White House Directs Agencies to Account for Climate Change in Budgets

The directive is intended to embed the cost of climate change into all federal agencies. But it is not legally binding and could come with legal and logistical challenges.

By Coral Davenport

On September 21, 2023

A directive issued on Thursday by the Biden administration would, for the first time, have federal agencies consider the economic damage caused by climate change when deciding what kinds of vehicles, equipment and goods to buy.

The new guidance from President Biden could affect purchasing decisions across the government, from agriculture to defense to health care. The idea is to take into account the greenhouse gases generated by goods and projects, how they contribute to global warming, and the cost of that to the economy.

The potential impact is significant. The federal government is the world’s largest consumer of goods and services, spending roughly $600 billion each year. The changes could shift purchases for the federal government’s fleet of roughly 600,000 cars and trucks from gasoline-powered to all-electric vehicles, redirect the flow of billions of dollars of government grants and reshape or kill some major construction projects.

“It will be the first time this ‘whole of government approach’ is used to evaluate the climate consequences of government actions,” said Richard Revesz, Mr. Biden’s regulatory chief, who is helping lead the initiative. Mr. Revesz, a climate law expert, has focused on using cost-benefit analysis when designing policies meant to protect human health and the environment.

Critics said they feared the new step would end up harming the fossil fuel industry.

“It will constrain the development of traditional energy sources and infrastructure build out, and give a new rationale to boost the development of wind and solar and E.V.s,” said Mandy Gunaskera, who served as chief of staff of the Environmental Protection Agency in the Trump administration and is now a visiting fellow at the Heritage Foundation, a conservative research organization.

Since the Obama administration, the E.P.A. has used a metric to calculate the economic harm caused by one ton of planet-warming carbon dioxide pollution, known as “the social cost of carbon,” and applied it when regulating polluting industries, such as transportation and energy.

The new guidance would expand that approach to thousands of other decisions across the federal government and help determine whether highways or other infrastructure projects are built, what kind of government buildings are purchased, leased or constructed, what kind of energy is purchased to heat and cool them, or which of a set of competing grants are approved.

In the Obama administration, White House economists calculated the social cost of carbon at $42 a ton. The Trump administration lowered it to less than $5 a ton. Under Mr. Biden, the cost was adjusted for inflation and set at $51. Officials are now working on an update that is expected to jump to around $190 a ton.

That change could radically reshape regulatory and procurement decisions.

For example, this year, the Biden administration approved Willow, an $8 billion oil drilling project on pristine federal land in Alaska that is estimated to lead to the release of roughly 9.2 million tons of carbon dioxide pollution per year. Under the $51 social cost of carbon, the damage to the economy from that pollution is estimated at roughly $469 million per year. If the cost of carbon is set at $190 a ton, the economic damage estimate would be $1.7 billion per year. And that cost could affect the government’s decision on whether to permit such a project.

“When the government decides how to evaluate different purchasing options, it will have to take into account this factor and they’ll have to weigh it in a particular way,” Mr. Revesz said. “And that was not part of government policy. Until now.”

Still, the new directive does not carry the force of law and, in some cases, agencies could be prevented by existing statutes from using it. For example, it would not apply to the purchase of combat vehicles such as tanks, Mr. Revesz said. And agencies would not be expected to use it in budget and procurement decisions that have little to no carbon impact.

But the goal, Mr. Revesz said, would be to ensure that the new system of accounting takes root in most of the federal government, where it could endure into future administrations.

There is some legal precedent that supports the government’s use of the social cost of carbon. One challenge to the Biden administration’s decision to set the cost at $51 a ton has already been dismissed by a federal judge. In other cases, judges have found in favor of litigants who have sued to compel agencies to use the social cost of carbon in specific decisions.

Still, expanding the metric to cover procurement decisions could get tangled up in debates over how to determine the number of carbon dioxide emissions associated with building, say, a new highway.

“There are undoubtedly a series of procurement and legal issues that would have to be worked out,” said Michael Greenstone, an economist at the University of Chicago who helped the Obama administration to develop the social cost of carbon. “The plumbing to make this work is where the rubber hits the road.”

Corrections were made on Sept. 21, 2023: An earlier version of this article stated incorrectly the social cost of carbon established under the Obama administration. It was $42 a ton, not $51.

Because of an editing error, an earlier version of a picture caption with this article described incorrectly Richard Revesz’s role in the Biden administration. While he is the president’s regulatory chief, he was never chairman of the White House Office of Management and Budget.

This piece was republished from The New York Times.