Green procurement strategy required for Australia

A new report from the Centre for Policy Development (CPD) recommends strategic changes to state and federal procurement policies to accelerate Australia’s net zero transition and support the growth of budding green industries like green steel and green hydrogen.

The report, ‘Green goods: Strategies for decarbonising government procurement in Australia’, says that aligning procurement policies across all levels of government can potentially drive demand towards low-emissions goods and services, and act as a catalyst for building demand in key green industries.

But according to the report, a patchwork of green procurement practices across different levels of government is causing confusion among suppliers and government buyers alike, and does not properly incentivise firms to use materials that are better for the environment. While announcements such as the new federal Environmentally Sustainable Procurement Policy are welcome, significant gaps still remain.

The report broadly aligns with the federal government’s Future Made in Australia plans, which would be strengthened by the inclusion of a green procurement element, as the report recommends.

The report proposes short-term steps that governments can take now, including setting green procurement targets that include Scope 3 emissions and measuring baseline procurement emissions. It also suggests collaborating closely with industries to understand what can be achieved, and encouraging innovation by suppliers.

In the longer term, it says governments should factor in the long-term costs of emissions-intensive materials to ensure they are prioritising environmentally friendly options and to deal with the potentially higher upfront costs of green procurement.

Infrastructure was identified as the biggest opportunity in green procurement, as it makes up the largest category of spending by Australian governments, with $319.5 billion allocated in federal and state government spending over FY24–FY27.

Andrew Hudson, CEO of the Centre for Policy Development, said that a more intentional approach was needed.

“Government procurement accounts for over 17% of GDP. If the government changed procurement rules to require companies to use green materials in government contracts, it would drastically cut Australia’s emissions. It’s a huge lever to combat climate change that the government can easily pull.

“Australia needs an integrated and coordinated procurement framework across government departments and authorities that incentivises firms to use materials that are better for the environment,” he said.

“The government is one of the biggest employers, electricity consumers, vehicle fleet owners, and purchasers of goods and services. Its choices at the checkout can radically increase uptake of low-emissions goods and services.

“To achieve our net zero goals and become a renewable energy superpower, it will be critical to align ambitious procurement policies across all levels of government.”

Report author and CPD economic adviser Mara Hammerle said, “While for some inputs such as low-emissions steel there are few suitable alternatives that are currently being produced at scale, for others there are options that are cheap and available now.

“Our analysis shows that using recycled alternatives in road infrastructure could reduce costs of specific components by up to 83%, and reduce emissions by up to 98%,” she continued.

“Prior CPD research found that green steel, hydrogen and alumina are industries where Australia has a unique comparative advantage, a key goal of the government’s ‘Future Made in Australia’ vision.

“Government procurement requirements for low-emissions materials could ensure there is secure demand for emerging sectors like these, generating local jobs and stimulating sustainable economic growth.”

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