Although less data is available regarding procurement in developing countries, literature suggests similar and, in some cases, higher percentages: 8 per cent of GDP in Kenya and Tanzania; 30 per cent in Uganda (Odhiambo and Kamau 2003); 35 per cent in South Africa; 43 per cent in India; and 47 per cent in Brazil (IISD 2008). By committing to purchase goods which meet certain criteria for sustainability, governments can therefore represent a powerful force of market demand.
Like many of the subsidy mechanisms identified above, government demand for green goods and services can provide businesses with a high-volume and long-term buyer. The market signal allows firms to make longer term investments in innovation, and allows producers to realise economies of scale, lowering costs. In turn, this can lead to the wider commercialisation of green goods and services and thereby promote sustainable consumption. One study examining 10 product groups found that the most advanced sustainable public procurement programmes in Europe reduced the carbon footprint of procurement by an average of 25 per cent (Pricewaterhouse Coopers, Significant and Ecofys 2009). Unlike most other subsidies, it can be achieved largely through the reorientation of existing spending. It also provides governments with a valuable tool to demonstrate their commitment to sustainable development. Nearly all developed countries have some kind of sustainable public procurement policies, and many developing countries, such as India, Chile, South Africa and Vietnam, are in the process of establishing their own (Perera, Chowdhury and Goswami 2007) (see Box 2).
Ensuring rational public expenditure There are a number of challenges associated with the implementation of public expenditure measures, and these challenges can be particularly pronounced in
countries with limited institutional capacity. In some cases, governments may lack the capacity to design effective
incentives and incentive schemes, or to
implement and monitor the measures. In other cases, governments may lack the technical expertise to ensure that an asset is constructed and operated (or a service provided) in the most cost-effective and sustainable way, or there may be a lack of available public funds. A number of innovative initiatives have been launched to overcome these constraints (see Box 3).
Given the institutional capacity that is often required to ensure that a public expenditure measure is effective and leads to a desired outcome, it is important to carefully assess what type of measure should be used. The various measures discussed above have their strengths and weaknesses and the choice of measure depends in large part of the overall policy objective. For instance, direct spending to support the development of environmentally sound technologies may in some cases be preferable to tax incentives because it can be difficult to ensure that expenditure in the form of tax incentives promotes innovation that generates social rather than private benefits (UNEP 2010b). Nevertheless, where the tax incentive supporting technology development is based on performance and rewards the best observed practices, the instrument is likely to be efficient (OECD 2010b).
In some cases, performance incentives may be more suitable for ensuring that economic activity is green. These incentives can be used to help reduce the cost of adherence to environmental and social standards without compromising those standards. For example, several regional investment incentives in India, the Philippines, Chile and Costa Rica have established funds for the certification of management systems on environmental and social performance. The International Organization
Box 2: The Marrakech Task Force on sustainable public procurement
The Marrakech Task Force on Sustainable Public Procurement was launched by the government of Switzerland in 2005, and is one of seven Task Forces in the Marrakech Process on Sustainable Consumption and Production, led by UNEP and the United Nations Department of Economic and Social Affairs (UN DESA). It is an international initiative to promote sustainable
public the implementation of procurement in
developing and developed countries. Since 2008, its objective has been to roll out an approach for
sustainable public
procurement in 14 countries, with pilot projects currently being conducted in Mauritius, Tunisia,
Costa Rica, Colombia, Uruguay, Chile and Lebanon. The approach consists of first assessing a country’s procurement status; identifying the legislative framework for procurement and possibilities for integrating social and environmental criteria into procurement activities; carrying out a market readiness analysis to scope the existing supply-side capacity in sustainable goods and services; and finally the development of a country- based sustainable public procurement policy, including a capacity-building programme for sustainable public procurement officers (UNEP 2010c; UNEP 2010d).