November 12, 2022 - Sceptics fear an American plan to use voluntary carbon markets to accelerate the energy transition in poor countries could amount to greenwashing. But if it is done in the right way it could help developing markets close down one of the world’s biggest carbon emitters: coal power plants.
The scheme, known as the Energy Transition Accelerator (ETA), was launched at the United Nations’ COP27 conference this week by John Kerry, the United States’ climate envoy, in collaboration with the Rockefeller Foundation and the Bezos Earth Fund.
The prize is considerable. The Rockefeller Foundation’s Elizabeth Yee says its modelling shows up to $130 billion could be mobilised by 2030. According to the International Energy Agency, coal power plants each year produce a fifth of global greenhouse gas emissions – more than any other single source.
Voluntary carbon markets, in which companies get emissions credits in return for channelling cash to poor countries that cut their carbon output, have often been riddled with fraud and double-counting. Many critics think rich countries should just fork out the cash themselves to close coal plants – or tax fossil fuel companies to get the money.
Unfortunately extracting extra cash, especially from America, is hard – and will be even harder after this week’s congressional elections. So it also makes sense to get voluntary contributions from big companies to help close down coal plants – but only if they are cutting their own emissions as fast as possible. Bank of America (BAC.N), Microsoft (MSFT.O) and PepsiCo (PEP.O) are interested.
The ETA partners have learnt lessons from previous mishaps. In particular, they are promising that the money would be used in countries that set out overall plans for transitioning their energy sectors. This “jurisdictional” approach is designed to prevent new coal plants springing up where old ones have been closed. Nigeria and Chile are keen to take part.
But there are still doubts. One is that the ETA hasn’t set out its criteria for what passes muster as an offset. Why not hitch itself to the high standards already being developed by the Voluntary Carbon Markets Integrity Initiative?
Another concern is that the ETA is planning to use cash not just to close coal plants but also to ramp up renewable energy. Of course, countries need cheap money to accelerate the rollout of solar and wind power. But building a solar plant doesn’t cut emissions in the way that closing a coal plant does.
The ETA partners are open that their plan isn’t fully baked. That’s good. If they listen to constructive criticism, their scheme could help turn COP26’s aspiration to phase out coal into a reality.