Public Procurement and the Private Supply of Green Buildings

Government purchasing programs often have policy objectives that go beyond getting a good deal for the taxpayer. For example, governments may purchase products with enhanced environmental or safety features not only to reduce environmental impacts and safeguard employees, but also to promote broader adoption of similar products in the private market. Such policies have been deployed by governments across the United States and European Union, but little is known about how well they actually work. This paper examines the impact of environmentally friendly government procurement policies on private-sector adoption of the targeted products. The authors find that municipal government green building procurement policies that apply only to municipal buildings also accelerate the use of green building practices in the private sector, both in the cities with these policies as well as in neighboring cities. They also find that such government policies encourage private-sector investment in complementary services, which likely reduces green building costs to private developers. Key concepts include:

• Government purchasing preferences can accelerate the diffusion of products and services, potentially replacing the need for subsidies.
• Government procurement policies can specify particular product standards can foster their adoption by the private sector.
• Cities with green building policies targeting only municipal buildings had nearly twice as many private-sector green buildings by 2008 as did other cities of similar size, demographics, and environmental preferences.