US develops plan for corporations to fund EM shift to fossil fuels

The United States is working on a plan to mobilize cash from the world’s biggest companies to help developing countries reduce their use of fossil fuels, an idea it aims to unveil at the UN summit on the weather this week.

US President Joe Biden’s climate envoy, John Kerry, is trying to mobilize support from other governments, businesses and climate experts to develop a new framework for carbon credits to sell to businesses. The proceeds could then fund new clean energy projects.

Under the potentially transformational plans, regional governments or state agencies would earn carbon credits by reducing emissions from their electricity sector as fossil fuel infrastructure such as coal-fired power plants were shut down and renewable energy was increasing.

The credits would be certified by an independent accreditation body, as yet unspecified. Companies could then buy the credits to offset their own carbon emissions.

Although the scheme is voluntary, Kerry recently said he hopes the private sector could be “brought” to the table as it would offer the most polluting companies a way to reduce their emissions.

Kerry and the US administration want to unveil the idea at the COP27 climate summit in Egypt, according to people familiar with the matter. More than 110 heads of state are expected at COP27, which started on Sunday.

World leaders are scrambling to fund the clean energy shift and reduce developing countries’ dependence on fossil fuels.

US officials hope the plan will tackle global warming by unlocking “tens of billions” of private capital to fund the energy transition in emerging economies, according to a person familiar with the talks.

The use and trading of carbon credits is unregulated and is a controversial solution to global warming. In theory, a credit represents a ton of carbon avoided or removed from the atmosphere, but critics say they don’t always reduce the emissions they promise.

However, the concept has exploded as companies and countries come under pressure to cut emissions and meet net zero emissions targets, which are legally binding under the Paris climate accord.

Several industry groups are working on standards in a bid to bring more credibility to carbon credits, and regulators including the US Commodity Futures Trading Commission have been urged to monitor the market.

US officials said they would work closely with all stakeholders on safeguards to ensure the environmental integrity of the credits.

The system designed by the US team is billed as an energy sector version of the so-called Reduce Emissions Through Accelerating Forest Finance (Leaf) venture launched at last year’s COP26, backed by companies such as Amazon, BCG and Nestlé, people familiar with were saying the plans. Under this program, credits are tied to preventing deforestation in countries like Brazil and Indonesia.

However, the US proposal lacked specifics, the people said. Carbon credits weren’t “the kind of thing you can have half-baked. Rules matter, details matter,” said a person familiar with the plans. “There’s no easier way to anger people than to add offsets to the mix.”

Another person familiar with the plans said the US State Department and external partners were aiming to introduce the general framework and would take more time to develop all the details.

“One of the things we’re looking at is the possibility of the private sector, indeed, being brought to the table,” Kerry said last month. The funds could go “directly to closing some coal-fired power plants and acquiring renewable energy, which is a direct reduction in emissions. I hope maybe even in Sharm el-Sheikh we will be able to describe this,” he said.

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