Trade Tools for Climate Action: Green Procurement

The United States has a unique opportunity to catalyze market demand for green technology and services. The U.S. government spends more than $630 billion annually procuring goods and services for everyday operations and projects such as building roads and bridges. Some of those goods and services are procured from domestic firms, and others from foreign companies through a competitive bidding process. As the largest global purchaser, the United States has a unique opportunity to catalyze market demand for green technology and services. If the government were to develop a comprehensive green procurement program that incentivized the purchase of goods and services with minimal environmental impact, relative to other comparable products, it could advance U.S. climate goals and encourage the growth and competitiveness of green industries in the United States.

The current procurement regime, however, thwarts the United States’ ability to drive green innovation because of disparate standards across agencies and convoluted administrative processes. Such barriers hamper businesses, particularly small ones, from understanding requirements and navigating agency-specific protocols. The World Economic Forum has identified outdated procurement practices as a constraint on flexibility and innovation, in particular their overemphasis on cost-effectiveness and bureaucratic challenges to procurement opportunities.

In addition to an easier procurement process, governments also need clearer standards for green procurement tenders (i.e., the soliciting of bids for government contracts), which vary around the world. Although the United States has taken steps toward developing a legal framework for green public procurement, some of those efforts have been rolled back by the Trump administration, including Executive Order 14057, which aimed to make the U.S. government the leader in supporting a net-zero emissions economy by 2050 through a procurement strategy that prioritized green purchases. This recent reversal threatens to dampen incentives for American industries to develop the next generation of green technologies and, by extension, win future green procurement opportunities globally. 

Luckily, there are still opportunities to improve U.S. procurement processes despite the Trump administration’s rolling back climate change policies and regulations. Building off the WTO (World Trade Organization) Government Procurement Agreement, the United States can update federal procurement practices to lead global buy-green practices. Congress can play an important role here by updating procurement laws, overseeing their implementation, and appropriating funds for green procurement purposes. Such a framework would streamline green procurement practices, facilitate innovation and exports, and encourage global alignment on climate policy. American industry would become more competitive in the global green economy, while at the same time setting higher standards for domestic purchases, ensuring that U.S. procurement meets sustainability goals and supports U.S. manufacturing and tech innovation.

What Is at Stake

Green procurement practices would facilitate the adoption of sustainable technologies and create demand signals for green tech innovation, increasing the competitiveness of U.S. firms as they can meet higher standards for foreign green-procurement tenders. First and foremost, green public procurement can create strong incentives for new advancements in the private sector, creating a more competitive domestic market for new technologies. This has been particularly notable when research and development contracts are bundled with production contracts, thereby crowding in investments in critical technologies.

High standards for green procurement (that are competitive and accessible to firms of all sizes) could incentivize more investment in cutting-edge green tech and services and help American companies better compete in an increasingly green global economy. The United States, by virtue of its global market share, could even set the groundwork for global green procurement standards that would give clean U.S. firms an advantage.

For example, if the United States were to adopt minimum standards for procuring products and services with low embodied emissions—such as climate-resilient infrastructure, clean vehicles, and low-carbon electricity—other countries would be inclined to do the same to support their own green transitions and compete globally. Therefore, broadening economic opportunities for green American firms would, over time, promote the diffusion of American technologies and know-how globally. Importantly, this step could be done in line with global trade rules, giving the United States an advantage over competitors, such as China, without alienating U.S. trading partners and allies.

This approach would be particularly beneficial vis-à-vis China due to its likely impact on indirect procurement—the purchase of goods and services from the holder of a government contract to support its fulfillment. With a green procurement framework, contract holders would be incentivized to source greener inputs to be competitive in the bidding process. This could carry an advantage in global procurement markets for U.S. firms investing in cleaner production processes and green tech.

Although the United States lags China as the second-largest global manufacturer, U.S. industrial processes are significantly cleaner. As the Climate Leadership Council reports, on average, every dollar of U.S. industrial output produces one-third the amount of greenhouse gas emissions as China. This discrepancy is expected to continue as Chinese industry increasingly relies on fossil fuels. While the Chinese industrial sector increased fossil fuel consumption by more than 150 percent between 2000 and 2022, the U.S. industrial sector reduced fossil fuel consumption by 24 percent during that same period. With this carbon advantage, the United States is well positioned to compete with China in products with low pollution intensity.

Challenges to Green Procurement Reforms

Even though the United States stands to gain from implementing green procurement standards, challenges to implementing a comprehensive framework persist. These largely stem from a lack of common standards and potential mismatches of rules and objectives. Of course, the Trump administration’s move to revoke the EPA’s 2009 scientific finding that greenhouse gases endanger public health and welfare suggests both political and regulatory challenges to developing robust green procurement protocols. In fact, the polarization of environmental politics has added further complications to progress on updating green standards. However, the benefits to U.S. firms and the economy more broadly provide a strong case for bipartisan support.

Fragmented Domestic Regulation

At the domestic level, local, state, and governments each have their own procurement processes; standardizing those disparate and sometimes convoluted policies would be a good first step. Notably, the Trump administration is already alleviating the federal procurement process of bureaucratic burdens, with Executive Order 14275 stating it to be “the policy of the United States to create the most agile, effective, and efficient procurement system possible … while simultaneously allowing for the expansion of the national and defense industrial base.” The executive order calls for the paring down of nearly two-thousand pages of regulations contained in the Federal Acquisition Regulation. As the government streamlines the federal procurement processes, state and local agencies should follow suit to boost domestic coordination.

To advance climate-mitigation initiatives and American competitiveness, further reforms should incorporate buy green requirements, as the current incentives are lacking: for example, the Environmental Protection Agency (EPA)established its Environmentally Preferable Purchasing program in 1993, drawing on a range of federal, private, and international lists and standards to develop guidance for federal agencies to purchase greener products and services. Unfortunately, its success has been stymied by its lack of a centralized data-collection system, limited awareness of its purchasing guidelines, and reliance on other agencies to incorporate its guidelines into their own processes.

An alternative mechanism, introduced through the federal Buy Clean Initiative, integrated benchmarks such as carbon-free electricity, zero-emissions vehicles, and net-zero emissions buildings into procurement strategies. Though rescinded by President Donald Trump in January 2025, early success in this effort showed the promise of coordination at the federal level and the need for uniform and centralized data collection.

Another major challenge to green procurement is the risk for misuse posed by new rules, potentially resulting in misaligned objectives that thwart intended outcomes. For example, green procurement policies could heighten the risk of greenwashing as firms attempt to compete for tenders with environmental requirements. Take the steel rules that were part of the Biden administration’s Buy Clean Initiative, whose stated goal was to prioritize “the use of American-made, lower-carbon construction materials in Federal procurement and Federally-funded projects.”

Despite that guidance, the procurement standards for steel disadvantaged cleaner steelmaking from electric arc furnaces (EAFs), which use electricity to melt raw materials, primarily recycled scrap, compared to integrated blast furnace/basic oxygen furnaces (BF/BOF), which use a coal derivative for fuel. Electricity sources that power EAFs generally have a lower carbon footprint than BF/BOF because they do not rely on coal as a combustion source. As BF/BOF producers have high union representation, the design of the Buy Clean Initiative for steel raised questions about whether the primary goal was to prioritize low-emissions manufacturing or unionized steel producers, leading industry to push back against the bifurcated standard. This example shows the risk of greenwashing even in well-intentioned policy and illustrates why projects should be evaluated on achieving their environmental objectives so that future procurement tenders can be revised accordingly.

Competing Internationally Through Green Procurement

International procurement coordination is also critical, similarly lowering barriers to entry abroad for American firms. Currently, in the absence of globally coordinated efforts, countries are pursuing other routes to develop green procurement practices. Examples range from bilateral and plurilateral frameworks, such as the Asia-Pacific Economic Cooperation’s reports on best practices for green procurement, to unilateral efforts, such as Canada’s low-carbon procurement standards. The United States had been engaged in a bilateral effort with the EU, but it appears that the U.S.-EU Trade and Technology Council’s Joint U.S.-EU Catalogue of Best Practices on Green Public Procurement has been abandoned.

Given international interest in green procurement strategies, the United States could lead in developing globally coordinated and recognized standards. If it did, U.S. interests would be reflected in those new trade norms and American companies would have an advantage in winning procurement tenders around the world. However, given the Trump administration’s approach to trade, the United States is unlikely to assume such a leadership role in the immediate future.

A venue that already exists for international coordination is the WTO Government Procurement Agreement (GPA), which establishes rules regarding state practices in government procurement processes. Premised on fair and transparent conditions, the WTO GPA—a plurilateral agreement with twenty-two parties comprising forty-nine countries, excluding China—has resulted in an estimated $1.7 trillion worth of procurement activities opening to foreign markets, in turn granting streamlined opportunities to American industry and advancing American technology diffusion. While international coordination is difficult, the GPA includes many of the United States’ allies and other like-minded markets.

Although the GPA is not tailored to green considerations, members can explicitly account for environmental goals and impact when assessing tenders. Since 2014, the GPA committee’s Work Program on Sustainable Procurement has compiled a catalog of green procurement practices among its signatories and in other international agreements. This could form the basis for more specific dialogue through a special WTO session on green procurement best practices. If the United States changed course, it could lead a subsequent discussion at the WTO for coordinating efforts on how those additional rules could be developed and applied.

Opportunities for Action

The market for government procurement of goods and services provides a unique opportunity for American firms to grow at home and access competitive economic opportunities abroad. If the United States deprioritizes environmental objectives over the next few years, it risks getting left behind in global markets. Data shows that global investments in the green transition continue apace, and the United States risks losing a critical market share at a time when competition is burgeoning.

Fortunately for U.S. businesses, this transition remains in its early stages. The steel industry has a particularly strong opportunity for growth: for example, the Steel Manufacturers Association, which represents the electric arc furnace steel industry and 70 percent of U.S. steel manufacturing, has argued that the United States leads the world in low-emissions steel, and therefore has a clean advantage that could be leveraged to support U.S. manufacturing. The steel sector is one of many potential sectors that could benefit from green tech innovation. To ensure U.S. firms get a piece of this growing economic opportunity, the following actions should be pursued at home and abroad:

• The U.S. government should develop country-wide best practices for green procurement.
• The U.S. government should develop baseline national standards for green procurement, allowing states to adopt higher standards if they wish.
• The U.S. government should ensure sufficient staffing to help bidders through procurement requirements is necessary to support a competitive procurement market.
• The U.S. government should cooperate with signatories of the WTO Government Procurement Agreement to develop common guidelines on green procurement.

A combination of domestic and international actions can help facilitate more sustainable trade and procurement markets and provide new advantages to American firms that have developed innovative products and invest in the next generation of green goods and services.