Procurement’s role in climate change: putting government money where policy needs to go



Governments can choose to spend money in ways that support climate change policy, including a shift to electric vehicle fleets.
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Barbara Allen, Victoria University of Wellington

This story is part of Covering Climate Now, a global collaboration of more than 250 news outlets to strengthen coverage of the climate story.


For three years in a row, the World Economic Forum’s Global Risks Report has identified climate change as the gravest threat for global business and industry.

The disruption of supply chains in food, medicines and even recycling from climate-related events poses innumerable problems for nations. But one way of dealing with various facets of climate change is levering change through central government procurement.

Policies that govern supply and how goods, construction and services are procured are increasingly important as the capacity to mitigate through government purchasing choices faces greater pressure.

As New Zealand is considering zero carbon legislation, new government procurement rules take effect in October.

The rules include broader outcomes, connecting wider social and environmental priorities to procurement processes. This is the first time New Zealand lays out specific rules about how the government plans to use its own purchases to help fulfil its wider promises.




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Charging ahead with EVs

A cabinet paper on effective government procurement policy, released in late 2018, laid out four outcomes, one of which focused on supporting the transition to a net zero emissions economy and meeting the government’s goal of significantly reducing waste by 2020.

The policy’s priorities include reducing the emissions profile of the government vehicle fleet and reducing emissions from fossil fuels used in electricity generation and in direct production of industrial heat. Describing the government’s intention, Economic Development Minister David Parker said:

We are looking beyond just the price of what we purchase, to ensure procurement is contributing to the transition to a low-carbon economy, inclusive growth and prosperity.

The government’s commitment is to make its own vehicle fleet emissions-free by 2025-26. When replacing vehicles, chief executives of government agencies must purchase vehicles with emission profiles substantially below their current fleet average.

The government fleet – at 14,995 vehicles (with only 0.24% electric) – has a job on its hands. But already it is reporting that emissions have dropped between April and July 2019. The reduction is partly due to 400 fewer vehicles and minor shifts in driving patterns.




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This is a gutsy move, especially given cost implications and market challenges. But jurisdictions such as Germany and Sweden have promoted renewable sources for some time through legislation and multiple instruments including procurement that supports innovation. Others, such as Transport London, have been shifting to electric public transport fleets.

New Zealand has been conservative in its approach to linking procurement with objectives beyond “best value”, which is nearly always interpreted as least cost. But times are changing. A growing number of people in most agencies are trying to raise the profile of procurement beyond a purchasing exercise.

Procurement as opportunity and responsibility

Leaving the market to decide how taxpayer funds are spent through a clunky contracting process is missing an opportunity to procure the best services and infrastructure, as well as increasing workforce skills. Research on sustainable procurement has grown and the topic now features at the OECD.

There are different targeted approaches. One is an “emissions dashboard”, which shows the average emissions profile of each agency’s fleet and tracks emission reductions. But dashboards are only indicative, given the inevitable variation in reporting across organisations and the underlying reasons why an agency might have a high emissions rating.

Australia’s Indigenous procurement policy has used a very targeted approach requiring 3% of government contracts go to Indigenous business by 2027. Māori Development Minister Nanaia Mahuta has been looking at the potential for something similar in New Zealand. A report on the benefits of indigenous procurement policies is expected.

Planning to replace vehicle fleets is a tangible use of the procurement lever to move towards lower emissions. But to support a fairly rapid change, supply chains need to be taken into consideration to ensure enough electric vehicles are available.

While there are many technical issues to resolve, New Zealand’s approach to procurement is a step in the right direction. Procurement can’t do everything at once, but it is an important instrument that needs to be directed at policy problems, underpinned by research and evidence.The Conversation

Barbara Allen, Senior Lecturer in Public Management, Victoria University of Wellington

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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It’s clear why coal struggles for finance – and the government can’t change that


Samantha Hepburn, Deakin University

The federal government has announced a raft of new measures ostensibly designed to secure energy pricing, boost investment in new “reliable” energy generation, and improve competitiveness in the retail energy market.

At a meeting of state and federal energy ministers last week, it also rejected the greenhouse emissions reductions outlined in the previous National Energy Guarantee, and proposed supporting new coal-fired power stations as part of a plan to boost investment in new electricity generation.




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One of the main reasons new coal projects do not proceed is because of the “unquantifiable” financial risk of carbon. Former Clean Energy Finance Corporation chief executive Oliver Yates has argued that coal-fired power generation would not be financially backable without the government providing indemnity against future carbon taxes.

He may have meant it as a reason not to proceed with coal at all, but federal energy minister Angus Taylor has signalled that he is seriously considering such a move.

In outlining his policy position, Taylor has also effectively expanded the definition of new electricity generation to include old facilities that would have been retired but may be revived with financial assistance.

Differing recommendations

The federal government says its new proposals are based on recommendations made in a July report by the Australian Competition and Consumer Commission (ACCC), aimed at ensuring affordable electricity. But there are some key differences between the report’s recommendations and the government’s plans.

The crucial one, at least as far as coal’s fortunes are concerned, is the proposal for the government to enter into contracts called “energy offtake agreements”. Under this approach, the government would agree to buy future electricity at a set price, from new generation projects that could include coal-fired electricity from either new coal plants or refitted coal plants. This, the government argues, would keep power prices in line while also providing greater investment certainty and make energy projects easier to finance.

The ACCC report did indeed recommend underwriting new power generation investments, but not with the obvious goal of propping up coal. Rather, it recommended that this support be directed to “appropriate new generation projects which meet certain criteria”, so as to reduce prices by boosting market competition.

It is hard to see how the government’s desire to artificially sustain the life of coal-fired electricity – in the face of ever-worsening economic prospects – is consistent with either the ACCC’s rationale of supporting sustainable, new generation energy projects in order to improve competition in the energy market.

Federal shadow climate change minister Mark Butler has indicated he would not support the inclusion of coal in any such agreements, and that the plan could cost taxpayers billions.

Is coal ‘new generation’ or not?

Taylor has argued that the backing and guarantees for new electricity generation could well include coal, because “it may well be that the best options we have available to us are expansions of existing coal facilities”.

But the reality, given our climate targets, is that coal can only be an option where it is supported by clean technology. And even the cleanest of “clean coal” is not on a par with renewable energy.

The latest generation of high-efficiency “ultra-supercritical” coal-fired plants are very expensive to build and run, particularly if they include carbon capture and storage – which they would certainly need to. If all of Australia’s existing coal plants were replaced with ultra-supercritical ones that did not include expensive carbon capture and storage technology, emissions would fall by between 26 million and 40 million tonnes by 2030. But Australia’s climate target calls for a reduction of 160 million tonnes by that deadline.

On the other hand, with carbon capture and storage, the emissions reductions would be much greater, but the electricity could cost up to three times the current wholesale price. This would mean the government would be effectively subsidising the production of electricity that is more expensive and more environmentally damaging than renewables.




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This raises the ultimate question of why – given Australia’s emissions targets and its responsibilities under the Paris Agreement – the government is prepared to subsidise coal-fired electricity at all.

There is no doubt that climate change is an important public concern. The attempt to characterise Taylor as “minister for getting power prices down” belies the fact that energy policy is not just about price and reliability, but about broader social and environmental welfare too. Electricity absolutely must be sustainable as well as affordable.

This is what energy security means today. Carbon-intensive energy production is neither environmentally sustainable nor financially viable. It is that simple. That is precisely why the financial risks of carbon are so high.The Conversation

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.