How governments can turn procurement into a climate innovation tool – Brookings Institution

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Tomorrow’s tech policy conversations today
All around the United Kingdom, local authorities desperately need to build additional primary and secondary schools. The UK’s school-age population is rapidly growing, and with nearly 400,000 additional pupils expected to enter the school system in the coming year, some 640 new schools are needed. At the same time, local authorities face twin pressures that make new construction a daunting challenge: dwindling budgets and a need to reduce emissions. To meet this challenge, researchers at the University of Cambridge are exploring the use of prefabricated engineered timber buildings that aim to reduce costs and hit sustainability targets for new school construction.
The role of technology innovation in climate crisis mitigation is by now well-established. But the Cambridge project stands out because it focuses on publicly procured school structures. Recent international climate policy encourages business and industry to green how they work through innovation. Yet governments often underappreciate their own procurement power as a vital environmental policy instrument far closer to home. Directing government procurement spending toward more sustainable projects represents a major opportunity not only to reduce emissions created by governments’ own operations, but also to encourage the development of technologies capable of mitigating and helping societies adapt to the climate crisis. As the economist William Janeway describes, when new technologies mature beyond R&D, the state can create a market “by serving as the first customer”, pulling innovations “down the learning curve” to cheaper, dependable production.
In 2018, the World Bank Group estimated that global government procurement amounts to $11 trillion annually, or approximately 12% of global GDP. By comparison, global venture capital funding is estimated at around $300 billion. Yet while there is growing appreciation of the role of VC investment in supporting the development of emerging technology to address climate change, green public procurement (GPP)—investing government purchasing power in environmentally friendly public goods, services, and works—is far less understood or discussed. From equipping schools to building transportation systems, to forest management, to stationary supplies, the scale and dependability of governments’ collective procurement spending makes it one of the most powerful policy instruments for stimulating innovation to address the climate crisis. As Cristina Peñasco, an environmental economist, and my colleague at the Bennett Institute, explains, GPP not only contributes to decarbonizing government organizations and operations, but can also “create incentives and new markets for sustainable products and processes,” boosting demand for green technologies in a wide range of sectors, from transport to construction.
Around the world, start-ups are developing technologies to help green government. While not the only vehicle of sustainable innovation, the pace and range of problems they are collectively addressing stands out. In a recent report, colleagues from multiple disciplines and I identify more than 100 of the highest quality start-ups working on green technology innovations for government internationally, covering a vast swath of government policy and operational domains from environmental restoration and management to sustainable mobility systems and climate-smart infrastructure.
By making smart procurement decisions, governments have the ability to stimulate the development of technologies with promise to mitigate the worst impacts of climate change. Governments own vast amounts of building stock, from offices to museums, that are often older and less energy efficient than privately owned stock. Retrofitting them with energy efficiency devices, including sensors and smart meters, will be vital to achieve net zero carbon by 2050. By investing in technology to manage and restore environmental resources and large-scale carbon capture and storage methods, governments can encourage development in fields crucial to emissions reduction. There are vast numbers of exciting projects underway that governments might support with their procurement power. MIT engineers, for example, are working on creating bioluminescent trees that local authorities might use to replace energy-hungry streetlights. Numerous startups are using aerial and other technologies to enable rapid tree-planting in both urban and rural settings to capture carbon from the air. While tree planting projects require careful planning in terms of optimizing for longevity (older trees do more good) and tree type for maximal positive impact, the environmental benefits are meaningful. New York City calculated that every dollar spent on planting and maintaining trees returns $5.60 in benefits.
Despite the quality and range of technology developments, governments and startups are struggling to collaborate. Central to this difficulty is scant knowledge exchange across sectors. Entrepreneurs find tendering processes inscrutable and think government agencies are closed-minded regarding new solutions. For their part, public servants often feel in the dark when it comes to public-purpose innovation. In a recent survey, half of 167 cities globally described difficulty in identifying partners and suppliers as one of the greatest obstacles to achieving the Sustainable Development Goals. While procurement reform may sometimes be needed, there are myriad examples of currently existing procurement vehicles, including challenge-led approaches, that can be deployed. Knowledge exchange, not law, is the major stumbling block.
For government procurement of innovative climate technologies to be the victim of disconnected knowledge in an age of informational over-abundance is depressing but addressable. First, governments need greater knowledge of what technology is available and the policy contexts in which they have already been engaged. Platforms like techdetector.de are beginning to do this by examining emerging technologies’ climate impact against SDG goals and technology readiness levels. But knowing what is available and plausible is only one part of the puzzle. To avoid both innovation avoidance and techno-solutionism, public procurers require the technical competency to assess the green credentials and technology impact of the products and services they are charged with purchasing. The economist Mariana Mazzucato puts it bluntly: “without these key competences […] the public sector will not be able to achieve its objectives.”
A few outlier nations, often drawn from those that already feel the impact of climate change most directly, are beginning to move the needle when it comes to public procurement of green technology. The organization of knowledge and capacity building is central to their efforts. Canada has opened a Centre for Greening Government, aimed at green technology uptake both to decarbonize the public sector and to stimulate the broader Canadian green technology sector. Singapore has developed a government green procurement agenda designed to contribute to a broader effort to decarbonize the economy, under the GreenGov.sg label. In both cases, these knowledge and capacity-building hubs are powerfully situated within the machinery of government, which should enhance their ability to act.
Technology also has a role to play in helping governments to understand when sustainability should be prioritized in a procurement process. As Paolo Turrini, an associate professor of computer science at the University of Warwick told me via email, environmental criteria, such as emissions, must be weighed against other criteria, such as perceived reliability. But these criteria, he explains, may not always align with each other. In these cases, online learning algorithms, which can handle the kind of incomplete information typical of real-world procurement cases, can be used to match suppliers according to selected assessment criteria.
This kind of decision-making depends upon high-quality data management, sharing, and analysis. Governments rely on accurate data to calculate both their current carbon emissions and a realistic estimate for the cuts they can and should make. But poorly collected or non-standardized data has resulted in governments miscalculating their environmental impact. The UK government, for example, estimated in 2019 that the public sector had only produced 2% of the country’s carbon emissions, while research found the National Health Service (a public sector institution) alone to be responsible for more than 5%. Under-estimation can have a knock-on effect on procurement, downplaying the need for both process reform and innovation uptake.
Beyond data, richer multidisciplinary research on green public procurement of innovation is needed. Despite the evident potential, public procurement—not the sexiest of subject matters—is understudied in the context of environmental impact. A recent study in Nature found only 16 studies of public procurement as an environmental policy instrument, compared with 40 on tax and tax exemptions. We need to better understand procurement as an instrument, how to maximize its potential as a tool to fight the climate crisis, how to build robust measurement and evaluation mechanisms, and how to share lessons among governments. While neither country offers a directly replicable model, Canada and Singapore are well-placed to share what they have learned from efforts to embed green public procurement of innovation into whole-of-government strategies.
Facilitating data-sharing and knowledge exchange between government and green technology could help governments move beyond pilotitis to enable high-quality commissioning and de-risk the adoption of unfamiliar technologies. In part inspired by COP26, piloting opportunities are springing up for small-scale interventions that test technology innovations in the public sector. This type of instrument is useful for relationship building, for bridging the cultural divide between start-ups and the state, and for collecting baseline data. It will not in isolation bring about large-scale change, nor put a dent in the trillions of dollars that governments should be deploying to decarbonize themselves. But almost every government would benefit from clearer plans and accountability structures to facilitate the leap from green pilot to green procurement.
Finally, citizens’ knowledge, ideas, and opinions on green technology have a role to play in enabling government green technology uptake. Climate breakdown is rapidly becoming a defining political issue of our age, and citizens are surprisingly willing to participate in consultation exercises to develop measures to combat the climate crisis. Some governments, especially at the municipal level, have seized this opportunity. In 2019, the city of Lisbon introduced a “green participatory budget” that allowed residents of the city to decide on their own greenhouse gas reduction schemes like cycling lanes and tree-planting, which the government then procured. Startups, including Citizenlab in Belgium and Commonplace and The Future Fox in the UK, have built platforms to enable inclusive decisionmaking, including with an environmental focus. Participatory approaches will not produce successful outcomes by default, but, carefully designed, they should be welcomed. We should lean into the participatory possibilities of public procurement, without losing sight of the technical expertise needed to procure experimentally.
Anyone who has experienced a government procurement process, from either side of the table, will recognize that change is unlikely to come overnight. Many would dismiss the role of government entirely, in part due to procedural slowness. But the state’s budgetary power and ability to reach everyone makes it a vital source of global decarbonization. Without a more deliberate and intensive focus on public procurement than most countries have embarked on to date, the focus on economic policy looks milquetoast. Developing a dynamic ecosystem for knowledge exchange around green technology development and uptake is foundational to public procurement meeting its environmental potential.
Dr. Tanya Filer leads the Digital State project at the Bennett Institute for Public Policy at the University of Cambridge. She is also the founder and CEO of StateUp.
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