On Wednesday, John Kerry unveiled a plan for a new carbon credit program aimed at mobilizing private capital to help middle-income countries transition away from coal and move toward renewable energy.
The plan, dubbed the Energy Transition Accelerator, was announced in partnership with the Bezos Earth Fund and the Rockefeller Foundation. Kerry, who is the Biden administration's climate envoy, told an audience at the COP27 climate conference in Egypt that the goal is to "have this up and running no later than COP28," which will take place next year in Dubai.
The accelerator would allow companies to buy carbon credits, which would fund renewable energy projects in developing countries. Those companies would then be able to count the emissions cuts toward the reaching of their own net zero goals.
Carbon credit programs like this have been criticized historically for a multitude of reasons, ranging from being used to greenwash corporations to being an ineffective way of achieving emissions reductions. Some organizations that were briefed on the plan prior to the announcement, including the Natural Resources Defense Council and the World Resources Institute, weren't supportive of the plan because they felt it could undermine global net zero goals, according to The New York Times.
“We’ve seen offsets being used as greenwashing and to delay action,” Harjeet Singh, head of strategy for the Climate Action Network, told E&E News. “I think the big question is, how is this going to be different?”
Those concerns echo a United Nations report published on Tuesday that found that for companies to meet their net zero goals, they "must use credits associated with a credibly governed standard-setting body that has the highest environmental integrity with attention to positive social and economic outcomes where the projects or jurisdictional programs are located." For companies to responsibly use carbon credits, they should ideally only help to cover the last 5% to 10% of emissions.
Kerry announced a few safeguards to try to quell skepticism, including that fossil fuel companies would not be allowed to participate in the program. Only companies with net zero goals and science-based interim targets will be allowed to participate, and they must use the credits to "supplement, not substitute" emission reductions. He also said that a portion of finance must go toward "supporting adaptation and resilience in vulnerable countries where it's difficult to attract capital to these two sectors."
"The fact is that we have to accelerate the clean energy transition, and, my friends, it takes money to do that," he said, noting that the bulk of that investment needs to go toward emerging and developing economies. An International Energy Agency report put out last year found that to reach net zero by midcentury, the world will need to ramp clean energy spending up to more than $4 trillion annually by 2030.
"No government in the world has enough money to get this job done," Kerry said. (Developed countries, for their part, have failed to provide promised climate aid to emerging economies. This isn't the first time the U.S. has tried to tap private money to make up the difference.)
Chile and Nigeria have expressed "early interest" in taking part in the program, as well as Microsoft and Pepsi, according to a press release from the State Department.
The agency will work alongside the Bezos Earth Fund and the Rockefeller Foundation over the next year to develop additional rules and safeguards for participating companies, as well as develop a methodology for monitoring, reporting, and verifying that the carbon credits are real, additional, and permanent.
"The beauty of voluntary carbon markets, if it is done right ... has the virtue of bringing in money that doesn't need to be repaid," Andrew Steer, president and CEO of the Bezos Earth Fund, said at the press conference.
Michelle Patron, Microsoft's director of sustainability policy, also spoke at the press conference, adding that a big focus of the company's energy procurement strategy includes enabling a just transition in the Global South. (In an interview with Protocol in the run-up to COP27, Microsoft president and vice chair Brad Smith also said working with the Global South was a high priority for the company.)
"We've seen clean energy investments in the developing world be flat since Paris, so we need investments to go up, and we need the costs to come down. And the enablers that we see at Microsoft to do that are markets, policy, and skills, and that's why this type of initiative is important," Patron said.
Climate TRACE's data show emissions at the facility-level.Image: Climate TRACE