The Federal Acquisition Regulatory Council is considering amending the Federal Acquisition Regulation (FAR) to ensure that major Federal agency procurements minimize the risk of climate change. DoD, GSA, and NASA are seeking public input on a potential FAR amendment.

On May 20, 2021, President Biden signed Executive Order (E.O.) 14030, Climate-Related Financial Risk (May 25, 2021, 86 FR 27967). The E.O. recognizes that the intensifying impacts of climate change present a set of growing risks to financial assets, companies, communities, and workers. The Federal Government itself is exposed to these same risks. The failure to appropriately and adequately account for these risks threatens the financial and operational effectiveness of the Federal Government and its ability to meet the needs of its citizens.

The E.O. states that the Federal Government should lead by example by appropriately prioritizing Federal investments and conducting prudent fiscal management. One critical lever is ensuring that the Federal Government manages climate-related financial risk within its own procurement activity, while also leveraging its scale as the Nation’s largest spender to speed the adoption of key assessment, disclosure, and mitigation measures across the private sector. To that end, section 5(b)(ii) of the E.O. directed the Federal Acquisition Regulatory Council, in consultation with the Chair of the Council on Environmental Quality and the heads of other agencies as appropriate, to consider amending the FAR to ensure that major Federal agency procurements minimize the risk of climate change, including requiring the social cost of greenhouse gas emissions to be considered in procurement decisions and, where appropriate and feasible, giving preference to bids and proposals from suppliers with a lower social cost of greenhouse gas emissions.

As stated in section 5(a) of E.O. 13990, Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis, the “social cost” is an estimate of the monetized damages associated with incremental increases in greenhouse gas emissions (January 25, 2021, 86 FR 7037). Interim estimates on the social cost of carbon, methane, and nitrous oxide under E.O. 13990 were published in February 2021 and are available at​wp-content/​uploads/​2021/​02/​TechnicalSupportDocument_​SocialCostofCarbonMethaneNitrousOxide.pdf. Recommendations from the Interagency Working Group on the Social Cost of Greenhouse Gases established under E.O. 13990 on considering the social cost of carbon, methane, and nitrous oxide in procurement will also be considered in development of a proposed rule under this FAR case.

Current FAR coverage of greenhouse gas emissions is primarily in subpart 23.8 and the associated clauses in part 52, with definitions at 2.101 and 23.001. FAR Case 2021-015, Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk, implements section 5(b)(i) of the E.O.; that paragraph requires consideration of a FAR amendment to require major Federal suppliers to publicly disclose greenhouse gas emissions and climate-related financial risk and to set science-based reduction targets.

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