Cornerstone to rapid federal climate action? Federal buildings

On climate change mitigation and adaptation, the commendable efforts of President Biden and his Cabinet are proving there is no shortage of ambition in the White House. From his administration’s quick rejoining of the Paris Climate Agreement and subsequent strengthening of the U.S. Nationally Determined Contribution (NDC), to its support for a federal Energy Efficiency and Clean Electricity Standard (EECES) and other climate-aligned interventions advocated in its budget proposal, the evidence is abundant.

Yet, as revealed over the months-long saga of the more than $1 trillion bipartisan infrastructure package passed by the Senate in August, the realization of some of the administration’s more ambitious climate proposals, including the EECES, may be delayed.

Regardless, if the president wants to accomplish the emissions reductions goals he’s set, then his administration will need to leverage existing authorizations to achieve them quickly.

The Infrastructure Investment and Jobs Act does still feature some encouraging climate-related provisions. And more can — and should — be done to include additional climate provisions in any forthcoming legislation, be it through amendments to the infrastructure deal or the Senate-approved $3.5 trillion budget resolution soon to be taken up by the House or otherwise. The potential inclusion of one “Build Back Better” provision in particular — a plan to invest $10 billion in the modernization, sustainability and resilience of federal buildings, as originally proposed in the $2.3 trillion American Jobs Plan (AJP) — offers the federal government a unique opportunity to lead by example and significantly reduce its own annual emissions in a cost-effective manner.

If future legislation includes this $10 billion provision, then the federal government — the nation’s largest building owner, operator and leaser — can finance an additional $8-$10 billion worth of building performance enhancement projects by strategically committing only 20 percent of that appropriation. Through a combination of energy savings performance contracts (ESPCs) and utility energy service contracts (UESCs), the administration can expect a principal investment of just $2 billion to leverage four to five times that amount in private financing for more aggressive building efficiency projects. And thanks to the contracted payback schedule of these projects, the annual energy and maintenance cost savings they generate means these upgrades would come at no incremental cost to the government.

But seizing this leveraging opportunity and capturing its estimated emissions reduction potential requires leadership.

To that end, the Biden-Harris administration should formally challenge federal agency executives to leverage privately financed, guaranteed performance contracts to achieve, as required by the Energy Act of 2020, their maximum operational emissions reduction potential. Agencies that rise to a Carbon Reduction Performance Contracting Challenge — even in the absence of the proposed $10 billion provision for federal building upgrades — would achieve an aggregate reduction in annual CO₂ output by approximately 2 million metric tons (MMmt). And like the building performance enhancements these contracts deliver, these 2 MMmt in avoided emissions would be achieved without requiring agencies to dip into their capital budgets.

Even still, far more can be achieved if such a performance contracting challenge is coupled with some new government funding. If the proposed $10 billion is made available, and federal agency executives are challenged to commit just $2 billion — 20 percent — towards performance contracts, then they could reduce federal building CO₂ emissions by an additional 4 MMmt. Combined with the 2 MMmt in avoided emissions that agencies can achieve without new support, this 6 MMmt in total annual emissions reduction amounts to roughly 20 percent of the federal government’s operational emissions.

Commendably, the president has signaled he’s on board. In addition to the building efficiency provisions of the bipartisan infrastructure agreement, the administration’s FY2022 budget request proposes a whopping $1.7 billion investment in energy-saving upgrades to building infrastructure nationwide, including an additional $387 million in grants for energy efficiency improvements across the federal building stock.

There is precedent for such a challenge, too. A challenge issued in 2011 for federal agencies to leverage $2 billion in performance contracts has significantly improved the energy performance of federal buildings and yielded attendant reductions in annual energy expenses and operational emissions. By 2016, following the 2014 addition of a second $2 billion tranche to the challenge, federal agencies had procured 340 energy efficiency projects via performance contracts that, together, have reduced annual federal building emissions by 1.4 MMmt while promising to save the U.S. government $8 billion in operational expenses over the following 18 years.

The advantages of a challenge-based approach to building emissions reduction are clear. Beyond the 4 MMmt in additional annual CO₂ emissions reduction it could achieve — before any change in the power generation mix is included — a challenge promises to create hundreds of thousands of new jobs across the clean energy, energy efficiency, manufacturing and building services and construction sectors hit hard by pandemic-era economic slowdown, and it would economically empower small and minority-owned energy service contractors and building equipment suppliers. And through competitive contract awards, a challenge would incentivize innovation across the energy efficiency industry, one of the mainstays throughout the bipartisan negotiations that produced the 2,702-page Senate-passed text.

At its core, though, a challenge for federal agencies to use these specialized contracts is a practical and precedented opportunity for the White House to rapidly carry out concerted and verifiable climate action across an asset class — buildings — whose annual emissions in the U.S. have remained virtually constant for decades. In that same vein, it is an opportunity for the administration to demonstrate climate leadership both at the national level, where agency executives have shown inertia in the face of budgetary constraints and inadequate authorizations, and at the state and local levels where policymakers have thus far pioneered building decarbonization.

This is a rare avenue through which President Biden has virtually unchecked capacity to drive the increasingly necessary climate action he aspires to and lay the foundations for a holistic, cross-sectoral, government-led approach to economy-wide decarbonization in the process. We hope he’s up for the challenge.

Dr. Timothy D. Unruh is executive director of the National Association of Energy Service Companies (NAESCO) and former deputy assistant secretary of renewable power at the Energy Efficiency and Renewable Energy (EERE) Office of the U.S. Department of Energy (DOE).