have the potential to make sustainable products more attractive to produce. 

What is the difference between Green Public Procurement and Lead Markets for green/low-carbon products?

Green Public Procurement refers to the process by which public authorities, such as government departments or local authorities, purchase work, goods or services from companies while using environmental criteria for selecting the tenders.  

Lead Markets for green and low-carbon products refer to countries or regions that are pioneers in successfully adopting low-carbon products that respect emissions thresholds.  

The two concepts are strongly interconnected as Green Public Procurement can be effectively used by public authorities to develop Lead Markets. 

What does Public Procurement entail at the moment? What would be the difference of adding the “green” bit?

The current version of the Public Procurement Directives recommends to public authorities the introduction of environmental and social consideration in their tenders. However, since this has remained voluntary,the reality is that 55% of the tenders in the EU still use the lowest price as award criteria. Making Public Procurement “green” would introduce mandatory environmental criteria, prohibiting price-only approaches, harmonise the procurement process, introduce monitoring and compliance mechanisms, and increase data availability.  

The introduction of environmental criteria has the potential to reduce EU’s cement emissions by 21% and steel emissions by 18%. 

Why are low-carbon products not as expensive as people believe?

The cost increase related to the use of low-carbon products —commonly referred to as green premium— can be relevant for the producer. At the same time, such cost is normally diluted along the value chain, meaning that the cost increase for the final product is minimal. For example, the green premium of green cement is estimated to be between 1-3%of the total cost of a project, which is not a significant increase. 

What would be the impact of requiring climate action (and other environmental goals) in all Public Procurement?

Introducing mandatory green criteria in Public Procurement at EU level would save almost 12 million tonnes of CO2-eq annually with minimal effort, while introducing ambitious criteria would allow to save an additional 6.5 million tonnes of CO2-eq.In perspective, they correspond to the emissions of 12 million cars over a year, for an average of 10900 kmy with minimal effort. 

In addition, introducing criteria to reduce emissions from construction sites would improve the air quality of European cities.  

Finally, banning the Public Procurement of materials that include deep-sea mining or raw materials from vulnerable parts of the world along their value chain would help preserving vulnerable ecosystems. 

It also goes without saying that all progress made in climate mitigation will also reduce the need for climate adaptation, ultimately significantly reducing cost.  

What would be an ambitious but realistic requirement for recycled content in concrete?

The topic of recycled content in concrete can refer both to the use of recycled aggregate and the use of supplementary cementitious materials (SCMs) that allow for a reduction in the cement content.  

In the first case, according to Eurostat data from 2020, 87% of the construction and demolition waste in EU was recycled, 7% was landfilled, and the rest 6% was used for energy recovery thanks to the wood and plastic fraction present in the waste stream. Therefore, introducing minimum requirement for recycled aggregate in concrete is not necessary. 

In the second case, the problem is more complex due to the high variety of options when it comes to SCMs. The most used ones are blast furnace slag and fly ash, byproducts of the steel industry and coal power plants respectively. If all the blast furnace slag produced in Europe were used to substitute cement in concrete, it would be possible to substitute 8.9% of the total cement produced in Europe, while for fly ash, the substitution rate would correspond to 31.7%. It is also important to highlight that the production of blast furnace slag and fly ash is bound to decrease as the European Union is working towards the decarbonisation of the steel and energy sectors.

At the same time, it is likely that innovation will find suitable alternatives not yet available that would allow to meet such requirements, but this will still require extensive testing.   

To conclude, there is potential for circularity in the production of concrete, but introducing thresholds requiring a certain amount of recycled materials is probably not the best way to improve circularity on the long term.  

Is there a risk that the focus on Lead Markets for low-carbon products and Green Public Procurement might stand in the way for market-based solutions like carbon pricing?

No. In fact, Green Public Procurement and the creation of Lead Markets for low-carbon products would boost demand for low-carbon products and would further encourage industries to decarbonise their production process, resulting in higher availability of low-carbon products in the market. This is completely compatible with supply-side policies like carbon pricing.