Environmental Criteria and Clauses in Public Procurement: Theory and Evidence on Their Effects on Bidder Participation

Many governments around the world use public procurement as an environmental policy instrument through clauses (i.e., mandatory environmental requirements governing contract performance) and award criteria (i.e., the dimensions used to evaluate bids). Green clauses and criteria are often thought to discourage firm participation in procurement procedures by excluding firms and raising participation costs. This article assesses the impact of green clauses and criteria on firm participation from both theoretical and empirical perspectives. From a theoretical standpoint, we show that these instruments have a twofold effect: although they can exclude some firms and raise participation costs, they also increase firms’ expected margins. We empirically illustrate this prediction using 50,000 procurement procedures in France between 2022 and 2023. We find a positive association between the implementation of green clauses and criteria and firm participation in procurement procedures, despite evidence of heterogeneity across procurement sectors and public buyers. The results of this paper suggest that the growing integration of sustainability into public procurement is unlikely to explain the observed decline in participation in procurement procedures.