Analysis
How Green Public Procurement can drive conversion of farmland: An empirical analysis of an organic food policy

https://doi.org/10.1016/j.ecolecon.2020.106622Get rights and content

Highlights

  • Public sector organic food purchases impact the conversion to organic agricultural land.

  • This effect of GPP mainly found on aggregated level and attributed to the joint market power of the Swedish municipalities.

  • Direct agricultural policy, i.e. subsidies also has a significant effect on organic farmland.

Abstract

This paper studies a Green Public Procurement (GPP) policy decided by the Swedish government in 2006, stating objectives related to organic farming. The policy aims to increase the public sector's organic food purchases, in order to incentivise Swedish farmers to convert to organic practices, thereby contributing to national environmental quality objectives. We analyse the effect of organic food procurement on organic agricultural land, using panel data from 2003 to 2016 including information on municipalities' organic food purchases, land use, and direct subsidies aimed at organic production. Based on different specifications and mainly FGLS estimations, we conclude that the 2006 organic food policy is associated with a significant positive impact on organic agricultural land. A significant effect of direct agricultural policy in the form of subsidies is also found.

Introduction

Promotion of public procurement as a policy instrument – Green Public Procurement (GPP) - is growing stronger. By the use of their purchasing power, public authorities are expected to shape consumption and production trends and thereby increase demand and alter the market structure in favour of more environmentally friendly products (Li and Geiser, 2005). GPP can be understood as a purchasing process where the public authority strives to procure goods, services and works with less environmental impact, based on life cycle costs, compared to the non-green alternative that would otherwise be procured. In 2002, the OECD adopted a recommendation on GPP policies, which have since been launched in member countries like USA, Japan, Australia and South Korea, but also in countries outside the OECD such as China, Thailand, and Philippines (European Commission, 2008).

While concepts of GPP, its adoption, implementation, and barriers thereof, are areas which have largely been explored (see, e.g., Erdmenger, 2003a, Erdmenger, 2003b; Preuss, 2007; Carlsson and Waara, 2007; Testa et al., 2016; Michelsen and de Boer, 2009), the effect of GPP as a policy instrument is not evident and currently not extensively researched (Cheng et al., 2018).

As one exception, Lundberg and Marklund (2018) discuss the design of a GPP policy and conclude that its multiple-objective character conflicts with the Tinbergen Rule, which states that the number of policy instruments must equal the number of policy objectives in order to effectively achieve all objectives (Tinbergen, 1952). A series of linked objectives can thus hamper the governing of the intended environmental outcome. Previous work by Marron (1997) and Lundberg et al. (2016) show that the function of public procurement as an environmental policy instrument will differ depending on factors such as product characteristics, market power, and price sensitivities of private and public consumers. Studying the impact of GPP on specific markets is thus, to a large extent, an empirical task, and what this paper aims to explore.

This paper focuses on a GPP policy decided in 2006 by the Swedish Government, stating that the public sector should increase its organic food consumption to 25% in order to contribute to a national environmental goal of 20% organic farmland by the year 2010 (Government Communication, 2006). In 2017, a more ambitious new version of the policy stated the organic share of the public sector's food consumption to be 60% and the share of organic farmland to reach 30% by 2030 (Swedish Government, 2017).

The paper's research question stems from the stipulated process of the 2006 GPP policy, where one objective acts as a policy instrument for another objective. Specifically, we empirically explore the relation between public sector organic food purchases and the provision of an organic input factor, i.e., organic agricultural land, while controlling for direct agricultural policy in the form of subsidies for organic production. We use mainly weighted and unweighted feasible generalized least squares (FGLS) estimations, which are performed using panel data on Swedish municipalities and counties for the period 2003–2016. Our findings suggest that an increase in public organic food purchases is positively associated with increases in organic farmland, and that direct agricultural policy in the form of subsidies also has a significant effect on organic farmland.

As such, this paper adds empirical knowledge to this relatively new area of research (Testa et al., 2012; Cheng et al., 2018) and is, to our knowledge, the first to empirically analyse the impact of GPP on organic farmland. The broader relevance of our findings is motivated by a globally increasing trend of using GPP and is thus of potential interest for any local or national government within and outside the European Union (EU) that are using or are considering using public purchasing as a means to pursue green industrial policy.

The paper is structured as follows: Section 2 provides a policy background. Section 3 presents previous literature with a focus on studies of GPP as a policy instrument and studies of policies aiming at incentivising farmers to adopt organic practices. Section 4 outlines the context of public food procurement. In Section 5, data and descriptive statistics are presented. The empirical approach is described in Section 6. Section 7 presents the results of the analysis and Section 8 concludes the analysis.

Section snippets

Policy background

A long-term environmental objective of the EU involves sustainable agriculture and increasing organic production. Organic production is recognized by policy makers for its potential to contribute to environmental objectives as well as improve the competitiveness of agricultural practice (European Commission, 2004), with rules on labelling and producing organic food in force in the EU since 1991 (Padel et al., 2009). Organic production is, in brief, farm management and food production while

Previous literature

Theoretical work shows that GPP from a socio-economic perspective is neither cost-effective nor objective-effective. The former means, in brief, that the command and control feature of GPP as a policy instrument leads to the potential suppliers (bidders) not ending up with the same marginal adaption cost to meet the environmental criteria (Lundberg and Marklund, 2013), i.e., the first-order condition for a cost-effective policy instrument is violated (Hanley et al., 2007). The latter means that

The context of public food procurement

This section presents the potential outcomes of an indirect GPP policy using public food consumption to incentivise private farms to convert to organic practices. While the GPP policy launched in 2006 states objectives on national level, its implementation is mainly on local level and in accordance with local preferences. Following the general set-up in Bergman and Lundberg (2013) we therefore assume a representative utility maximizing local public authority, e.g., a municipality, procuring a

Data

The empirical approach follows the structure of the policy as it is formulated. We observe the decision to convert to organic production or not, made by an aggregate of individual agricultural households located in the same geographical area. The national policy objectives are expressed in percentages, i.e., share of organic food purchased and share of organic farmland, and one of our empirical specifications are modelled accordingly. Data on organic land is only available on county level for

Empirical approach

The effect of the GPP policy on domestic organic farmland is estimated using data on the 21 counties in Sweden between 2003 and 2016. The main specifications used for this purpose are:Landjt=β0+i=02αiFood_localjti+i=02δiFood_othersjti+β1Subsidyvegt+β2Subsidyanimalt+β3CCjt+β4Tt+γj+εjtLand_hajt=β0+i=02αiTCOcap_localjti+i=02δiTCOcap_othersjti+β1Subsidyvegt+β2Subsidyanimalt+β3CCjt+β4Tt+γj+εjtDiffjt=β0+β1D.TCOcap_localjt+β2D.TCOcap_othersjt+β3D.Subsidyvegt+β4D.Subsidyanimalt+β5CCjt+β6Tt

Results

This section presents the results from our three main specifications, estimated with FGLS. Results are presented from estimations including county fixed effects and zone fixed effects, respectively. Full-length tables, A1 to A3, are found in Appendix A.

Discussion and conclusions

In this paper, we empirically study the effect of a GPP policy implemented by the Swedish Government in 2006. The policy aims at increasing the public sector's organic food purchases with an expected positive effect on the share of domestic organic farmland. The effect of public procurement as a policy instrument is an empirical question which is determined by market specifics and also contingent on the agricultural household's preferences on organic production, and other policies aiming at the

Declaration of competing interest

None.

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  • Cited by (0)

    Financial support from the Swedish Competition Authority is gratefully acknowledged. Funding source had no role in the study design; in the collection, analysis and interpretation of data; in the writing of the paper; or in the submission decision.

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