This could be the year the Biden administration takes climate economics to new frontiers, building the societal costs of climate change into everything from agency budgets to large federal purchases. That could be a game-changer, because the U.S. government spends more on goods and services than any entity on Earth. Policies that take the ravages of global warming into account and give an advantage to contractors that produce less carbon pollution could reshape how the government spends upwards of $630 billion a year, with ripple effects for the broader economy. Agencies will also be able to use new, higher estimates for the so-called social cost of greenhouse gases in rules, budgets, project assessments and other actions. EPA finalized the metrics last month, and the White House has given other agencies the green light to adopt it. “I think it would be quite big if it were used for lease sales and in procurement,” said Brian Prest, a fellow at Resources for the Future. “But I think that depends on to what degree these finalized estimates for the EPA are then picked up by other agencies.” The White House laid the groundwork in 2023 for the social cost of greenhouse gases to be used in new and different ways. First, it revamped its regulatory review guidelines to give more importance to impacts that happen years down the line — such as climate change. Then, it told agencies to start considering climate costs in their annual budgets, project reviews, purchasing and contracting and even when assessing fines. That’s new territory for an old regulatory staple that has been in use since the George W. Bush administration, which started developing the social cost of carbon after a federal court ruled that the government had failed to adequately weigh climate impacts when crafting a fuel economy rule. The social cost values are designed to turn the global harm done by a ton of carbon, methane or nitrous oxides into dollars and cents. That makes it easier for agencies to consider climate damage when conducting cost-benefit accounting as part of rulemakings. The estimates have sometimes popped up in other areas, such as when agencies use them to write mineral lease plans or environmental impact assessments. But the Biden administration is the first to propose using the metric to guide how the federal government uses its massive spending power. EPA’s new higher social cost estimates could also tip the scales even more strongly toward climate-friendly alternatives and vendors. EPA now puts the social cost of carbon at $190 per ton, more than three times the $51-per-ton value the Biden administration has been using.
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