Monday, November 07, 2022

U.S. looks to companies to fund more of energy transition at COP27


COP27 climate summit in Egypt

Mon, November 7, 2022 
By Valerie Volcovici and Sarah McFarlane

SHARM EL-SHEIKH, Egypt (Reuters) - The United States wants businesses to pay countries to stop burning coal via carbon markets, in a proposal it will announce at the United Nations climate conference this week, people familiar with the matter said.

The initiative, expected to launch on Wednesday at the COP27 Summit in Egypt, proposes that companies buy carbon credits and the proceeds be used to fund renewable energy projects in countries seeking to replace fossil fuels such as coal, the people said.

Top U.S. climate diplomat John Kerry has been canvassing companies in sectors including banking, consumer goods, shipping and aviation on the proposal, the people said. The idea is that companies would participate voluntarily.

The U.S. State Department did not immediately respond to a request for comment.

Voluntary carbon markets are expanding rapidly, whereby credits are generated by activities including tree planting and solar power projects, although concerns persist about these credits being outside regulated markets. The voluntary market was valued at around $2 billion in 2021, almost quadruple the previous year, according to data provider Ecosystems Marketplace.

One incentive for a company to participate in the proposed scheme is that it could help reduce its own emissions balance sheet, assuming the company has operations in a country that is phasing out coal. Companies do not necessarily have big operations that they need to decarbonize in countries looking at transition deals such as Indonesia and Senegal, however.

Fossil fuel producers are excluded from participating in the proposed scheme, the people said, although the industry has been one of the largest users of carbon markets to date.

"Crediting of energy transition in a country is an interesting concept but some of the restrictions on participation need to be worked on if it is going to have any scale," said Dirk Forrister, chief executive of the International Emissions Trading Association.

"Right now, the idea is it should be narrowly applied to be bought by non-fossil fuel companies like tech companies and banks, which would restrict private sector demand."

(Additional reporting by Kate Abnett; Editing by Mark Potter)

Biden’s climate envoy Kerry wants to tap companies to fund developing world’s move off fossil fuels: report

Rachel Koning Beals -

 peter dejong/Agence France-Presse/Getty Images

WASHINGTON WATCH

The U.S. reportedly wants to launch a carbon credit program to tap the might of the world’s largest companies to fund a transition off coal, especially, but also oil and gas in developing countries. The financing would help those nations switch to alternatives such as wind, solar, hydrogen and other energy options.

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The plans were reported in the Financial Times, which said it had talked to policy officials working closely with John Kerry, the Biden administration’s lead representative at a major U.N. climate conference just underway in Egypt, known as COP27.

Read: What is COP27? Key issues for markets to watch as U.N. climate talks kick off in Egypt

The report said Kerry is trying to gin up support from other governments, companies and climate experts to develop a new framework for carbon credits to be sold to businesses. With carbon credits, there is financial incentive to create fewer emissions, and lighter emitters can sell their credits to heavier emitters.

President Joe Biden will attend COP27 on Friday. MarketWatch reached out to the White House for a comment on the Financial Times article.

Kerry and team hope to unveil the plan this week, the report said. It will remain voluntary, according to the FT, but is seen pressuring more companies to join as they also face the likelihood of increased regulatory requirements when it comes to reporting their own emissions. Many also shoulder increased pressure to prove to employees and investors that they won’t sit out what some call the “green” Industrial Revolution for too long.

The U.N. has said that rich nations have made welcome pledges to clean up their greenhouse gas emissions, but are moving too slowly. Most wealthy nations, and many private companies, have vowed to flip to net-zero emissions by 2050, with some setting a plan to cut emissions in half as soon as 2030.

These efforts are part of the 2015 Paris climate accord, which set out to limit global warming to no more than 1.5 degrees Celsius. In reality, emissions are still rising, with atmospheric levels of the three main greenhouse gases (carbon dioxide, methane and nitrous oxide) all reaching new record highs in 2021.

Related: At COP27, U.N. chief tells climate summit to ‘cooperate or perish’

The credits would be certified by an independent, but yet unnamed, accreditation body. Companies would then be able to buy the credits to offset their own carbon emissions. The proceeds could then fund new clean energy projects.

Under the plans, according to the FT, regional governments or state bodies would earn carbon credits by reducing their power sector’s emissions as fossil fuel infrastructure such as coal-fired plants were cut and renewable energy increased.

U.S. officials hope the plan will combat 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 discussions, the FT said.

Carbon credit markets have existed for years, so the Kerry plan would advance yet another framework. To date, largely unregulated credit markets have faced controversy, in part for double counting and lack of transparency. The staunchest advocates for exiting fossil fuels sooner versus later regularly charge that credit programs don’t do enough to cut demand for burning coal, oil and gas in the first place. Others say they are a key tool among many as the world transitions to cleaner energy.

A primary focus of the roughly two weeks of talks in Egypt will be on how wealthy nations can financially resolve the added burden they put on developing nations when it comes to resource use, deforestation and the health and economic costs of pollution.


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