How the Federal Government Can Buy Greener
Federal agencies perform many functions: they issue rules, resolve disputes, and offer guidance to the public on what various laws mean. But they also do something else that receives comparably little attention: they buy things. In fact, the government spends billions of dollars on everything from pens and computers to cars and buildings. That makes the federal government one of, if not the, biggest spenders in the country. It also means that its purchases have a huge carbon footprint.
The Biden administration has made slashing that carbon footprint one of its top priorities. In May 2021, President Biden signed an Executive Order requiring climate-focused revisions to the main set of rules governing federal procurement, the Federal Acquisition Regulation (FAR). In December, he signed another Executive Order setting an ambitious goal of net-zero emissions in federal procurement, with more specific targets for electricity, vehicles, and buildings.
This attention on government purchasing to slash greenhouse gas emissions is well justified. Buying a lower-emitting product yields clear, direct emission reductions. For instance, if an agency buys an electric car over a gas guzzler, that car would emit many fewer tons of carbon over its life cycle.
But the climate benefits go beyond those direct reductions. The government’s huge spending power gives it massive sway over what sorts of goods and services companies offer in the first place. Basic supply-and-demand principles suggest that, if the government wants something and offers significant money for it, companies will bend over backward to offer better and cheaper versions. That sort of government-spurred innovation has given consumers everything from better GPS technology to camera phones to scratch-resistant glasses. It is no stretch to imagine government demand for, say, electric vehicles yielding cheaper car batteries, or demand for efficient buildings yielding better insulating materials. Those benefits could easily spill into consumer markets, yielding even more emission reductions as the public buys more of those lower-emitting products.
So Biden’s focus on amending the FAR to make agencies take better account of climate impacts makes good sense from a social standpoint. But that raises the question of how the FAR Council — a group of agencies that oversee the FAR — can do so most rigorously. A hint lies in the May Executive Order, which instructs the FAR Council to “requir[e] the social cost of greenhouse gas emissions to be considered in procurement decisions.” The social cost of greenhouse gases represents the amount of harm, in dollar terms, that an extra ton of greenhouse gases imposes. Put differently, these government-wide metrics represent, in dollars, how much benefit society enjoys when the government reduces greenhouse gas emissions by one ton.
In October, the FAR Council requested input on, among other things, how it can best integrate those metrics into agency procurement decisions. A comment letter that the Institute for Policy Integrity and others recently filed offers a path forward: if a purchasing agency knows how much each alternative emits, then it can use the social cost figures to estimate how much additional harm the higher-emitting alternative would impose. (The calculation is simple: extra tons of emissions times the per-ton social cost for each gas.) Then the agency knows how much extra climate harm a higher-emitting option entails, and it can decide precisely how much extra it should be willing to pay for a lower-emitting option.
Granted, for many procurement decisions, greenhouse gas emission estimates are not readily available. But even in those cases, agencies have plenty of options. First, and most obvious, is to develop — or direct bidders to develop — emission estimates wherever possible. Those estimates would benefit not only the government but also the many consumers and companies who bake climate impacts into their own purchasing decisions. Lowering the cost of emissions information in this way amounts to another positive spillover.
Second is to use the limited information available about greenhouse gas emissions to rank options in terms of their carbon footprints. Even if a procuring agency cannot calculate exactly how much emissions each option entails, it still might be confident that one option emits more than others if it involves, say, heavier shipping materials, longer shipping distances, or a more carbon-intensive production process. In those cases, agencies might inflate the higher-emitting options’ costs a bit as they select an alternative — a crude but effective way to give preference to lower-emitting options.
Third is to build commitments into government contracts, from emission disclosures and targets to climate-sensitive corporate decisionmaking processes. Government contracts already commonly require companies to comport with various minimum standards regarding labor treatment and manufacturing processes. Those sorts of climate-focused requirements could simply become another part of the cost of doing business with the government, and agencies can impose them regardless of whether they perform the “social cost” calculations described above.
Of course, not every purchase involves enough emissions to make these additional steps worthwhile. And not every contracting company will have the resources to comply (though the government could help those companies by offering guidance and even direct support or technical assistance). But if the Biden administration believes its own rhetoric about climate change, then ensuring that agencies rigorously consider climate impacts in their purchases is not only helpful, but necessary.
