Fostering industry transition through green public procurement: A “how to” guide for the cement and steel sectors

The need for industry decarbonization is nothing short of critical. Global momentum for deep decarbonization of harder to abate industries (including steel, cement, aluminum, chemicals, plastics, metals and mining, aviation, and heavy-duty transport) is growing.

This is the next frontier in climate mitigation, as these heavy industry activities are energy-intensive and typically rely on fossil fuel inputs, giving rise to significant CO₂ emissions. Emissions from the production of five basic industrial materials – steel, cement, plastic (and other chemicals), paper and aluminium – account for 20% of global CO₂ emissions and demand for these materials is only expected to increase as many countries around the world continue to industrialize.

There is growing awareness that emissions from heavy industry must be reduced sharply in order for the world to reach the target of the Paris Agreement: to limit global warming to “well below” 2°C.

Green public procurement is a policy tool gaining a lot of attention. Governmental expenditure on works, goods and services is estimated to represent 14% of GDP in the EU and up to 30% of GDP in developing countries, giving public procurement a colossal purchasing power. As public procurement of infrastructure such as buildings and bridges is often significant, the introduction of GPP policies could stimulate the demand for low carbon concrete and steel products.

With GPP, public authorities use their purchasing power to procure goods and services with reduced environmental impact throughout the product life cycle, stimulating the market and rewarding businesses that have developed products and services with lower environmental impacts. Use of GPP to support the development of a market for green commodities is a well-established policy measure in some countries, showing the market producers that there is willingness to pay for the anticipated green premium on these green commodities.

In this brief study, jointly produced by the United Nations Industrial Development Organization and the Leadership Group for Industry Transition, we provide an overview of the key components of GPP policy design and methodologies for target setting. We aim for this study to be a “how-to guide”.

To do this, we provide evidence on the role GPP can play in accelerating emissions reductions from harder-to-abate sectors, with a focus on steel, cement and concrete, demonstrate national best practices and explore the impact of a regional or global GPP procurement program on demand creation for low carbon products and materials. The study also provides a background to the Industrial Deep Decarbonisation Initiative.