Carbon pricing in provincial procurement and tender procedures, focusing on catering, office furniture and textiles

Carbon pricing, the pricing of greenhouse gas emissions, can serve as an efficacious, cost-effective and equitable instrument for speeding up the transition to a low-carbon economy. This study examines the options for applying it in procurement/outsourcing of catering, office furniture and textiles. It involves multiplying the carbon footprint of the product or service by a carbon price. For these three product groups, the current approach to reducing carbon emissions is by means of sustainable procurement criteria (Dutch: MVI criteria).

For government procurement departments there are three options for applying carbon pricing to catering, furniture and textiles:

1. For information purposes, using publicly available data to calculate the carbon costs of the products to gain an idea of which products have the biggest carbon footprint.
2. For ranking tender bids, evaluating them on the specific carbon footprint of the products or services being supplied, with reference to a minimum criterion, for example.
3. As a financial steering instrument: based on the (estimated) CO2 emissions of all the goods and services procured, an organisation can calculate the attendant carbon costs and actually pay them –- into a carbon fund, for example, which the organisation can then use to invest in carbon-cutting projects.

Impact of carbon pricing
The study shows that the figure adopted for the carbon price is of major influence on the effectiveness of carbon pricing as a tool to guide procurement decisions. In many cases, carbon costs represent only a small fraction of the overall cost. With the fifteen products analysed in the product groups catering, furniture and textiles, carbon costs as a fraction of total cost vary between, on average, 1% at 25 €/t CO2, 3% at 100 €/t CO2 and 18% at 700 €/t CO2.

Recommendations
For procurement departments and agencies we recommend:

1. Start by using carbon pricing for information purposes.
2. Use that information to establish a financial steering instrument.
3. Communicate robustly with suppliers on carbon pricing and the options for CO2 abatement.
4. Experiment with using carbon pricing to rank tender bids, e.g. in the form of pilots. One promising product group to start with is office furniture, for which a specific calculation methodology has already been developed.

For Dutch national government we recommend:

1. Encourage development of Product Category Rules (PCR).
2. For the longer term, take the lead in developing a system like the External Costs Charge (EEC), i.e. a price paid economy-wide that covers the social costs of every product and service.