Climate Budgeting & Green Procurement Mandate

Overview

Municipalities often set ambitious climate goals (e.g., “Net Zero by 2050”) but continue to award contracts to the lowest bidder, regardless of their environmental impact. This creates a “Split Incentive” where the city’s policy goals fight against its own wallet.

This policy solves that by treating Carbon as a currency with a strict limit (The Carbon Budget) and forcing vendors to compete on environmental performance (Green Procurement).

Policy 1: The Climate Budget (The “Oslo Model”)

Concept: Climate goals often fail because they are separated from financial power. A “Climate Action Plan” is just a wish list; a “Budget” is law.

The Policy: The City Charter is amended to require a “Carbon Budget” be passed simultaneously with the Annual Financial Budget.

1. The Cap: Every department (Transport, Buildings, Waste) is assigned a maximum carbon emission limit (in tonnes of CO2e) for the fiscal year.
2. Accountability: Department heads are legally responsible for meeting their Carbon Budget just as they are for their Financial Budget. Overspending carbon requires a formal variance vote by City Council.
3. The “Gatekeeper” Rule: No capital project (e.g., a new road or library) can be approved for funding unless its projected emissions fit within the department’s remaining Carbon Cap.

Real-World Example:

• Oslo, Norway: Since 2017, Oslo has integrated its climate budget into its financial budget. They count carbon reduction measures line-by-line. If a measure (e.g., electric buses) is delayed, the budget is “unbalanced,” and the city must cut emissions elsewhere or stop projects to close the gap.

Policy 2: “Buy Clean” Infrastructure (Concrete & Steel)

Concept: Construction materials (specifically concrete and steel) account for ~11% of global emissions. Because the City is the largest buyer of concrete (for sidewalks, roads, foundations), it can force the local market to clean up.

The Policy:

1. Mandatory EPDs: All bidders for municipal infrastructure contracts >$100k must submit Environmental Product Declarations (EPDs). Think of an EPD as a “Nutrition Label” for materials, verified by a third party.
2. Global Warming Potential (GWP) Limits: The City sets a maximum GWP per cubic meter of concrete.
   • Mechanism: If standard concrete is 400kg CO2/m³, the City sets the limit at 350kg.
   • Ratchet: The limit tightens by 5-10% every 2 years, forcing suppliers to innovate (e.g., using injected CO2 or recycled aggregates) to keep winning government contracts.

Real-World Example:

• Buy Clean California Act: State projects are prohibited from buying steel, glass, or insulation that exceeds specific GWP limits. This forced suppliers to map their supply chains to stay eligible for state contracts.

Policy 3: The “Shadow Carbon Price” (Incentivizing Green Providers)

Concept: How do we let a green provider win if they are slightly more expensive? We rig the math using “Shadow Pricing.”

The Policy: In all public tenders (RFPs), the City applies a Shadow Carbon Price (e.g., $150 per tonne of CO2) to the bid evaluation.

• How it works:
  • Bidder A (Dirty): Price $1.0M + (1,000 tonnes CO2 * $150) = $1.15M Evaluated Cost.
  • Bidder B (Clean): Price $1.05M + (200 tonnes CO2 * $150) = $1.08M Evaluated Cost.
  • Result: Bidder B wins because their evaluated cost is lower, even though their cash price is higher.
• Outcome: This rewards innovation. A company that invests in electric trucks or low-carbon materials can now beat a cheaper, dirtier competitor.

Real-World Example:

• Vancouver, Canada: The city uses a shadow carbon price in its capital planning to justify buying electric heat pumps over gas boilers. Even if gas is cheaper upfront, the shadow price makes it “expensive” on the ledger, justifying the green investment.

Policy 4: The Zero-Emission Fleet Mandate

Concept: Municipal fleets are high-visibility leaders. Transitioning them creates the base demand needed for mechanics and charging networks to establish themselves in the region.

The Policy:

1. Procurement Ban: Effective immediately, the City is prohibited from purchasing Internal Combustion Engine (ICE) passenger vehicles.
2. Heavy Duty Phase-In: For heavy equipment (garbage trucks, plows) where EV options are scarce, the city mandates Renewable Diesel (HVO) use in existing assets while prioritizing pilot programs for electric/hydrogen replacements.
3. Right to Repair: Procurement contracts for EVs must mandate access to repair manuals and diagnostic software, ensuring the city’s unionized mechanics can service the new fleet.

---

Implementation Roadmap

Phase 1: The Signal (Months 1-12)

• Data Cleanup: Departments must inventory their Scope 1 (Direct) and Scope 2 (Energy) emissions to establish the “Base Year” for the Carbon Budget.
• EPD Request: Include a “voluntary” request for EPDs in all new tenders to warn suppliers that the requirement is coming.
• Shadow Price Setting: Finance Department sets the Shadow Carbon Price (recommended: tie it to the Federal Social Cost of Carbon).

Phase 2: The Rules (Year 2)

• Pass the Carbon Budget: The first “Shadow Year” budget is run (tracking only, no penalties) to test the system.
• Concrete Limit: Set the GWP limit for concrete at 110% of the regional average (weeding out only the absolute worst offenders initially).

Phase 3: The Market Force (Year 3+)

• Binding Budget: The Carbon Budget becomes binding. Departments overspending carbon must purchase offsets or cut services.
• The Ratchet: Tighten the Concrete GWP limit to 90% of the regional average. Now, only the top-performing suppliers can bid on city work.