U.S. to Announce Plan for Private Companies to Fund International Renewable Energy Transition

Yves here. True to form, the US is willing to engage only in virtue signaling and marginal at best private sector enriching climate/energy schemes. We need war level mobilization and we need it yesterday. But the US does not do dirigisme, and our current leaders can’t manage their way out of a paper bag.

By Olivia Rosane, edited by Chris McDermot. Originally published at EcoWatch

The U.S. is set to unveil a plan at COP27 for private companies to fund the renewable energy transition in exchange for carbon credits.

U.S. president Joe Biden’s climate envoy John Kerry has reportedly been speaking with private companies and national governments to build support for the idea. It is slated to be announced at the UN climate conference in Sharm el-Sheikh, Egypt, on Wednesday, people familiar with the matter told Reuters.

“One of the things we’re looking at is the possibility of the private sector, in effect, being enticed to the table,” Kerry said last month, as the Financial Times reported. He added that money would be siphoned “directly into closing down some coal plants and acquiring renewables, which is direct emissions reduction.”

The plan, first reported by the Financial Times on Sunday, would see either regional or national governments amass carbon credits by shutting down fossil fuel infrastructure like coal-fired plants and replacing it with renewable energy. Private companies could then purchase these credits to offset their greenhouse gas emissions. The scheme would be voluntarily and would be certified by an independent entity still to be determined.

The purpose of the plan is to provide an incentive for private companies to help fund the renewable energy transition in poorer countries, The Washington Post reported. Fossil fuel companies would not be allowed to participate, according to Reuters.

The plan has many potential weaknesses. For one thing, carbon offsets are already controversial because they give companies a license to continue polluting without any real guarantee that an equal amount of carbon will be drawn down from the atmosphere to compensate. In this case, a company purchasing carbon credits from a coal plant turned into a wind farm, for example, would only truly offset its emissions if the transformation would not have happened without its assistance.

People familiar with the plan told the Financial Times that it currently lacked the details that would make its offsets mechanism robust.

“[Carbon credits are not] the kind of thing you can have half-baked. The rules matter, the details matter,” the anonymous person said. “There’s no easier way to get people angry than to throw offsets into the mix.”

Another problem with offsets is that they distract from the essential truth that every company and nation needs to get its real emissions as close to zero as soon as possible in order to limit global warming to 1.5 degrees Celsius and avoid the worst impacts of the climate crisis.

However, there is a strong argument in favor of finding a way to get the private sector involved in the clean energy transition in the developing world. Developed nations have still not followed through on their pledge to send $100 billion a year by 2020 to help poorer nations both wean themselves off of fossil fuels and adapt to climate impacts. And actual needs are even greater than that — around $3.8 trillion in investments yearly over the next three years — Biden’s senior advisor on climate change John D. Podesta told The Washington Post. So far, only 16 percent of that has materialized.

“Private-sector capital flows… that’s where the real money is,” Podesta said. “We’re talking billions when the need is trillions. We’ve got to unlock that [private-sector] capacity for people to make investments in building a clean-energy future or else we’ll miss both the development goals and the climate goals.”

On the other hand, many leaders in the Global South are frustrated with the broken promises of their Global North counterparts and are mistrustful of corporate financing.

“Are we really delivering on climate change, or are we delivering on guarantees to ensure profits for the private sector?” Egypt’s lead climate negotiator Mohamed Nasr told the press ahead of COP27, as The Washington Post reported. “The thinking has to change. Investors should be thinking of their climate-positive impacts as part of their assessment of projects and delivery for investors.”

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  1. Colonel Smithers

    Thank you, Yves.

    I had been meaning to post a comment on this issue.

    After its severe difficulties with liability driven investments last month, BlackRock has beefed up its policy / lobbyist team in London and Brussels. The action was also driven by the need to make itself indispensable to energy transition. As part of that drive, BlackRock, already advising Macron on reform of pensions / retirement, discussed Senegal’s needs with Macron and Macky Sall before they jetted to Egypt.

    The band is back together as per https://www.gov.uk/government/news/government-to-establish-expert-economic-advisory-council. Harrison (and Matt Hancock) advised George Osborne in opposition and government before joining BlackRock, which Osborne joined not long after his sacking by May. Osborne has also returned as per https://www.thetimes.co.uk/article/george-osborne-reborn-hes-back-in-downing-street-for-his-second-act-b3zctkhcq. The boys are back in town. That’s the UK even more effed then.

  2. leaf

    I’m still not sure how selling the right to pollute when the goal is to not have pollution is supposed to be effective.

    1. BeliTsari

      Thousands of slumlord superdelegates in NYC, moving their carbon footprint into Cancer Valley, Frackistan (go Fetterman!) It’s how you can PAY Shell, ExxonMobil, BP so they can make us an offer, we can’t refuse: geo-engineering, GE monoculture, fission reactors, carbon sequestration & bio-fuel… to supplement “bridge-fuel” Ponzi schemes, spewing exponentially more methane, ethane, bitumen… too late, baby!

  3. Matthew G. Saroff

    Carbon credits and cap and trade are almost as criminogenic as crypto-currencies.

    A refundable carbon tax, which would work like a VAT in that it would be refunded for exports, and assessed at import is better.

    It is simpler, cheaper, and less vulnerable to fraud.

    It also has the effect of preventing a race to the bottom, because if you (for example) want to sell in the US, the same tax is paid whether manufacture and assembly takes place in Deerborn or Bangladesh.

    “Market based solutions” never solve anything, they just make money for finance weasels.

  4. voislav

    John Oliver had a good segment looking at carbon offsets and the problem is that a lot of them are fake. These carbon offsets are sold under the premise that an endangered green areas will be cut down in the next 2 years unless carbon offsets prevent that, rather than to create new green areas.

    So offsets are sold not to create new green areas that absorb carbon, but rather to preserve existing ones. But even this is widely abused, as a lot of offsets are sold for areas that are in no danger of being destroyed, like hunting preserves, wildlife refuges, even golf courses.

    So these are not even licenses to pollute, they are licenses to green-wash pollution, as there is nothing in those carbon offsets that actually offsets the pollution.

    1. NoFreeWill

      Increasing risk of wildfire in California has put the states carbon offset/credits scheme at huge risk of default, as insuring the risk of the credits you sold being burned out from under you will continue to get more expensive. So a lot of the land that wasn’t ever going to be developed (because in the middle of nowhere) or logged will also burn, which emits CO2

      basically these schemes are complete bullshit from the start and even then they might fail.

  5. Karl

    It looks like Kerry’s found a way to network with the CEO class and get his “pro private sector” bona-fides out before quitting the Biden administration. Big announcement of lucrative pseudo-Green gig to follow, six months later.

  6. Cetra Ess

    I’m puzzled, isn’t the private sector already “at the table”? How is it they need to be “enticed to the table”? All of the automakers are going electric. Tesla is on the verge of revolutionizing the trucking industry. If both cars and semis are gone electric then that takes out half of gasoline and diesel fuel usage, leaving only avgas and diesel for trains/ships. And there are already a number of electric plane prototypes in play waiting for FAA approval. And wind generators, solar panels, geothermal plants, hydroelectric dams, nuclear plants, the range of battery technologies, etc., aren’t built by nonprofits…the capital has been unlocked already?

    The article makes it seem as if the private sector has been MIA. Not sure I understand where this is coming from.

  7. Gus 2021

    What would have reduced emissions especially in the US is decent public transportation, even if oil powered

  8. jefemt

    I thought this was an Onion headline….

    Here’s an idea: take the most destructive, impactful species on earth, create a contrivance that likely will not have any meaningful impact at an existentially threatening time in the early Anthropocene, and hand it to Wall Street.

    Of course, a US dominated ‘system’.

  9. Paula

    “The U.S. is set to unveil a plan at COP27 for private companies to fund the renewable energy transition in exchange for carbon credits.”

    Isn’t that why Bill Gates is the largest land owner in USA? And why there’s so much land grabbing going on around the world, esp. farmland. Is it possible to make money off of carbon capture and grow food at the same time on the same land?

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