US Special Presidential Envoy for Climate John Kerry marked Finance Day at COP27 on Wednesday by launching a new Energy Transition Accelerator (ETA) in a bid to finance the decommissioning of coal and accelerate clean energy deployment in developing countries.
At the launch event, Kerry said: “Our intention is to put the carbon market to work to deploy capital to speed the transition from dirty to clean power, specifically for two purposes — to retire unabated coal-fired power and accelerate renewable.”
Yet in its current shape, the plan lacks integrity and risks undermining the work being done on Just Energy Transition Partnerships (JETPs), Article 6, and the UN High-Level Expert Group on Net Zero.
Developing countries have been clear that the focus of the finance negotiations at this COP needs to be on grant and concessional finance to overcome the structural barriers to the energy transition.
This plan risks being a distraction from that work, giving corporations in the Global North access to yet another scheme to delay reducing emissions now.
The priority — especially on Finance Day at COP27 — is mobilizing more real finance. The work that has been done by developing countries with the financial reform agenda and through the Just Energy Transition Partnerships has been very clear on the fact that there needs to be additional grant and concessional finance, as well as real public finance.
There are other priorities where the US has the chance to make significant structural changes. For instance, the US can significantly influence the reform of the Capital Adequacy Framework for MDBs, which would allow banks to leverage a trillion in concessional finance.
With the G20 meetings coming up, the priority should be on driving this agenda forward.
The US plan states that the program will only be open to “companies committed to achieving net zero no later than 2050 and science-based interim targets”.
But we know that commitments are not enough –most corporate 2050 net-zero commitments are not underpinned by plans to reduce emissions rapidly enough. Seventy-five percent of “climate leading” companies in the Climate Action 100+ have a target of net zero by 2050, but only 10 percent have plans compatible with the Paris Agreement.
Responding to the “Energy Transition Accelerator” plan, Vaibhav Chaturvedi, Fellow, Council for Energy Environment and Water, said: “The US’s Energy Transition Accelerator is arguably the first large-scale structured programme that will demonstrate how Article 6.2 will look in practice.
“This is a very important announcement and I hope it is able to showcase successful case studies soon that the world can learn from. However, if the US companies buy emissions from India, then India will not be able to account for these in its emission reduction. Even if both the US and India get 50 percent each of the carbon mitigation credits generated, that means India has to let go of the 50 percent emissions mitigation implemented within its boundary.”
Ulka Kelkar, Director, of the Climate Change Programme, World Resources Institute (India), said: “What developing countries need is predictable finance — not offset markets. The proposed initiative cannot make up for the US’ failure to provide its fair share of climate finance — an estimated $40 billion of the unmet goal of $100 billion a year.
“It also should not substitute for deep decarbonization needed within the US and other industrialized countries. For developing countries like India, who have been raising their climate ambition, the first priority would be to meet their own targets and not provide offsets for reductions in developed nations.”
