Climate based protectionism: Green Public Procurement can incentivise public sector to eliminate polluting tech

Relevance: Tackling Climate Change Through Innovative Methodologies

Synopsis: In June 2021, the European Parliament signed the first dedicated Climate Law. There are some problematic or protectionist provisions in the law, but it is still considered as a step in the right direction to tackle the issue of climate change.

• Till now countries have used various measures to reduce carbon emission such as Carbon tax, Emission Trading systems, and most recently Carbon Border Arrangements (CBA).

Note: CBA or CBAM or EU’s carbon border tax are one and the same thing.

What is CBA?

It is a tool which taxes the imported goods in proportion to their carbon emission. Under this mechanism the importer will be required to buy emission certificates for carbon intensive products which will improve the shift towards Green Economy.

• Advantageous to low emission industries in EU: However, this mechanism places low emission industries of the European Union at an advantage compared to the industries from developing countries. Thus, it incentivizes domestic industries (in the EU), to lower their emissions to gain from CBA.

Implications of CBA

Despite the concerns raised from India, China, Brazil, and South Africa, CBA’s may see a greater adoption across the world in the years to come as a tool to tackle climate change.

Emerging economies need to understand that CBA might only be the first of many such regulations to come, thus thorough clean up of manufacturing sector’s emissions is the way forward.

Measures

There are two ways of doing this clean up –

• Offering subsidies to low emission businesses
• Incentivizing manufacturers to make switch themselves

How to incentivize the manufacturers?

• Green Public Procurement (GPP) is a tool through which government can capitalize on their purchasing power to incentivize the manufacturers.
• For India, GPP has immense potential, since public procurement in our economy accounts for 20-25% of our GDP.
• It is increasingly used by countries to achieve policy objectives in the area of environment protection.
• It also helps individual commitments of the G20 major economies towards the Good Practices for Integrity in Public Procurement prepared by the OECD

Obstacles to formalizing Green Procurement

There are three main obstacles –

1. The perception that green products and services may be more expensive than conventional ones
2. the lack of technical knowledge and capacity to integrate green standards in the procurement process
3. the absence of monitoring mechanisms to evaluate if green procurement goals are achieved.

Examples from India

1. Indian Green Building Council has certified over 2500 products and 150 manufacturers with GreenPro EcoLabel
2. Indian Railways also replaced energy inefficient incandescent lights in railway housing colonies with compact fluorescent lamps.

Benefits of GPP

1. Green public procurement presents an opportunity for the Indian manufacturing sector to change course in time for major policy shifts across the world.
2. It has the potential to be a major driver for innovation, providing industries with incentives to develop environmentally friendly works, products and services.
3. GPP may also provide financial savings for government when life cycle approach is taken into consideration.
4. Help the world to actively cut down the emission and prevent ‘leaks’ by way of exports.

Conclusion

India needs to integrate green standards and specifications within its procurement manuals in a phased manner. This will act as a signal to industries and also gives them time to cope. It can have a profound impact on the quality of life that the country promises its future generations.

Terms to Know:

• UNFCCC
• OECD