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September 1, 2013

Introduction

Having public authorities buy only low-carbon, low greenhouse gas (GHG) emitting, or sustainable, products and services seems like a most sensible step toward a more sustainable planet. Such a “green public procurement” (GPP) policy would result not only in direct savings on GHGs but also have indirect positive results by driving the market toward sustainable, energy-saving goods and services through the significant purchasing power of government agencies. Public authorities in Europe spend 2 trillion Euros annually, which is equivalent to about 19% of the EU’s gross domestic product.

EEB GreenProcurement-treesIn 2008 the European Commission (EC) proposed that by 2010, 50% of public procurement in the EU member countries should be green and each member was encouraged to voluntarily adopt a National Action Plan for GPP. To assist in the development of GPP, the EC has established criteria for assessing which products and services constitute GPP. To date there are 19 products and services with established criteria, including transport, office IT equipment, construction, cleaning products and services, and copy paper.

While the EC set a target of 50% GPP by 2010, only 26% of purchases met all the GPP criteria for a particular product or service by 2012, with transport the only product that met the 50% target. Note 1. So what has gone wrong?

We will look at three reports to get a handle on this question. The European Environment Bureau (EEB) issued a Guidance to Foster Green Public Procurement that reviews the existing status of GPP and offers ways of encouraging public authorities to introduce GPP in their purchasing. Another report, Court of Justice of the EU case law review: The link to the subject matter – a question of importance for sustainable public procurement, is from ClientEarth. It analyses several court cases that address whether specific characteristics (including environmental sustainability concerns) have been correctly used by a contracting authority as an award criteria in a procurement procedure. The third report from Friends of the Earth Dublin, Cuts That Don’t Hurt, demonstrates how €100 million can be saved now on energy use by the public sector in Ireland.

GPP on the EU Level

In addition to the EC Communications on GPP, in 2003 and 2008, first encouraging national action plans and then adopting the 2010 target, a number of Directives provide direct or indirect support for GPP. For instance, Directive 2004/18, on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, clarifies how authorities may contribute to environmental protection and sustainable development while getting the best value in the public procurement process. It also provides for guidance on setting technical specifications for these contracts, and allows for the use of existing eco-labels to satisfy the technical specifications, as long as other methods of satisfying the specifications are permitted.

The Directive provides that public authorities can base their award of public contracts on either: the lowest price only, or the most economically advantageous one, as long as this latter criteria is based on various criteria “linked to the subject-matter of the public contract in question.” The criteria can include quality, price, after-sales service, social and “environmental characteristics,” as well as others. This provision has led to certain legal challenges, which are discussed below in the ClientEarth report.

Besides the Directives applying directly to procurement, other EU Directives and Regulations impact on the procurement of sustainable or green products and services in more or less indirect ways. For instance, the EU Energy Star Regulation (106/2008), a voluntary scheme similar to the programme established by the US EPA and Dept of Energy, enables local authorities to specify energy-efficient office equipment; the Clean Vehicles Directive (2009/33/EC) provides for the purchase of energy-saving and low-emission vehicles; the Energy Performance of buildings Directive (2010/31/EU) provides for public authority buildings to be zero-energy buildings; the Energy Efficiency Directive (2012/27/EU) encourages public authorities to purchase products and services with high energy-efficiency performance.

Technical and Cost Considerations

Despite the common sense underpinning GPP, and the regulatory support that exists, several obstacles remain. First, the EEB report analyses the lack of technical expertise in procurement departments of public authorities. While many people and public authorities want to, or at least are willing to, purchase sustainable products and services, a major hurdle is determining what is sustainable. Assessing each product and service can require significant expertise, time and resources, and there are other, some times, strict procurement policies that have to be managed, some of which can conflict with GPP (e.g., on buying cost-effectively). The EBB suggests that a public authority can provide training in such matters, or combine efforts with other departments within the authority to share resources and expertise. Another approach is to adopt ready-to-use criteria being established by the EU that evaluate environmental impacts of, and set criteria for choosing, sustainable products and services. An alternative is to adopt ecolabels established by independent organisations, such as the EU Ecolabel, the German Blue Angel, the Nordic Swan, or the Forest Stewardship Council.

The second major obstacle is the high cost and long-term return of investments. Sustainable products and services often cost more upfront. While those costs can be offset by long-term savings on energy use of the sustainable goods and services, public authorities are political entities and depend on short-term budgets and short-term political careers. As for the higher upfront costs, we see through various Green New Deals that private households often require public support, in the form of tax credits or subsidized loans, before people take up energy-efficiency systems, for example. Unfortunately, public authorities have no such support system available to them. To the extent the authority can require Life-cycle Assessment (LCA) in the technical tender specifications, the higher upfront costs can be more readily justified. See “LCA” in the iePEDIA section of irish environment.

Legal Considerations

A third obstacle is that of legal technicalities that can sometimes be seen to undermine GPP. This issue is addressed in the report by ClientEarth. Note 2. In its report, ClientEarth analyses several cases in the Court of Justice of the European Union on the issue of whether specific environmental or social concerns can be used by a contracting authority as an award criteria in a procurement procedure.

As noted above, Directives have provided that public authorities can base their award of public contracts on either: the lowest price only, or the most economically advantageous one, as long as this latter criteria is based on various criteria “linked to the subject-matter of the public contract in question.” The cases discussed explore the meaning and reach of the requirement that the criteria be linked to the subject matter of the contract, as set forth in earlier versions of Directive 2004/18, discussed above.

In the first case the Court found that a tender for operation of bus services can include an award criteria that takes into account the nitrogen oxide (NOx) emissions and noise level of the bus fleet offered by those tendering for the contract. The court ruled that environmental externalities, NOx and noise, arising from the use of the goods or services — the pollution effects of the bus services —are linked to the subject matter of a contract for bus services, and therefore permissible criteria.

In the second case, the court held that a tender for provision of electricity could require that the electricity be supplied from renewable sources and that the ecological criteria was permissible. A second criteria, not related to ecological matter, was found to be impermissible.

The third case involved a tender for the supply and management of automatic coffee machines. The court ruled that the authority could require that the ingredients had to be organically produced and fair trade as a criteria based on considerations of a social nature, recognized by the Directive, along with environmental matters. The court reasoned that such a requirement was analogous to the renewable origin of electricity in the earlier case.

ClientEarth concluded that the court has broadly defined environmental and social criteria as being linked to the subject matter of procurement contracts and has found them to be generally permissible.

RoI Green Tender - tree image GPP in Ireland

In Ireland, “Government consumption accounts for a sizeable part of economic activity and demand. The annual public sector procurement budget accounts for 10% to 12% of Ireland’s GDP. In monetary terms, this equated to about €14 billion in 2011. This provides Ireland’s public sector with considerable leverage to stimulate the marketplace in favour of the provision of more resource-efficient, less polluting goods, services and works.” Green Tenders

 

Friends of the Earth, Dublin, Ireland recently issued a report on Cuts That Don’t Hurt, demonstrating that there are significant savings in energy, and money, within the public sector through simple energy efficiency measures, especially in public buildings. Friends of the Earth (FoE) is not fantasizing what might be done, rather it is simply showing for anyone to see, particularly government leaders, that government agencies already know how to, and have demonstrated how to, save energy and money. FoE points out that €100 million a year can be saved by requiring, not just encouraging, energy efficiency in schools, hospitals, offices, libraries, and other public facilities. No rocket science is required, just common sense and commitment to install smart meters, turn off lights and computers at night, reduce overheating and wasteful air conditioning, install motion sensors for lighting and similar actions. The Office of Public Works (OPW), between 2007 and 2012, cut €5 million from its budget of €30 million for 250 buildings by such measures as those outlined above, at an initial cost of just €600,000 a year. Even non-economists can figure out that if you spend 600,000 and save 5,000,000, that seems to make economic sense, at the same time it reduces GHG emissions.

Besides the OPW, the Sustainable Energy Authority of Ireland has developed a number of programs that could be adopted by schools and other institutions, saving as much as 20% in energy usage, but the government is leaderless in this area and public institutions are encouraged, on paper, to do more but no one is setting hard targets.

Sometimes any success in the area depends entirely on the initiative of single individuals. FoE offers the example of a fireman, Neil McCabe, on Dublin’s northside who reduced electricity use in his fire station by 80% over four years and led to the saving of 1.5 million litres of water, at a cost saving of 90%. He is now helping to develop a similar action plan for all Dublin fire stations.

As FoE points out, there is no one in government with a comparable sense of commitment.

 

Note 1. Some of the products and services met some but not all of the GPP criteria established.

Note 2. It should be acknowledged that ClientEarth argues that public procurement should be based on sustainability principles, not just environmental issues. “Both green public procurement (GPP) and sustainable public procurement (SPP) require procurers to look beyond the function of the goods or services that are being procured to consider their impact, at all stages of the life-cycle, on the world around. However, in GPP the focus is solely on reducing the environmental impact of the goods and services whereas SPP brings in all three pillars of sustainable development, not just the environment. Under SPP the aim is for the goods procured to generate benefits not only to the organization, but also to society and the economy, whilst minimizing damage to the environment.”

 

Sources

Lukasz Wozniacki, European Environment Bureau, Guidance to Foster Green Public Procurement (April 2012). www.eeb.org/?LinkServID=7073853F-5056-B741-DB185D44F5C2CB4E&showMeta=0&aa

ClientEarth, Court of Justice of the EU case law review: The link to the subject matter – a question of importance for sustainable public procurement   www.clientearth.org/201302212125/public-procurement/public-procurement-publications/court-of-justice-of-the-eu-case-law-review-2125

Friends of the Earth Dublin, Cuts That Don’t Hurt! How To Save €100 Million On Public Sector Energy Use      www.foe.ie/download/pdf/dublin_foe_cuts_that_dont_hurt.pdf

ClientEarth, The EU’s commitment to sustainable development. Time to progress from Green Public Procurement to Sustainable Public Procurement? (February 2012).  www.clientearth.org/public-procurement/public-procurement-publications/the-eus-commitment-to-sustainable-development-time-to-progress-from-green-public-procurement-to-su-1775

Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts  eur-lex.europa.eu/Notice.do?val=343601:cs&lang=en&list=474306:cs,418913:cs,391837:cs,343601:cs,&pos=4&page=1&nbl=4&pgs=10&hwords=&checktexte=checkbox&visu=#texte

Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors  eur-lex.europa.eu/Notice.do?val=343600:cs&lang=en&list=474305:cs,417664:cs,392135:cs,343600:cs,&pos=4&page=1&nbl=4&pgs=10&hwords=&checktexte=checkbox&visu=#texte

Irish Department of Environment, Community and Local Government, Green Tenders: An Action Plan on Green Public Procurement (January 2012). www.environ.ie/en/Environment/SustainableDevelopment/GreenPublicProcurement/News/MainBody,29206,en.htm

“Green Public Procurement,” in iePEDIA section of irish environment (February 2010).  www.irishenvironment.com/iepedia/green-public-procurement/

European Commission, What is GPP  ec.europa.eu/environment/gpp/what_en.htm

Envirocentre.ie, Green Public Procurement  www.greenpublicprocurement.ie/

 “Life Cycle Assessment,” in the iePEDIA section of irish environment (1 Dec 2010).  www.irishenvironment.com/iepedia/life-cycle-assessment/

 

 

 

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