Eco-Labeling Standards, Green Procurement, and the WTO: Significance for World Bank Borrowers (March, 2005)

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Eco-labeling, which provides information to consumers about the environmental andsocial impacts of the products and services they buy and use, can be an essential tool for protecting the environment and promoting sustainable development. Carefully designed “green procurement” policies can lead to environmentally and socially sound purchasing decisions by governmental agencies and other entities. When these two tools operate together, as when government rules require procured goods and services to bear eco- labels, or meet equivalent standards and criteria, they have the potential to create powerful incentives for the marketing of green products and services and thereby promote sustainable development.

The World Bank has announced that it will “increase its ongoing push for green procurement and support certified products.” Given the World Bank’s commitment to sustainable development, this statement presumably pertains not only to the Bank’s own procurement practices, but to project-related procurement by World Bank borrowers.

This paper examines whether the rules of the World Trade Organization (WTO) are compatible with World Bank borrowers incorporating eco-labeling standards and criteria into their project-related procurement practices. It is understood that the World Bank procurement guidelines do not need to comply with WTO rules, and that the findings of this paper are relevant to WTO member countries. This paper reviews WTO agreements, committee reports, and dispute panel and Appellate Body findings and concludes that eco-label standards and criteria can be used by client countries to “green” World Bank
financed projects without offending WTO rules. This conclusion is based primarily on the exclusion of government procurement from the main WTO rules for goods and services and the flexibility provided by the rules of the plurilateral Agreement on Government Procurement.

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