Europe’s Sustainable Products get a Powerful New Buyer

European Union

By Neil Thomson

January 23, 2014

In 2010 the European public sector accounted for 19% of the EU’s gross domestic product. This makes it the largest buyer in the economy and a massive funding pool for the deployment of more innovative and energy efficient products.

Energy prices in the EU are considerably more expensive than in other parts of the world. Industrial gas prices are three to four times higher than in the United States and Russia and some 12 per cent higher than in China. A recent report from Brussels finds that the gap in energy costs between Europe and its leading trading partners is widening. Steel magnate Lakshmi Mittal says, “If we paid US energy prices at our EU facilities, our costs would drop by more than $1bn a year”.

Enter public sector procurement. On January 15 of this year the European parliament approved a revision to the rules that govern the way public authorities purchase goods and services. This means that governments are now able to embrace the use of procurement to buy sustainably and protect the environment. Where the lowest cost option was usually the default option, officials are now instructed to consider the lifetime environmental performance of the product.

This new directive also relates to energy consumption, meaning that energy efficient goods, despite their higher upfront costs, could enjoy a competitive advantage thanks to their strong environmental performance. With Europe still heavily dependent on fossil power generation, the benefits of these new measures extend beyond energy efficiency to cutting energy bills and reducing greenhouse gas emissions. Government buying in Europe now holds considerable potential to boost energy savings for the region.

Public procurement in Canada is estimated at 10 – 15% of GDP, or approximately $200 billion. This represents a massive market for Canadian companies working on the next generation of sustainable technologies. Cleantech companies in particular are 9 times more likely to export than the average Canadian small and medium-sized enterprise, meaning that support at home is likely to result in much coveted cash inflows from foreign markets.