U.S. Government and Foundations Announce New Public-Private Effort to Unlock Finance to Accelerate the Energy Transition
U.S. Special Presidential Envoy for Climate John Kerry, The Rockefeller Foundation, and the Bezos Earth Fund announced a partnership today to work toward the creation of an Energy Transition Accelerator (ETA) intended to catalyze private capital to accelerate the clean energy transition in developing countries.
Unprecedented investment in clean energy is needed in this critical decade to limit warming to 1.5°C and avert catastrophic climate impacts on communities worldwide. Annual clean energy investment must triple to $4.2 trillion by 2030, according to the International Energy Agency, and more than half of that investment must be in emerging and developing economies.
The partnership will work towards launching the ETA as an innovative, independent initiative to drive private investment in comprehensive energy transition strategies that accelerate the deployment of renewable power and the retirement of fossil fuel assets in developing countries. The ETA is expected to deliver deeper and earlier emissions reductions, help developing countries achieve and strengthen their nationally determined contributions (NDCs) under the Paris Agreement, and help them advance broader sustainable development goals, including expanded energy access. It will also generate new finance to strengthen adaptation efforts in vulnerable countries.
The U.S. Government and the two philanthropies will work with input from governments, experts, the private sector, and civil society to develop and launch the Energy Transition Accelerator. The ETA is expected to operate through 2030, possibly extending to 2035. Chile and Nigeria are among the developing countries expressing early interest in exploring the ETA’s potential benefits. Bank of America, Microsoft, PepsiCo, and Standard Chartered Bank have also expressed interest in informing the ETA’s development, with decisions on whether to formally participate pending the completion of its design. The ETA will also be open to sovereign government investments and engagement.
Vision for a High-Integrity Framework
The goal of the partnership is to establish a high-integrity framework enabling developing countries to attract finance to support their clean energy transitions. Operating at the scale of national or subnational jurisdictions, the ETA will produce verified greenhouse gas emission reductions, which participating jurisdictions will have the option of issuing as marketable carbon credits.
The jurisdictional approach, similar to approaches currently employed in the forestry sector, will help avoid emissions leakage, ensure that emissions reductions are real and additional, and align a jurisdiction’s power sector policies, investment priorities, and just transition strategies. While incentivizing system-wide transformation, jurisdictional arrangements can also help steer finance to discrete projects producing deep, rapid emission reductions.
Revenue raised through the ETA will supplement other sources of finance being mobilized by governments, donors, and multilateral and private financial institutions in support of developing countries’ energy transition. It will also help catalyze additional investment. By providing jurisdictions with fixed-price advance purchase commitments for verified emission reductions, the ETA will create a predictable finance stream that can unlock upfront private finance at more favorable rates.
Social and Environmental Safeguards
To help promote an inclusive, just transition, the energy transition strategies of participating jurisdictions will include social safeguards and benefits to local economies, including support for job creation and training.
To promote environmental integrity in the use of carbon credits, one idea for the ETA will be to open it only to companies committed to achieving net zero no later than 2050 and science-based interim targets. Other provisions will establish strong transparency requirements and address how companies’ investments in verified emissions reductions through the ETA could be recognized.
For instance, companies could use credits to support mitigation above and beyond their interim targets, to contribute to climate finance or other voluntary goals, or to contribute to a host country’s NDC achievement. Another approach to be explored is the use of some credits to address a limited portion of Scope 3 emissions within a company’s near-term target, in which case companies would be required to pay for additional credits solely to magnify the ETA’s financial and climate benefits.
A range of stakeholders will be consulted on the ETA’s technical aspects as well as environmental, social, and just transition safeguards. Organizations to be consulted include the Science Based Targets Initiative (SBTi), the Voluntary Carbon Markets Initiative (VCMI), the Integrity Council for the Voluntary Carbon Market (ICVCM), and the World Resources Institute (WRI) for GHG Protocol.
With safeguards in place, participating companies will need to achieve deep reductions in their own value chain emissions, with emission reductions generated through the ETA supplementing their internal abatement. The final ETA participation and use criteria will be informed by further analysis of potential emissions and financial implications and will seek broad alignment with evolving best-practice standards, including those of SBTi and VCMI.
To help strengthen climate adaption efforts in vulnerable countries, five percent of the value of all credits generated through the ETA will be dedicated to international support for adaptation and resilience.
-First Movers Coalition Announces Expansion
Special Presidential Envoy for Climate John Kerry announced a major expansion of the First Movers Coalition, the public-private partnership to commercialize clean technologies through advance purchase commitments, on the initiative’s first anniversary. Launched by President Biden in partnership with the World Economic Forum at COP26, the First Movers Coalition has expanded to include 65 companies, representing more than 10 percent of the global Fortune 2000 by market value, as well as ten government partners. New corporate members include General Motors, PepsiCo, and Rio Tinto.
In addition, today the First Movers Coalition launched an unprecedented set of new commitments focused on cement and concrete – in which companies will purchase at least 10 percent near-zero carbon cement and concrete by 2030 – anchored by world-leading companies such as General Motors. Cement and concrete make up 7 percent of global emissions today and are on track to reach 9 percent by 2050. This ambitious set of purchasing commitments by First Movers Coalition members will create an early market to stimulate investment in the next generation of technologies needed to decarbonize cement and concrete.
In total, First Movers Coalition corporate members have pledged $12 billion, the world’s strongest demand signal, for bringing emerging innovations to scale. These commitments will drive investment in next-generation clean steel, aluminum, and cement; near-zero carbon aviation fuels; zero-emission trucking and shipping; and carbon dioxide removal. The companies that have stepped forward as First Movers will drive down the cost of emerging technologies and bring them to market this decade in order to decarbonize the sectors of the global economy that produce a third of global emissions.
-Kerry makes his move on private climate finance
The U.S. is teaming up with philanthropic and corporate heavyweights to pitch a new — but controversial — carbon credit system to boost private finance for low-carbon energy in developing nations, Ben and Andrew write.
Driving the news: This morning, U.S. climate envoy John Kerry — along with the Rockefeller Foundation and the Bezos Earth Fund — unveiled plans for the “Energy Transition Accelerator” at the COP27 summit.
- PepsiCo, Microsoft, Bank of America and others have expressed interest, the U.S. announcement states.
- “We’re hearing strong interest from developing countries,” Kerry said in Sharm el-Sheikh, Egypt, this morning, citing Nigeria and Chile.
How it works: It’s designed to enable the sale of high-integrity carbon-reduction credits to finance new and rapid renewables deployment and retire coal-fired power plants.
- “This is an approach that can deliver deep and rapid emission reductions. It can convert those reductions into high quality carbon credits,” Kerry said in Sharm el-Sheikh, Egypt this morning.
- It would not be open to fossil fuel companies, Kerry said.
- Participating companies must have net-zero goals and science-based interim targets. And credits must supplement — not substitute for — emissions cuts, the proposal states.
- “It’s not going to let anybody off the hook,” Kerry said.
Why it matters: Huge amounts of public and private money are needed to keep the Paris targets within reach. The U.S. cites International Energy Agency estimates that investment needs to exceed $4 trillion annually by 2030 to create a net-zero emissions pathway by 2o50.
Yes, but: Carbon credit systems have a checkered history and many environmentalists and national leaders view them skeptically.
- “Unfortunately, some past abuses have in many minds discredited the use of a carbon credit. But we also know that with the right safeguards, with the right transparency, the right accountability…this can be done well,” Kerry said.
The intrigue: The U.S. proposal comes a day after a UN-backed panel unveiled a series of safeguards against greenwashing via carbon credits.
- Kerry said he met with UN secretary-general António Guterres, who expressed interest provided strict rules and transparency are included.
What’s next: Kerry said the goal is to have the ETA up and running by the next big UN climate summit, in one year.
–Al Gore unveils global inventory of polluters
A coalition of groups using satellite observations, artificial intelligence and machine learning revealed on Wednesday the most comprehensive facility-level accounting of global carbon emissions.
Why it matters: The information can be used by regulators, journalists and investors to put pressure on governments and corporations to cut their emissions.
Driving the news: In a report released at COP27 in Egypt, the Climate TRACE coalition, which counts former Vice President Al Gore as a founding financial backer and participant, unveiled its latest census of global emissions from 2021.
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