Biden Directs Federal Agencies to Factor Climate Cost in Purchases

In a groundbreaking move, the Biden administration issued a directive on Thursday, mandating federal agencies to incorporate the economic repercussions of climate change in their procurement decisions. This directive could potentially alter purchasing choices across various sectors including defense, agriculture, and health care, impacting the acquisition of vehicles, equipment, and other goods.

The federal government, being the world’s largest consumer of goods and services, expends approximately $600 billion annually. This initiative could significantly redirect these expenditures, potentially favoring all-electric vehicles over gasoline-powered ones for the government’s fleet of around 600,000 cars and trucks, and influencing the allocation of billions in government grants. It could also determine the fate of major construction projects, reshaping or even terminating some.

Richard Revesz, President Biden’s regulatory chief, emphasized that this is the inaugural implementation of a ‘whole of government approach’ to assess the climate implications of government actions. Revesz, a specialist in climate law, has been instrumental in integrating cost-benefit analysis in policy formulation aimed at environmental and human health protection.

Critics argue that this move could detrimentally impact the fossil fuel industry, constraining the development of conventional energy sources and infrastructure, while propelling the growth of renewable energy sources like wind and solar, and electric vehicles.

The concept of evaluating the economic damage caused by carbon dioxide pollution, termed “the social cost of carbon,” has been in use since the Obama administration, primarily in regulating pollution-intensive industries. The new directive expands this approach to myriad other decisions across the federal government, influencing the construction of infrastructure projects, the acquisition and construction of government buildings, and the approval of various grants.

The social cost of carbon has seen fluctuations, being valued at $42 a ton during Obama’s tenure, reduced to below $5 a ton during Trump’s administration, and readjusted to $51 under Biden, with expectations of it soaring to around $190 a ton after an impending update.

According to The New York Times, this alteration in the cost of carbon could drastically modify regulatory and procurement decisions. For instance, the Biden administration sanctioned an $8 billion oil drilling project, Willow, in Alaska, anticipated to emit approximately 9.2 million tons of carbon dioxide pollution annually. The economic damage from this pollution, calculated based on the social cost of carbon, could influence the government’s approval of such projects.

However, this directive does not possess the authority of law and may not apply in certain cases due to existing statutes. For example, it would not influence the purchase of combat vehicles like tanks, and agencies are not obligated to apply it in decisions with minimal carbon impact.

The objective is to embed this new accounting system in the majority of the federal government, ensuring its continuity into future administrations. There is legal precedent supporting the government’s use of the social cost of carbon, with some challenges to the Biden administration’s valuation already dismissed by federal judges.

However, extending this metric to procurement decisions could lead to debates over determining the carbon emissions associated with new projects. Michael Greenstone, an economist who assisted the Obama administration in developing the social cost of carbon, highlighted the potential procurement and legal challenges that need resolution to operationalize this initiative effectively.