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Abstract
This paper investigates the impact of green public procurement (governments’
purchases) of certified wood in the EU. A spatial price equilibrium model is developed
to analyse whether this policy impacts the interregional trade flows of wood and other
regions’ economic welfare. The model contains an innovative feature which allows the
introduction of consumers’ willingness to pay for certified wood, and producers’
willingness to accept certified wood production. The outcome of the analysis
demonstrates that green public procurement of certified wood in one region can create
a trade barrier for other regions and decrease their economic welfare. In the worst
case scenario, the forced increase of demand for certified wood increases the prices of
certified wood. This decreases the relative price of conventional wood which can
trigger the production of conventional wood and endanger forest conservation. Cost
reductions and adequate financial compensation for certified wood producers can
tackle these problems.