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.
Generated Summary
This research article investigates the effects of a Green Public Procurement (GPP) policy implemented by the Swedish government in 2006, which aimed to boost organic food purchases in the public sector. The study employs panel data from 2003 to 2016, focusing on the relationship between public organic food procurement, organic agricultural land, and direct subsidies for organic production. The research approach involves econometric analysis, primarily utilizing weighted and unweighted feasible generalized least squares (FGLS) estimations, to explore how the GPP policy influences the conversion of farmland to organic practices. The scope of the study is limited to the Swedish context, examining the impact of the GPP policy on organic farmland at the county level. The research also takes into account the broader policy context, including the EU’s objectives for sustainable agriculture and the use of GPP as a tool for environmental policy.
Key Findings & Statistics
- The study analyzed data from 21 counties in Sweden over the period 2003-2016.
- The agricultural area in Sweden amounts to 3,035,920 ha, covering about 7% of the total land area.
- The mean county share of organic farmland increased from 6.9% in 2003 to approximately 19.8% in 2016.
- The absolute levels of organic farmland increased from a mean of 10,800 ha in 2003 to 26,300 ha in 2016.
- The average share of organic food consumed by the public sector was 33% in 2016.
- In 2016, the average share of certified organic farmland was 15.6%.
- Conversion to organic production entails costs for the individual farmer, with organic harvests in Sweden at about 50-60% of conventional harvests.
- The price of an organic food basket was, on average, 66% higher than the price of a conventional food basket.
- In 2003, the mean share of organic food procured in the county was 2.2%, increasing to around 30% in 2016.
- The organic expenditures in SEK/capita ranged from 14 SEK/capita in 2003 to 192 SEK/capita in 2016.
- The study found that an increase by 1% in the weighted average share of other counties’ procurement is associated with an increase in the share of organic land in county j ranging from around 0.4% up to around 0.6%.
- The average size of a county’s organic farmland during the period studied amounts to 12.8% or 18,000 ha.
- A 1% increase in the weighted average share of other counties’ organic food procurement in year t is associated with an average increase in the organic farmland in county j in the same year, corresponding to around 72 to 108 ha.
- The coefficients of Subsidyveg and Subsidyanimal show a significant positive impact on the share of organic farmland.
Other Important Findings
- The study found that an increase in the share of organic food procured by other counties is positively associated with an increase in organic farmland.
- Direct agricultural policy in the form of organic subsidies also showed a significant positive impact on the share of organic farmland.
- The study suggests that public organic food consumption within an individual county generally creates none, or small, incentives for producers within that county to convert to organic production.
- The results indicate that the public sector’s market power, through a coordination effect of the oligopolistic wholesalers, plays a role in influencing organic farmland.
Limitations Noted in the Document
- The study acknowledges that the impact of the GPP policy may be overestimated due to potential non-response bias in the survey data.
- The analysis is based on the assumption that the increased demand for organic food leads to an increase in organic farmland within Sweden, which may not always be the case if demand is met by imports.
- The study’s approach is a reduced form analysis, which may not fully capture the complexity of the relationship between public procurement and organic conversion.
- The study focuses on the aggregated level (county level) due to data limitations, potentially overlooking variations at the municipal level.
- The study’s conclusions are based on the Swedish context, and the results may not be directly applicable to other regions with different agricultural practices or policy frameworks.
Conclusion
The central finding of the study is that the GPP policy, as implemented by the Swedish government, is associated with a significant positive impact on organic farmland. This effect is primarily observed at the aggregated level, suggesting that the joint market power of Swedish municipalities plays a role in incentivizing farmers to convert to organic practices. This finding implies that the policy, despite its focus on local implementation, benefits from the coordinated actions of the public sector across different municipalities. The study underscores the importance of considering the interplay between public procurement and the broader market dynamics, including the behavior of wholesalers and the overall demand for organic food. Furthermore, direct agricultural subsidies, as part of the national policy, also have a notable positive effect on organic farmland, which aligns with previous research and expectations. A key takeaway from this research is that the effectiveness of GPP as an environmental policy instrument can be enhanced by considering the role of market power and coordination among public authorities. The study also recognizes that there are limitations, such as the potential for non-response bias in the data and the challenges in isolating the specific effects of public consumption. This research provides a foundation for future work by recognizing the relationship between policy instruments and market behaviors. This research contributes to the broader understanding of how policies can drive transformation in farming practices. In line with expectations and previous literature, direct organic subsidies have a significant positive effect on organic farmland, and compared to organic food purchases, this effect is generally somewhat larger. It is important to address some caveats of the present study. There is, theoretically, a possibility that increases in organic food purchases are met by proportional increases in organic agricultural land by all, or a majority of the counties. In that case, the policy would indeed have an effect, but given this study’s reduced form approach, we would not detect a significant impact.