Germany’s increased spending plans call for green public procurement criteria – report
Clean Energy Wire
Germany could make its buildings and transport sectors more sustainable by including climate-relevant public procurement criteria in planned government investments, said a report commissioned by the foundation Bertelsmann Stiftung. Considering the planned increase in public spending through a special 500-billion-euro infrastructure and climate fund, Germany should introduce sustainability criteria when granting public contracts. This could drive demand for climate friendly technologies and products and support the green transition, concluded the economic think tank Forum Ökologisch-Soziale Marktwirtschaft (FÖS), who carried out the research.
The government coalition agreement from earlier this year promises the creation of "lead markets" for climate-friendly products, for example through "quotas for low-emission steel production, a green gas quota or public procurement requirements." A draft law to speed up procurement in general, adopted by the government in early August, would allow the government to set green requirements by way of a regulation, but the reform has yet to be debated by parliament.
However, the FÖS report said that taking into account a so-called CO2 shadow price is already mandated by law. This is a monetary value which quantifies the economic damage caused by emitting a tonne of carbon into the atmosphere. It is used in calculations, but never actually paid by anyone. This climate-related cost is then included in public tenders to evaluate the cost-efficiency of a product or service over its entire lifecycle, including external environmental costs. Or it is used as one of the many criteria that decide which product or service wins the tender.
The authors found that using a CO2 shadow price in public procurement law was mandatory at the national level in theory. However, in practice the instrument was barely used due to a lack of enforcement, insufficient capacity in public administration and companies, and a lack of emissions data.
“Given the enormous leverage that public procurement has in Germany due to its volume, the systematic inclusion of climate impact costs can make a significant contribution to achieving climate targets,” the authors wrote.
A CO2 shadow price would “create market incentives, planning security, and promote the necessary capacities in administration and industry,” the authors wrote. They recommended promoting the use of Environmental Product Declarations (EPDs), a voluntary tool for construction material manufacturers which provides data on the product’s impact throughout its lifetime, including resource consumption and carbon emissions. These could provide the necessary data basis to implement CO2 shadow prices.
