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Greening US industrial production through smarter governmental purchasing

03 December 2020 Kevin Adler

Industrial production represents about one-third of the globe's greenhouse gas (GHG) emissions annually, making it a crucial target for reductions if the world is to reach the goals of the Paris Treaty by 2050, said Alan Krupnick, senior fellow at Washington, DC-based think tank Resources for the Future (RFF).

In a report released by RFF in November 2020, "Green Public Procurement of Natural Gas, Cement, and Steel," Krupnick proposed that the US government take a leadership role in pushing key industries such as steel, cement and natural gas to move towards net zero. Tighter federal procurement practices that incorporate deep emissions cuts as one of the factors in federal purchasing decisions are needed, he said. It's a message that he believes will resonate through the new administration of President-elect Joe Biden. "There's a wave that's building," he said in a webinar on 1 December to discuss government procurement and climate change (see link).

Government does have an important role to play, agreed fellow webinar panelist Holly Elwood, senior advisor for the Environmentally Preferable Purchasing Program (EPP) at the US Environmental Protection Agency (EPA). "Procurement is a huge opportunity and a powerful tool to shift to a low-carbon economy. Last year, $586 billion was spent by the federal government on procurement," Elwood said.

The US House of Representatives is very supportive of leveraging government procurement at the federal level to not only directly influence suppliers, but also to create a template for state and local government and private purchasers, added Abigail Regitsky, a staff member of the bipartisan US House Select Committee on the Climate Crisis. The committee released a report on 30 June 2020 called "Solving the Climate Crisis," which includes procurement as one of dozens of strategies to be implemented to enable the US to reach net zero emissions by 2050, she said.

Democrats in the US Senate launched a Special Committee on the Climate Crisis in May 2020 without Republican members, and they issued a report in August. While it does not include specific recommendations for government procurement, the report also emphasizes the federal role in areas such as infrastructure and technological development to advance the US towards net zero in 2050.

Designing a program

A government or private procurement program must begin with performance standards that define what is "green" and measurement protocols so bidders can report how green they are, said Krupnick. The suppliers must adhere to some type of certification system, backed up by audits, so that the purchasing agents can rely on their representations. In addition, the procuring agency needs a scoring system that includes all the attributes that will be considered in a purchasing decision, he said.

"This is a 'carrot' approach, rather than a 'stick' like a carbon tax," Krupnick said. Models exist, such as the EPA's EPP Program. "The EPP Program engages with procurement staff in federal agencies, works to build consensus in private sector standards development, encourages ecolabel organizations to develop robust product registries and calculators to document cost savings and environmental benefits achieved due to procurement of more sustainable products, and focuses on sectors where the federal government represents a significant segment of the market, including some electronic products," Krupnick wrote in his report.

EPA's ENERGY STAR Program focuses similarly on products and buildings that have superior performance in energy use and lifecycle energy. "The close connection between energy use and CO2 emissions makes ENERGY STAR relevant to green procurement. This particular program's emphasis on the energy performance of cement, iron, glass, and steel manufacturing plants makes it especially relevant," Krupnick wrote.

Other federal agencies have programs as well, said EPA's Elwood. For example, the US Department of Transportation has a Sustainable Pavement Program and its broader INVEST Program that shares best practices for sustainability in highway development. The General Services Administration, which is in charge of federal real estate, has convened a Green Building Advisory Committee, which is due to issue a report in January 2021 with new recommended standards.

For natural gas procurement, a comparable system doesn't exist within the government, but Krupnick said that an industry-developed program could be adopted by government procurement agents fairly easily. For example, more than 60 oil and gas producers and midstream companies in the US participate in the ONE Future Coalition, which sets a target of 1% methane emissions across the natural gas value chain, and Krupnick said the 1% standard could be the baseline for any natural gas purchases by an agency or the military.

When in office, Biden can push some of those strategies through executive order, said Regitsky, and she said she expects those types of procurement directives to be issued fairly early in his presidency. President Obama, for example, released a six-page executive order on 1 November 2013 titled, "Preparing the United States for the Impacts of Climate Change," which itself built on his 2009 executive order about climate change. The executive orders created the Interagency Climate Change Adaptation Task Force; required greater data collection and public dissemination of data about emissions; and sought to "identify opportunities to support and encourage smarter, more climate resilient investments" at all levels of government. President Trump revoked that order in March 2017, but Biden could revive it and expand it.

Looking longer term, Regitsky said the industry needs certainty in order to make the financial commitment to transform production activities to net zero. One route could be to incorporate into federal purchasing, by administrative action or legislation, the Environmental Production Declaration ® (EPD) system, which defines internationally accepted standards for emissions and other environmental impacts.

The House's climate report recommends the creation of a national EPD data base, which could be used not only by the federal government, but also by buyers at other levels of government and private industry. The first step would be to ensure that the government has the emissions data to make comparisons between products, and she said that industries such as cement and steel would have to work with the government to create the data.

The actual procurement standards could be a two-tiered model, similar to California's Buy Clean Program, Regitsky said. The first tier would be an industry-wide standard that emissions cannot exceed, which Regitsky said would "cut out the dirtiest actors." This would be ratcheted down over time. The second tier would incentivize manufacturers who achieve much lower emissions, perhaps by requiring that a percentage of government procurement meet this second tier. It also could be tightened over time, and government purchases could be required to account for a higher percentage as well.

Finally, those requirements would be complemented with increased government support for research and development (R&D) on new manufacturing processes and products, as well as moving the most promising of them from R&D to commercialization. "If we are asking industry to ratchet down emissions, we have to help them achieve that," she said.

Limits

However, while government procurement can speed up use of cement or steel produced with low or nearly zero carbon emissions, the panelists said that the road ahead is long and challenging. "You can't expect miracles from these programs," Krupnick said, pointing out that federal government's share of the steel market annually is not likely to be more than about 3%. For cement, US government purchases are much higher, maybe 15% of the market, and it's higher still for ready-mix concrete.

The cement industry is committed to reducing its environmental impact, said Charles Franklin, representing the Portland Cement Association, during the webinar. Since 1990, the industry has reduced energy consumption by 35% per ton of production and related carbon emissions intensity by 11%, he said. In November 2020, the Portland Cement Association created a committee to develop by the end of 2021 a roadmap for reaching carbon neutrality across the value chain.

But the industry is wary of EPDs, which do not always capture a product's emissions lifecycle, Franklin said. As an example, he said that cement and concrete (of which cement is a major component) are highly energy-intensive to make. Both the energy to make the products and the chemical process to generate cement give off large amounts of CO2. But at the same time, Franklin observed, "the products are the tools to make the buildings themselves more energy efficient," and so the end-use factor needs to be considered in the life cycle as well.

The association's roadmap will look at the use of EPDs, and it will also seek to answer questions such as how the industry's manufacturing processes can incorporate the use of clean energy, alternative materials and emerging technologies such as carbon capture for the chemically-produced CO2 emissions.

It will also seek to develop standards that can imposed globally, as about 15% of annual US cement is imported. "We are a trade-exposed industry," he said. "The worst-case scenario is offshoring the emissions and then [making] them even higher when shipping is included."

Wrapping it up, Krupnick said that government and industry can focus on several key issues:

  • Defining the green benchmark for products. How is performance measured, and how will that expectation be increased over time?
  • Lifecycle (end use) emissions. How can these be fully counted? This becomes important in comparing products such as cement and concrete with alternatives such as wood for a building.
  • Choosing winners. Does procurement rest on the picking the supplier with the lowest emissions, or does a successful candidate just have to meet a minimum performance standard?
  • Balancing with other criteria. Product quality, design, cost, durability—all of these factors, and more, are still part of every government purchasing decision. It's also where market considerations come in, as government purchasing can influence producers and other buyers.

Posted 03 December 2020 by Kevin Adler, Editor, Energy and Natural Resources Group, IHS Markit

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