Concerns about the environmental effects of procurement decisions are gaining momentum. We investigate how the environmental quality of public purchases changes under two possible institutional settings: a centralized one, where a single regulator is in charge of both production efficiency and environmental quality, and a decentralized one, where two separate bodies operate, namely an environmental agency securing environmental quality and a procurement agency pursuing efficiency. Informational asymmetries that affect such regulatory relationship are taken into account. We conclude that, under certain conditions, non-cooperation tightens the trade off between incentives to efficiency and rent extraction, resulting in a downward distortion in environmental quality. [JEL Classification: D82, L51, Q58].

*damato@economia.uniroma2.it

The Author wishes to thank Laura Castellucci and Gianni De Fraja for their very valuable suggestions and ideas. The Author is also indebted to Gianmaria Bernareggi, Vincenzo Denicolò, Laurent Franckx, Stefano Gorini, Alberto Iozzi, Claudio Mezzetti, Francesca Stroffolini and Edilio Valentini, the participants in the 2002 GPE Conference, and seminar audience at CEIS-«Tor Vergata», for helpful comments. The usual disclaimer applies.