US scopes projects for carbon credit scheme under heavyweight committee

The US proposal for a new carbon credit system has begun sizing up potential interest from countries and corporate backers to help finance the shift of poorer nations away from fossil fuels. The Department of State-led initiative that is backed by a group including the Bezos Earth Fund and the Rockefeller Foundation met recently to begin setting up a framework to attract corporate buyers to the scheme. Bezos Earth Fund chief executive Andrew Steer said the group would this year begin developing rules for how the system might work.

The blueprint for a new category of carbon offsets, which buyers use to compensate for their emissions, was announced at the COP27 UN climate summit in Egypt as a way to funnel private sector funds into the decarbonization of energy systems in developing countries. Under plans for the so-called Energy Transition Accelerator (ETA), regional or state bodies would earn carbon credits by decarbonizing their power sectors, which they could then sell to corporate emitters.

Steer told a Financial Times conference that the plan could dovetail with the Just Energy Transition Partnership (JETP) deals struck between rich countries and a number of poorer nations including most recently in Vietnam and Indonesia, since the first programme in South Africa. The use of the scheme to underpin these deals would represent a shift in its concept, as US officials had originally envisaged the ETA as distinct, if complementary, to the JETPs. “Let’s see if we can really accelerate the [voluntary carbon market] to help the kinds of transitions that are going on in the so-called JETPs,” Steer told the FT Climate Capital audience at the end of last week. “Carbon market money would come in together with government subsidisation, which is fairly limited, and some philanthropic money.

” That was necessary, since most of the money that would finance JETP deals would come from the private sector, which “says we need some de-risking or some subsidisation” but governments “don’t have much money for that”, said Steer. The $2bn market for carbon credits has boomed over the past two years, with a growing number of corporates as well as financial institutions interested in buying, using and trading the units. The market remains unregulated, however, and many critics have voiced concerns about the quality of certain offsets and the difficulty of distinguishing good from bad.

High profile standard setters including the Science Based Targets initiative (SBTi) have stressed that companies cannot buy offsets in place of reducing their emissions. Steer acknowledged concerns about credit quality, and said one solution might be to “buy more [offsets] than you actually get credit for”. It was “remarkable” how little of the carbon market money “goes into the energy transition in the developing and emerging world”, he added. US climate envoy John Kerry, who launched the ETA last year, told an energy industry conference in Houston earlier this month that he expected some progress in developing a pilot project by the northern summer.

The ETA’s new consultation group includes International Energy Agency president Fatih Birol and Catherine McKenna, the former Canadian environment minister who launched an UN-commissioned report last year about how to combat corporate greenwashing, and the head of the SBTi. Details about how the new system might work, such as how the credits would be generated, which companies would be eligible to buy them and how that would be enforced, would be discussed this year, said Steer. “What we have given ourselves is this year to set the standards, build the coalitions, both on the supply side and the demand side,” with discussions also expected to take place at the World Bank and IMF spring meetings, he said.

The group had begun talking to potential corporate buyer across sectors, including transport and technology, he added. This year’s COP28 climate summit in November was a “milestone”, he said. One person familiar with the plans said the team was “looking to have something to announce at COP28”.

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