In March, House Democrats re-introduced the Climate Leadership and Environmental Action for Our Nation’s (CLEAN) Future Act, a comprehensive climate package that aims to transition virtually every major sector of the U.S. economy toward a “clean energy” future. With the establishment of federal “Buy Clean” and “Climate Star” programs, the bill seeks to catalyze a fundamental shift in industrial production and federal procurement.
Buy Clean Program
According to the U.S. Environmental Protection Agency (EPA), the industrial sector accounts for more than one-fifth of the country’s greenhouse gas emissions. The Buy Clean program targets the largest contributor to those emissions; construction materials and other manufactured products used in large projects. The bill directs EPA, the Department of Energy (DOE), and the National Institute of Standards and Technology (NIST) to gather data on greenhouse gas emissions associated with listed eligible materials, including aluminum, iron, steel, concrete, cement, flat glass, insulation, unit masonry and wood products. Next, the bill requires these agencies to create environmental product declarations for all such materials, as well as produce reports on their environmental impacts and associated federal spending.
From there, EPA, DOE, and other agencies that oversee billions of dollars of procurement each year (including the Departments of Commerce, Defense, Transportation, Agriculture and Veterans Affairs) will develop a program to reduce their procurement emissions by promoting the use of low-emission materials. Intended to be robust, yet flexible, EPA and DOE likely will develop performance standards governing the possible materials, products and project types subject to the program.
Climate Star Program
To complement the Buy Clean program’s focus on materials, the bill requires EPA and DOE to create a Climate Star program that aims to identify and promote low-emission products. Much like the well-known Energy Star program, which distinguishes best-in-class energy efficient products ranging from computers to appliances and homes, Climate Star would be a wholly voluntary labeling program for materials that meet certain specifications. Beyond just targeting consumers however, the bill requires agencies to procure Climate Star certified products and include them in the federal government’s product inventories.
Clearly, the bill’s drafters took inspiration for Climate Star from Energy Star, the latter of which includes approximately 70,000 products in over 75 product categories. Energy Star also certifies commercial buildings, industrial plants and residential homes and apartments. While the goals of both programs overlap, Climate Star would focus specifically on rewarding products with lower greenhouse gas emission intensities. If successful, Climate Star likely would follow a similar path to its sister program and attract significant attention from federal agencies, state and local governments, the private sector and consumers.
Anticipated Impact
If enacted, these programs could spur significant investments in “clean” products by pressuring both ends of the supply chain. The Buy Clean program would leverage the spending power of the federal government, encouraging manufacturers to curtail emissions from the supply side, while Climate Star’s signaling would focus on increasing demand for green products from middle and end users. Although neither program would impose prescriptive, command-and-control-type requirements on industry, both rely on market forces to green the manufacturing sector.
The success of these programs is dependent on a number of factors, including the availability and transparency of life-cycle assessment and greenhouse-gas intensity data, the stringency of their performance standards, the avoidance of fraud and abuse by bad actors, and industry buy-in. There also is the potential for the Climate Star program to overlap with or generate confusion with respect to the Energy Star program. Regardless, the power of federal spending is likely to exert significant competitive influence on major industrial players. Additionally, the Climate Star program should be impactful even if it does not reach the magnitude of the $100 billion Energy Star product market.
Notably, the bill leaves room for flexibility and input from industry. For instance, it provides a petition process through which stakeholders can ask the agencies to modify the list of products eligible for the Buy Clean program. In addition, EPA would have the option of relying on third-parties to help develop environmental product declarations. Similarly, the Climate Star program would allow third-party certification of applicable products, subject to government oversight.
Where to Go from Here
Republicans in Congress have not yet supported the Buy Clean or Climate Star proposals, but these programs may be more politically palatable than many of Democrats’ most ambitious recent proposals. Even if the programs do not become law, their ideals may live on in future state and federal legislation or through voluntary industry initiatives. For example, federal agencies and state and local governments already have levers to incentivize environmentally friendly materials and products, and some industry players might choose to embrace Climate Star’s ideals on their own accord.
While the market may not be ready for a drastic shift in low-carbon manufacturing, there are compelling reasons to prepare for this shifting landscape. There is growing demand for more sustainable products throughout the supply chain, including from investors, end consumers, the government and business-to-business purchasers. Manufacturers that respond early to these trends will remain competitive as demand continues to grow, and command-and-control regulations, or market forces, favor the production and purchase of low-carbon materials and products. Moreover, companies throughout the world—including those domiciled in the United States—face, or soon will face, heightened Environmental, Social, and Governance (ESG) disclosure requirements. These requirements, and increased demand from investors and other stakeholders for robust ESG programs and reporting, will force companies to describe and improve their sustainability efforts. Likewise, the reputational benefits of sustainability are well documented. Accordingly, prudent manufacturers and other interested parties should familiarize themselves with both programs, as well as ensure that their ESG strategies and business plans account for the imminent shift to a low-carbon future.
Kenneth J. Markowitz focuses on clean energy and environmental issues, working with clients on issues related to greenhouse gas mitigation, carbon pricing, regulatory compliance and international negotiations.
To read the original commentary from Akin Gump Strauss Hauer & Feld LLP, please visit here