Latest Climate Change Executive Order Adds More Goals for Clean Procurement, but Little Direction
On December 8, 2021, President Biden signed Executive Order 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability (“EO 14057”). Below we summarize EO 14057 and call out what matters for business, and what to watch for. EO 14057 makes clear that the federal government intends to use its purchasing power to achieve the overall goal of net-zero emissions by 2050. As individual agencies now create agency-level goals, targets, and acquisition strategies to meet the goals announced in EO 14057, industry has a tremendous opportunity to identify innovative and practical solutions that could drive requirements for individual procurements. Companies that are not traditional government contractors, but that have innovative products and services that can advance EO 14057’s goals, should familiarize themselves with the statutory, regulatory, and contractual requirements for doing business with the government, as well as existing programs that relax those requirements. Finally, current and prospective contractors and business partners should continue developing a framework for climate information disclosure, including identifying and tracking progress against realistic, measurable impact reduction targets.
Summary of EO 14057
EO 14057 is the latest element of President Biden’s plan to “lead by example” in order to achieve net-zero emissions economy-wide by no later than 2050. Section 102 of EO 14057 directs the federal government to use its “scale and procurement power” to achieve five “Government-wide Goals” along the path to net-zero emissions by 2050:
- 100 percent carbon pollution-free electricity (“CFE”) by 2030, at least half of which will be locally supplied clean energy to meet 24/7 demand on an hourly basis;
- 100 percent zero-emission vehicle acquisitions by 2035, including 100 percent zero-emission light-duty vehicle acquisitions by 2027;
- Net-zero emissions from federal procurement no later than 2050, including a Buy Clean policy to promote use of construction materials with lower embodied emissions;
- A net-zero emissions building portfolio by 2045, including a 50 percent emissions reduction by 2032; and
- Net-zero emissions from overall federal operations by 2050, including a 65 percent emissions reduction by 2030.
The Government-wide Goals that are stated in terms of reductions generally use 2008 levels as a baseline. In addition to these five goals, EO 14057 directs the federal government to achieve “climate resilient infrastructure and operations” and “a climate- and sustainability-focused workforce.”
Beyond the five Government-wide Goals described above, EO 14057 leaves the details regarding how those goals will be achieved to future agency-level decisions. Sections 201 through 206 of EO 14057 direct each Federal agency to propose targets, including annual progress targets, in support of the Government-wide goals listed above. Of particular note are Sections 203 through 205:
- Section 203 establishes agency goals for meeting the Government-wide Goal of 100 percent CFE by 2030. Section 203 directs agencies to “facilitate new carbon pollution-free electricity generation and energy storage capacity by authorizing use of their real property assets, such as rooftops, parking structures, and adjoining land, for the development of new carbon pollution-free electricity generation and energy storage through leases, grants, permits, or other mechanisms, to the extent permitted by law.” Section 509(a) further requires the Departments of Defense and Energy and the General Services Administration (“GSA”) to “use the scale of the Federal Government’s electricity use to aggregate and accelerate new carbon pollution-free electricity generation capacity to meet Federal energy needs.”
- Section 204 expands on the Government-wide Goal of 100 percent zero-emission vehicle acquisition. Section 204 requires that all light-duty vehicle acquisitions be zero-emission vehicles by the end of fiscal year 2027. That section requires agencies to develop and annually update a zero-emission fleet strategy that includes maximizing acquisition and deployment of zero-emission light-, medium-, and heavy-duty vehicles where the GSA offers one or more zero-emission vehicle options for that vehicle class.
- Section 205 establishes agency goals to support the Government-wide Goal of a net-zero building portfolio by 2045 and a 50 percent emissions reduction by 2032. Section 205 directs agencies to, among other things, “prioritize[e] improvement of energy efficiency and the elimination of onsite fossil fuel use,” and “design new construction and modernization projects greater than 25,000 gross square feet to be net-zero emissions by 2030.”
EO 14057 applies to agency activities, personnel, resources, and facilities located within the United States, but Section 601 permits agency heads to apply EO 14057, in whole or in part, outside the United States. Section 602(a) gives agency heads the authority to exempt particular agency activities and related personnel, resources, and facilities from the provisions of EO 14057 “when it is in the interest of national security, to protect intelligence sources and methods from unauthorized disclosure, or where necessary to protect undercover law enforcement operations from unauthorized disclosure.” Section 602(b) also allows for exemptions for “any vehicle, vessel, aircraft, or non-road equipment that is used in combat support, combat service support, military tactical or relief operations, or training for such operations or spaceflight vehicles, including associated ground-support equipment.”
Several sections of EO 14057 address the use of the federal procurement process to achieve the administration’s goal of net-zero emissions by 2050. As with much of EO 14057, these sections exhort agencies and contractors to be “greener,” but provide little in the way of substantive guidance and direction:
- EO 14057 designates GSA as the agency responsible for tracking “disclosure of greenhouse gas emissions, emissions reduction targets, climate risk, and other sustainability-related actions by major Federal suppliers” required by Executive Order 14030 of May 20, 2021 (“EO 14030”). EO 14030directed the Federal Acquisition Regulatory Council (“FAR Council”) to consider amending the Federal Acquisition Regulation (“FAR”) to require major federal suppliers to (i) publicly disclose greenhouse gas emissions and climate-related financial risk and (ii) set science-based reduction targets. The FAR Council has barely begun the process of considering such a requirement, and the deadline to respond to the requests for information set forth in the FAR Council’s October 15, 2021 Advance Notice of Proposed Rulemaking has been extended to January 13, 2022.
- Section 208, “Sustainable Acquisition and Procurement,” generally seeks to prioritize the acquisition of reusable products; products that contain recycled content, are biobased, or are energy or water efficient; and products and services recommended by the Environmental Protection Agency. It is unclear how, if at all, Section 208 adds to the existing requirements in FAR Part 23.
- Section 301, “Federal Supply Chain Sustainability,” directs agencies to “pursue procurement strategies to reduce contractor emissions and embodied emissions in products acquired or used in Federal projects.”
- Section 508 establishes a “Buy Clean Task Force” and Section 303 directs that Task Force to provide recommendations “on policies and procedures to expand consideration of embodied emissions and pollutants of construction materials” in federal procurement and federally funded projects.
- Section 401 recognizes that the government’s ability to leverage federal procurement to achieve the goals set forth in EO 14057 “requires an investment in the Federal Government’s employees and a workforce with the knowledge and skills to effectively apply sustainability, climate adaptation, and environmental stewardship across disciplines and functions.” Section 401 directs the Office of Personnel Management (OPM) to “outline opportunities for including or expanding environmental sustainability and climate adaptation training content in existing Federal training programs.”
Along with EO 14057, the White House also released The Federal Sustainability Plan: Catalyzing America’s Clean Energy Industries and Creating Jobs Through Federal Sustainability (the “Federal Sustainability Plan”). The Federal Sustainability Plan expands on why the administration believes the goals established in EO 14057 are critical for minimizing the risks of climate change and why achievement of those goals will advance other related administration policy objectives, including promoting innovation and economic growth, creating new union jobs, and advancing equity and environmental justice. The Federal Sustainability Plan also expands on the government’s current position as a major—if not the major—potential consumer of clean energy, products, and services. But the Federal Sustainability Plan adds little in the way of how the government will use its position to achieve the goals of EO 14057.
What Matters for Business
- EO 14057 is the clearest statement to date that the federal government believes that its purchasing power is critical to achieving the overall goal of net-zero emissions by 2050. Individual agencies must now create agency-level goals, targets, and acquisition strategies to meet the Government-wide Goals in EO 14057. This is a tremendous opportunity for industry to identify innovative and practical solutions that will help agencies define requirements for individual procurements.
- EO 14057’s focus on innovation and creating demand for new products and services begs the question of whether and how the federal government will relax traditional contracting rules for businesses that are not traditional contractors. The government has long understood that the statutory and regulatory requirements that apply to many federal acquisitions are disincentives for companies to do business with the government. As a result, the government has created more streamlined rules for “commercial item” acquisitions and the development of prototypes. Companies seeking to support the goals of EO 14057 need to understand the different ways in which the government buys goods and services and the rules that attach to different agreements and relationships with the government. Companies need to do this regardless of whether they anticipate working directly with the government, or as a subcontractor, supplier or vendor to a prime contractor.
- While we await actual regulatory guidance from the FAR Council and agency-specific plans, the White House continues to signal that government contractors may both need to have corporate-level climate targets and be required to provide project-specific emissions information in bids and proposals for government contracts.
- There is a potential that government procurement could leapfrog current corporate practice on quantifying supply chain emissions and meeting real time demand with renewable energy.
What to Watch For
- Next month, agencies must establish “Agency Chief Sustainability Officers,” who will be responsible for planning and implementing actions to achieve their agency’s targets and goals. EO 14057 requires agency heads to develop and implement annual “Sustainability Plans,” describing actions and progress toward the goals and requirements of EO 14057, although no firm deadline is established for these Plans. By April 2022, the chair of the Council on Environmental Quality (“CEQ”), in consultation with the Office of Management and Budget (“OMB”), will issue implementing guidance for agencies with directions, strategies, and recommended actions to meet the policies and goals of EO 14057. The chair of CEQ will also issue building performance standards to support achievement of net-zero emissions in the federal building portfolio. OMB, for its part, will issue a memorandum for agencies that provides direction on immediate actions and further requirements to meet the policies and goals of EO 14057, although no deadline is established for this memorandum.
- The FAR Council has two open cases implementing EO 14030:
- FAR Case No. 2021-015, Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk, implements section 5(b)(i) of EO 14030, which directs the FAR Council to consider amending the FAR to require major federal suppliers to publicly disclose greenhouse gas emissions and climate-related financial risk and to set science-based reduction targets.
- FAR Case No. 2021-016, Minimizing the Risk of Climate Change in Federal Acquisitions, implements section 5(b)(ii) of EO 14030, which directs the FAR Council to consider amending the FAR to ensure that major agency procurements minimize the risk of climate change and consider the social cost of greenhouse gas emissions in procurement decisions.
These cases take on even greater importance in the wake of EO 14057. As noted above, the FAR Council published an Advance Notice of Proposed Rulemaking in Case No. 2021-016 in October and comments are due January 13, 2022. Proposed rules for these cases may be the first detailed glimpse into how the government will structure individual procurements and set procurement-wide standards to achieve the goals of EO 14057.
- Where is the net in net zero? While EO 14057 has been covered as a net-zero commitment, it does not address the question of whether the federal government would use carbon offsets to meet its emissions reduction goals if procurement alone cannot meet them.
- How will the government implement the requirement for matching of electricity use to carbon-free electricity on an hour-by-hour basis? Implementation could create opportunities in data management, storage, and renewables generation to meet any requirements that may be forthcoming.
What to do now
- Consider how your business can help federal agencies start thinking about the products and services that advance the Government-wide Goals of EO 14057, and how those products and services can best be purchased.
- Consider how your business can leverage the capabilities and capacity of existing federal buildings and facilities to generate CFE electricity.
- Continue building an interdisciplinary team of internal and external counsel, advisors and managers, and continue developing a framework for climate information disclosure, including identifying and tracking progress against realistic, measurable impact reduction targets. Be ready to hit the ground running when the FAR Council proposes rules to implement EO 14030.
- Assess the state of your current climate programs and goals, including whether to set a net-zero target.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.