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

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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.

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
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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
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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
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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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