Green public procurement and firms' pollution emissions: Does demand-side environmental policy matter?

Abstract

Environmental governance requires both production-side and demand-side approaches. Previous literature has extensively studied environmental regulatory policies on the production side, while the role of demand side factors has often been neglected. This study constructs a staggered difference-in-difference model to investigate the impact of Green Public Procurement (GPP) on firms' pollution emissions taking the green procurement lists enacted by the Chinese government as a quasi-natural experiment. The results demonstrate that being selected into the green procurement lists significantly reduces firms' pollution emissions, and the findings still hold after endogeneity tests and a series of robustness tests. We identified the mechanisms responsible for this effect. The reduction in firms' pollution emissions mainly results from energy transition, enhanced technological innovation, and improved end-of-pipe treatment capacity. Heterogeneity analyses indicate that the pollution reduction effect of GPP differs depending on the procurement implementation modalities and firm characteristics. Finally, we use China's domestic input-output table to calculate the indicators of upstream and downstream industry linkages and examine the production network spillover effects of GPP. The results show that GPP effectively reduces the pollution emissions of upstream and downstream firms through production network linkages. This study provides empirical evidence from China on the effectiveness of GPP as a demand-side policy in pollution reduction, and offers valuable policy insights for further improving the policy system of environmental governance.