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 specifications in the contract performance) and award criteria (i.e., the dimensions of the offers the contracting authority assesses). Green clauses and criteria are often thought to discourage firm participation in procurement procedures. This article evaluates 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: they may exclude some firms and raise participation costs, while also increasing firm expected margins. We test this prediction empirically using 50,000 procurement procedures in France between 2022 and 2023. We find a robust positive effect of both green clauses and criteria on participation, suggesting that the growing integration of sustainability into public procurement is unlikely to explain the observed decline in participation in procurement procedures.