Advancing Green Public Procurement of Steel and Cement in China
China spends trillions of yuan each year on public procurement: the purchase of goods, engineering, and services by the Chinese government. This large-scale purchasing power gives China’s government huge leverage in driving markets toward the development of low-carbon products. Green public procurement (GPP) is a policy instrument where public entities seek to procure goods with a reduced environmental impact throughout their lifecycle relative to similar goods that provide the same function.
GPP adoption is increasing around the world as national governments, sub-national governments, and multilateral entities develop policies to reduce their carbon footprints and create new low-carbon markets. Countries are competing to lead the way on low-carbon material innovations and to meet growing trade requirements imposed by policies like the carbon border adjustment mechanism (CBAM). This report focuses on the use of GPP policies to reduce greenhouse gas (GHG) emissions associated with construction materials procured using government funds in China.
This report focuses on two energy- and carbon-intensive industries/products: steel and cement. Together, the two sectors account for around 18% of global carbon dioxide (CO2) emissions and about 30% of national CO2 emissions in China (Hasanbeigi 2021, 2022). In comparison, these two sectors account for about 2% of U.S. CO2 emissions, demonstrating the particular importance of industrial decarbonization in China. In 2021, total steel and cement production in China were about 1 billion tonnes and 2.36 billion tonnes, respectively, each accounting for over half of the world’s production for the steel and cement industries. According to our estimates in this report, around one-third of total annual steel and cement demand in China is used for public construction. This is equal to 350 Mt of steel and 775 Mt of cement per year. This is around 3 times the total steel and over 2 times the total cement production in India in 2021.
We estimated the CO2 emissions associated with steel and cement used in public construction projects and the potential impact of a GPP policy to reduce those emissions. Public procurement of steel and cement in China account for approximately 689 Mt CO2 and 459 Mt CO2 per year, respectively. Combined, 1,148 Mt CO2 emissions in China is associated with publicly procured steel and cement. Figure ES1 shows the annual CO2 emissions reduction potential resulting from GPP of steel and cement in China. For each scenario and product, we estimated the direct impact of GPP as well as the indirect impact if GPP led to the adoption of lower carbon steel and cement production for non-government-funded procurement. The potential CO2 emissions reduction impact of GPP could increase by nearly three-fold when taking indirect impacts into account, with a potential overall impact of 2,594 Mt CO2 emissions reduction for GPP of steel and cement combined in a transformative scenario with a larger decrease in CO2 intensity of steel and cement production relative to the baseline.
It should be noted that in the majority of cases, the government and its contractors do not purchase cement and instead purchase concrete (mainly ready-mix concrete), which is the final product used in construction projects. The values shown in this report include the cement used in concrete that is then used in construction projects.
Figure 1. Annual CO2 emissions reduction potential resulting from GPP of steel and cement in China
Note: Potential indirect impact assumes that changes in steel and cement plants to reduce CO2 emissions to meet GPP targets would impact the CO2 intensity of all steel and cement produced and sold even to non-government-funded projects.
China has developed several policies related to GPP, particularly for the procurement of green building materials. Several governmental entities are involved, with the Ministry of Housing and Urban-Rural Development (MOHURD), Ministry of Industry and Information Technology (MIIT), Ministry of Finance, and the State Administration for Market Regulation (SAMR) playing crucial roles alongside key certification and standardization institutions. However, while China has made progress on GPP, there are currently no mandatory CO2 intensity limits of steel and cement used in public construction projects.
Applying learnings from international best practices, we make the following recommendations for accelerating a national GPP policy for steel and cement in China:
• Prioritize the development of standardized and mandatory emissions reporting and industry-wide Environmental Product Declarations (EPDs) as a necessary first step towards GPP.
• Given existing pilot programs and policies related to GPP, a national-level policy should be rapidly established to elevate standards and ensure harmonization and efficiency.
• To balance feasibility with innovation, a two-tiered approach is recommended: one with industry-average criteria and another for top low-carbon innovations.
• Instead of strict prescriptive measures, standards should emphasize performance and whole-project life-cycle assessments, offering bidders greater flexibility.
• Standards must be regularly updated to reflect technological advancements, with maximum emissions intensities caps tightened regularly.
• Investments in the procurement budget should complement investments in capacity-building programs, addressing the knowledge and skills gap arising from the adoption of new materials and technologies.
• Continue to support industrial transformation through supportive industrial decarbonization policies such as TOP 10,000 enterprises and financial aid, such as loans and grants
Figure 2: Recommendations to advance GPP policy for construction materials in China and relevant ministries/government bodies.
Note: MOHURD: Ministry of Housing and Urban-Rural Development, MIIT: Ministry of Industry and Information Technology, SAMR: State Administration for Market Regulation.
GPP in China can catalyze huge CO2 emissions reductions in construction materials by acting as a signal to the industry of reliable large government demand. This complements China’s ongoing investments in industrial decarbonization by demonstrating demand for the growing supply of low-carbon materials. Together, these policies can make China a green materials leader as domestic and global steel and cement markets shift and international climate policy strengthens.
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