Greenhouse Gas Emissions Could Become a Factor in Winning Government Contracts

The Biden administration is considering changes to federal procurement that would bolster its “whole-of-government” approach to tackling climate change. 

The White House released a report on Friday titled, “A Roadmap to Build a Climate-Resilient Economy,” which furthers an executive order President Biden signed in May. This also aligns with the climate adoption and resilience plans the major federal agencies released on October 7.

“As the world’s single largest purchaser of goods and services, spending over $600 billion in contracts in [fiscal] 2020 alone, the federal government has an obligation to be a leader and model contracting partner,” the report stated. “Public procurement can shift markets, drive innovation, and be a catalyst for new global standards. The [Federal Acquisition Regulatory] Council is exploring two substantial amendments to federal procurement regulations in order to better disclose and mitigate the risks climate change poses in federal contracting.” 

First, the FAR Council––which includes senior officials from the Office of Management and Budget, General Services Administration, Defense Department and NASA––is considering a rule that would “require agencies to consider a supplier’s greenhouse gas emissions when making procurement decisions and to give preference to bids from companies with lower greenhouse gas emissions,” said the White House in a fact-sheet. A notice of advanced rulemaking published in the Federal Register on Friday looks to gather stakeholder feedback as the administration shapes the proposed rule. 

Additionally, the FAR Council is considering an amendment to federal procurement regulations that would increase the disclosure of greenhouse gas emissions by companies involved in federal contracting and set emissions reduction targets. The council opened two cases on the pending regulations, which can be viewed in the open case report.

Besides climate change, the Biden administration is looking to use federal procurement to close the racial wealth gap, increase American manufacturing, advance equity and help small businesses. 

The new report also lays out how the administration seeks to incorporate climate policies into shaping federal budgets, among other things.

The administration’s fiscal 2023 budget will include “an assessment of the federal government’s climate risk exposure and impacts on the long-term budget outlook, along with additional assessments,” the report said. “Federal agencies will continue work to further develop assessments and report climate-related risk to their programs and services.”

Through the next year and a half, “agencies will continue to work to incorporate climate risk into their assessments and improve their management of enterprise risks and opportunities,” the report continued. “In addition, agencies will begin to report climate-related financial risk in both the budget and agency financial reports to increase transparency and promote accountability.” 

OMB has already updated the federal government’s financial reporting requirements and guidance on the preparation, submission and execution of the budget to include a discussion of risks related to climate change. 

The White House’s report is a first-time recognition of the threat of climate change to the U.S. financial system, which is “an important first step,” Todd Phillips, director of financial regulatory and corporate governance at the Center for American Progress, said in a tweet. 

Ben Cushing, fossil-free finance campaign manager at the Sierra Club, said in a statement that Treasury Secretary Janet Yellen and the Financial Stability Oversight Council must now supplement the strategy with a “bold plan of action” in an anticipated report “to use all the tools available to financial regulators to rein in Wall Street’s risky fossil fuel financing and ensure that the climate crisis doesn’t push us into financial crisis.” 

Related, in August, OMB and Office of Science and Technology Policy leaders wrote in a memo to heads of executive departments and agencies they should be considering pandemic readiness, climate change and equity in their research and development priorities for their fiscal 2023 budget proposals. Addressing the climate crisis was also a major component of Biden’s budget request for fiscal 2022.