U.S. looks to companies to fund more of energy transition at COP27
2022.11.07 09:30
© Reuters. People attend the COP27 climate summit, in Sharm el-Sheikh, Egypt November 7, 2022. REUTERS/Mohammed Salem
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.”
