Biden Administration Directs Federal Agencies to Consider Economic Damage of Climate Change in Purchasing Decisions

Biden Administration Directs Federal Agencies to Consider Economic Damage of Climate Change in Purchasing Decisions

Title: Biden Administration Takes Groundbreaking Step to Consider Economic Damage Caused by Climate Change in Government Purchasing Decisions

Date: [Current Date]

The Biden administration has issued a directive that marks a significant milestone in climate change mitigation efforts. For the first time, federal agencies will be required to consider the economic damage caused by climate change when deciding what types of vehicles, equipment, and goods to purchase.

The new guidance from President Biden has the potential to impact purchasing decisions across various sectors of the government, including agriculture, defense, and healthcare. The goal is to assess the greenhouse gas emissions generated by goods and projects, their contribution to global warming, and the cost of such damage to the economy.

With the federal government being the largest consumer of goods and services in the world, spending approximately $600 billion annually, these changes could have far-reaching effects. It could shift the government’s fleet of approximately 600,000 cars and trucks from gasoline-powered to all-electric vehicles, redirect billions of dollars in government grants, and potentially reshape or halt major construction projects.

Richard Revesz, Mr. Biden’s regulatory chief and a climate law expert, described this approach as a “whole of government approach” used to evaluate the climate consequences of government actions. Revesz has focused on using cost-benefit analysis to design policies aimed at protecting human health and the environment.

Critics of the directive express concerns that it may harm the fossil fuel industry. Mandy Gunaskera, a visiting fellow at the conservative research organization Heritage Foundation and former chief of staff of the Environmental Protection Agency during the Trump administration, believes the directive will hinder the development of traditional energy sources and infrastructure, while favoring the boost of wind, solar, and electric vehicles.

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The concept of “the social cost of carbon” has been utilized by the Environmental Protection Agency (EPA) since the Obama administration. It calculates the economic harm caused by one ton of carbon dioxide pollution and has been applied in regulating polluting industries such as transportation and energy. The new guidance expands this approach to thousands of other decisions across the federal government. It will help determine the construction of highways and other infrastructure projects, the procurement of government buildings, the type of energy used, and the approval of competing grants.

Under the Obama administration, the social cost of carbon was set at $42 per ton. However, the Trump administration significantly lowered it to less than $5 per ton. The Biden administration has adjusted the cost to $51 per ton, factoring in inflation. Officials are currently working on an update that is expected to increase the cost to around $190 per ton. This change could greatly impact regulatory and procurement decisions.

One example is the approval of the Willow oil drilling project in Alaska by the Biden administration. If the social cost of carbon is set at $51 per ton, the economic damage caused by the estimated 9.2 million tons of carbon dioxide pollution released annually would be approximately $469 million. However, with the cost potentially jumping to $190 per ton, the economic damage could amount to $1.7 billion annually. This higher cost could influence the government’s decision on whether to permit such a project.

Despite the directive’s significance, it does not have the force of law, and existing statutes may prevent some agencies from implementing it. Combat vehicle purchases, such as tanks, are among the exempted categories. Budget and procurement decisions with minimal carbon impact are also not expected to be influenced by the directive.

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Richard Revesz, however, expressed the aim for the new system of accounting to take root in most of the federal government, ensuring its endurance into future administrations.

Legal precedents supporting the government’s use of the social cost of carbon already exist, with federal judges dismissing challenges against the Biden administration’s decision to set the cost at $51 per ton. In other cases, litigants have successfully compelled agencies to incorporate the social cost of carbon in specific decisions through legal action.

The expansion of this metric to cover procurement decisions may entail resolving debates over determining the carbon dioxide emissions associated with constructing infrastructure projects such as highways.

Michael Greenstone, an economist at the University of Chicago who assisted the Obama administration in developing the social cost of carbon, emphasized the need for detailed planning and coordination to implement this directive effectively.

As the Biden administration continues to prioritize climate change mitigation, this latest directive signals an important step towards integrating sustainability considerations into government purchasing decisions.


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