The US is setting up a new program to use money from the voluntary carbon markets to help developing countries decarbonize their energy sectors.
US climate envoy John Kerry today announced the creation of the Energy Transition Accelerator (ETA), though which developing countries would be able to offer carbon credits to the voluntary market, with the revenue to be used to accelerate the deployment of renewable energy and the retirement conventional coal-fired power plants.
"Our intention is to put the carbon market to work to deploy capital to speed the transition from dirty to clean power," Kerry said at the UN Cop 27 climate talks in Sharm el-Sheikh, Egypt.
This will help developing countries achieve and strengthen their Paris Agreement emissions-reduction pledges, known as nationally determined contributions (NDCs).
In addition, 5pc of the value of all credits generated through the ETA will be dedicated to support adaptation and resilience efforts for vulnerable countries, the State Department said.
Kerry stressed this will supplement, not replace, other sources of financing for developing countries, one of the top issues at the Cop, as the US and other major emitters seek to satisfy their commitments to mobilize $100bn/yr in climate-related funding to help other nations.
"This is just one tool, but it's a critical one. It will supplement, not replace, other sources of climate finance," Kerry said. "And I believe it will drive deeper, faster emissions reductions than individual companies are able to achieve on their own."
Some countries at the Cop, notably Germany, have already expressed some skepticism toward the program, while some non-governmental groups are waiting to see more details, especially around how it will prevent "greenwashing" by participating companies.
"Done right, leveraging voluntary carbon markets can help unlock billions of dollars from the private sector to accelerate the energy transition," World Resources Institute president Ani Dasgupta said.
Kerry acknowledged that carbon offsets are viewed negatively by some groups but said the US wants to have strong safeguards included in the new program. It would produce verified greenhouse gas (GHG) emissions reductions, which participating countries could issue as "marketable" carbon credits to be sold to the private sector. The initiative is being set up in conjunction with the Rockefeller Foundation and the Bezos Earth Fund.
The exact details of the program will be worked out over the next year, with the US and the two philanthropies to gather input from governments, experts, the private sector and others to set up the program. The goal is to have the ETA up and running by next year's Cop in the United Arab Emirates, Kerry said. The program is expected to operate through 2030 and could continue through 2035.
Among the design details being considered is allowing only companies committed to achieving net-zero emissions no later than 2050 and with science-based targets to participate. The program will also include provisions for how the companies' investments could be recognized, such as by using credits to go beyond their interim targets or they could contribute to the host country's NDC. Another idea that will be considered is allowing companies to use the credits to address a "limited portion" of their Scope 3 emissions, which would require them to buy additional credits "solely to magnify the ETA's financial and climate benefits," the State Department said.
Chile and Nigeria are among the countries that have already expressed interest in the program, the State Department said. Companies including Microsoft, Bank of America, PespsiCo and Standard Chartered Bank have also signaled interest in participating.
