Green public spending multiplier exceeds one within a year
A De Nederlandsche Bank working paper finds that green public procurement yields a cumulative GDP multiplier above one within a year, while brown procurement has virtually zero impact. The study analyzes 171,000 Eurozone contracts between 2011 and 2023.
A tale of two multipliers
Classifying 171,000 public contracts across ten Eurozone economies from 2011 to 2023, DNB researchers measured the macroeconomic effects of green versus brown procurement.
Green procurement generates an immediate expansion in government consumption, private consumption, and fixed investment.
Its cumulative fiscal multiplier is 0.69 on impact and surpasses 1.0 within the first year, peaking between 4.0 and 5.0 after two years.
In contrast, the brown procurement multiplier remains statistically indistinguishable from zero over the first two years.
These differences are strongest during economic downturns and periods of elevated uncertainty, where green spending delivers significantly larger output gains than fossil-fuel-intensive alternatives.
Mirror images in energy markets
The transmission of spending shocks occurs primarily through energy markets, where green and brown procurement produce near mirror-image effects.
Green procurement lowers consumer energy prices by up to 0.9 percent and producer prices by 1.2 percent, while reducing oil import dependence by 1.4 percentage points on impact and 4.6 percentage points at peak.
Conversely, brown procurement elevates energy prices and depresses green innovation, reducing green patent filings by 20 percent after two years.
Composition beats aggregate volume
The paper provides solid empirical proof that spending composition matters as much as fiscal volume.
By showing that green procurement lowers energy prices while brown spending depresses innovation, the authors dismantle the myth of neutral fiscal policy.
Policymakers should leverage green procurement as a high-return growth engine.