Green public procurement and taxation for circularity

For any country looking to develop efficient instruments to accelerate the transformation towards a more resource efficient, circular and sustainable community, environmentally informed taxation on resource heavy- and polluting industries, as well as green public procurement, are two core instruments.

Green Public Procurement (GPP) or green purchasing is a voluntary instrument in the EU toolbox but plays a key role in the EU’s efforts to become a more resource-efficient economy. The European Commission states: “Europe’s public authorities are major consumers. By using their purchasing power to choose environmentally friendly goods, services and works, they can make an important contribution to sustainable consumption and production – what we call Green Public Procurement (GPP) or green purchasing”.

Latvia has implemented a Natural Resource Tax and guidelines and criteria for GPP. The country is by no means alone in using these instruments to enhance the country´s resource efficiency and promote circularity in procurement processes, but the country is a good example of how such policy regulations could look and be developed.

Challenges

A major challenge to the development of legal guidelines for GPP is a perception among authorities that GPP is more expensive and complicated and introduction of “green” requirements and criteria will restrict the competition and could result in an appeal of the tender results. Also, the concept of “greening” of the procurement has to be made as early as possible in the procurement process, preferably at the project planning phase. This requires comprehensive cooperation between project developers and procurement specialists, which also has proven a challenge.

Good practices and solutions

Latvia has further strengthened one of the core economic instruments serving for environmental purposes – the Natural Resource Tax – by regularly reviewing both the tax rates and tax base in order to target the polluting activities and enhance resource efficiency. The review aims to provide financial incentives to improve waste management, reduce landfilling, enhance efficient use of resources and transition from natural resources to secondary materials34. The review of the tax also includes increased tax rates for waste disposals, with the aim of reducing waste volumes in landfills while stimulating waste management companies to switch to other more favourable waste treatment options, such as recycling or reuse. Together, these measures will help Latvia to transition towards a circular economy, where waste becomes a resource and returns back to the economy.

Latvia has also established the legal basis for Green Public Procurement with specific environmental criteria for public procurement of specific product groups including office paper, office IT equipment, office furniture, food and catering services, cleaning products and services, indoor lighting, traffic signals and several other voluntary product groups. To help develop guidelines for GPP, Latvia is also developing a “calculator” of life-cycle costs for energy consuming products groups.

Outcomes & Opportunities

The Natural Resource Tax and GPP facilitates and accelerates the transition to circular economy. These practices contribute to “doing more with less”, by increasing net welfare gains from economic activities while reducing resource use and the degradation of ecosystems. Expected co-benefits include reduced pressure on environment, a more efficient use of resources and changing consumer behaviour, which is paramount when achieving the transition to circular economy.

Related SDG targets:

• 7.3 By 2030, double the global rate of improvement in energy efficiency.
• 12.7 Promote public procurement practices that are sustainable, in accordance with national policies and priorities.
• 13.2 Integrate climate change measures into national policies, strategies and planning.

 

Photo: © Appolinary Kalashnikova/Unsplash

Project: Circular Baltic 2030