Last week, at the COP27 climate summit in Egypt, U.S. Climate Envoy John Kerry announced the potential for a carbon offset program that could go a long way to helping developing countries establish their renewable energy industries. Companies may be given the opportunity to invest in clean energy projects in other countries to counterbalance their greenhouse gas emissions if they fail to reduce their carbon output at home. It also responds to the growing global demand for clean energy. The new carbon offset plan, known as the Energy Transition Accelerator (ETA), would allow companies in the U.S. to invest in renewable energy projects in developing countries to support the global transition away from fossil fuels. Philanthropic associations, including the Rockefeller Foundation and the Bezos Earth Fund, will participate in the program, which will allow private companies to channel funds into accelerating the green energy transition worldwide.
Kerry stated at the COP27 summit, “Our administration is working as hard as we can to deliver on President Biden’s pledge to quadruple U.S. climate support by 2024. We are absolutely committed to doing our part. But no government in the world has enough money to get this job done. We will only succeed with a massive infusion of private capital.
The scheme would provide alternative carbon offset options for companies in the U.S. that are finding it difficult to curb their emissions. Firms would have the opportunity to buy carbon offsets to counterbalance their carbon emissions by investing in the development of renewable energy projects elsewhere. It would also assist the U.S. government and other world powers in their decarbonization efforts by supporting public investment in clean energy initiatives with high levels of private funding. Countries including Chile and Nigeria have already been highlighted as potential candidates for investment under the offset scheme.
Interest in the scheme has already been shown from Bank of America, Microsoft, PepsiCo, and Standard Chartered Bank. Many heavy industries that are powered heavily by fossil fuels are also likely to favor the scheme until there is enough renewable energy in the U.S. to power these industries.
Several companies have already established their own carbon offsetting programs in response to growing pressure from the Biden Administration and international organizations to act on climate change by curbing carbon emissions. Some of these schemes include investments in reforestation and incorporating carbon capture and storage (CCS) technology into operations. However, many of these programs have been widely criticised for their lack of regulation and need for more consistency. Many companies still need to establish effective reporting or monitoring and evaluation mechanisms, meaning that little is known about their offsetting action in practice. Moreover, many companies need to identify tried-and-tested offsetting schemes, leading them to pump funds into carbon-cutting projects that are not viable.
The ETA would provide a coordinated, national scheme for carbon offsetting that companies could use to counter their emissions with better mechanisms for transparency and accountability, potentially reducing the criticism of carbon offsets. In addition, companies need a carte blanche to continue operating long-term with high carbon emissions. The scheme would require companies to commit to achieving net-zero emissions by 2050, as well as report annually on their targets and progress. In addition, oil and gas firms will be able to take part in the scheme.
Related: EU Presents New Climate Fund For Developing Nations, But There’s A Catch
Yet, many environmentalist groups are critical of the scheme, once again seeing the potential for greenwashing from major corporations. Even if the scheme establishes effective methods of cutting carbon or well-researched renewable energy projects, the fact that companies are purchasing these carbon offsets will remain the same so that they can continue operating with high levels of greenhouse gas emissions. The question is: can effective carbon offsets counterbalance carbon emissions?
The world requires greater investment in renewable energy projects to achieve Paris Agreement and COP26 climate goals over the coming decades. This is particularly true in developing countries, which need more financing and infrastructure to develop their green energy sectors, many of which have the natural resources available to provide significant renewable energy output with the right funding and sectoral expertise.
However, Rachel Cleetus, policy director of the climate program at the Union of Concerned Scientists explains “Carbon offsets are not an answer in a world already on fire, underwater and facing mounting climate losses and damage.” She adds, “A voluntary carbon credit program won’t guarantee deep, real cuts in emissions — it’s tantamount to rearranging the deck chairs as the climate ship is going down.”
While Kerry’s carbon offset scheme is attractive to many private companies looking to offset their carbon emissions in a streamlined and transparent manner, some environmentalists are skeptical of any scheme supporting the ongoing release of greenhouse gasses. The program seeks to encourage greater private investment in the development of renewable energy operations worldwide, which would help meet the growing global energy demand while supporting developing economies in their transition away from fossil fuels to green alternatives. However, it could also potentially prolong the time many American companies take to reduce their carbon emissions at home.
By Felicity Bradstock for Oilprice.com
More Top Reads From Oilprice.com: