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US plan to sell carbon credits to private firms gets mixed reaction

Activists demonstrate at the Sharm El Sheikh International Convention Centre during Cop27 Reuters/Thaier Al-Sudani
Activists demonstrate at the Sharm El Sheikh International Convention Centre during Cop27

With the opening speeches out of the way, day four of Cop27 was the first of the “thematic days”, as member parties moved into the back rooms out of view of the cameras to conduct the real negotiations.

The biggest announcement of the day came via the US climate envoy, John Kerry.

A new carbon offset plan, which Kerry said would be up and running within a year, will raise funds to aid the green transition in developing countries by selling carbon credits to private companies. 

He told reporters that companies which have shown an initial interest in the scheme, dubbed the Energy Transition Accelerator (ETA), include Bank of America, Microsoft, PepsiCo and Standard Chartered Bank.

Carbon offsets have long been a controversial form of tackling climate change and have been roundly criticised as a way for companies to “greenwash” their way out of reducing carbon emissions themselves. 

Whilst Kerry claimed that the ETA will have “strong safeguards” to prevent any greenwashing violation, the scheme attracted instant criticism for allowing rich companies to pay developing nations to cut their carbon emissions for them.

Among those criticising the programme is New Delhi-based Harjeet Singh, head of global strategy for the Carbon Action Network, which represents 1,500 civil society organisations.

Speaking in Sharm el-Sheikh shortly after Kerry’s announcement, Singh called the ETA “a distraction” from the bigger issues, particularly that of an intergovernmental loss and damage fund, of which the US has been “the biggest blocker” for years. 

He accused Kerry of failing to read the room and being 15 years behind the times in shying away from the US’s obligations to help countries deal with current effects of climate change.

“The private sector has no interest in giving money to poor people to rebuild their homes,” said Singh.

What is “loss and damage”?

Much talk at this year’s conference has been about loss and damage. This refers to the harm that climate change has already wrought on countries, whether through floods, drought or rising sea levels.

A proposed loss and damage fund would be akin to reparations, whereby the industrialised countries that have created the most carbon emissions give financial contributions to the developing nations suffering the most acute consequences.

While Sharm el-Sheikh is the first Cop to place loss and damage formally on the agenda, the term itself is not new.

The phrase first appeared in global climate change negotiations in 1991. Opposition from rich, industrialised countries have kept it off the agenda for previous Cop meetings, including at Cop26 in Glasgow, in which Scotland lobbied hard for its inclusion.

London-based Jess Beagley, a policy expert at Climate Health Alliance, said that its inclusion in the Cop27 agenda is less a reflection of growing support for loss and damage as of the growing demand.

“The calls from developing countries and civil societies have grown to the point where they can no longer be ignored,” Beagley said. “Groups like Climate Action Network have pushed the conversation.”

Big questions still remain over how a loss and damage fund would be implemented, if national governments would receive the funds directly, and how the money would ultimately be dispersed.

Humanitarian aid practitioner, Sobia Kapadia, is worried that “these are all undiscovered challenges” and that without addressing them, loss and damage is in danger of becoming just a “hashtag”.

The term is often misunderstood, Kapadia believed. “People are confusing loss and damage reparations as some kind of humanitarian aid or financial aid,” she said.

“Yet, since this whole [issue] started in the 90s, it was always a notion of solidarity and a notion of responsibility.” 

Any loss and damage payments should be a form of accountability by industrialised nations, she said, not a means by which they absolve their responsibility to stop climate change at its source: “The impact of hazards and disasters is due to the use of fossil fuels.”

Few developed countries have expressed formal support for loss and damage. In the run-up to this year’s conference, Denmark joined Scotland in pledging contributions to a loss and damage fund. 

Since the conference began, Austria, Belgium and New Zealand have added their names to the list of countries making explicit pledges, bringing the total amount promised to around $92 million.

Kapadia said she welcomed the pledges, “but we have seen these commitments last year and the year before,” referring to previous unfulfilled promises by wealthy nations to commit to $100 billion in annual climate finance for the developing world.

“How binding are these Cop negotiations? I don’t know how they will have an impact on a community that has been inundated for 90 days underwater.”

In an enigmatic statement on Wednesday, China indicated that it too might contribute to a loss and damage fund. “There is not an obligation on China,” said China’s climate envoy Xie Zhenhua, “but we are willing to make our contribution, to make our effort.”

America and Europe join forces over methane

Reuters reported on Wednesday that the US and EU will be unveiling a joint agreement that aims to cut oil and gas methane emissions.

The plan apparently targets specific aspects of the oil and gas industry, curbing the use of controversial practices like venting and flaring, and requiring companies to repair leaks in their infrastructure.

The UK also announced that its export credit agency would become the first of its kind to provide “climate resilient debt clauses”.

The plans would freeze debt payments on loans for two years in the event of a climate disaster to allow countries to redivert funds to tackle it.

Cop also saw the first signs of the colourful protests that seasoned attendees have grown accustomed to.

A British reporter made waves on social media when he doorstepped the World Bank president David Malpass about remarks he made about global warming science.

When asked repeatedly, “Are you a climate change denier?”, the Trump appointee eventually replied: “You know I’m not”.

Despite fears that this year’s conference would be heavily policed to prevent any mass demonstrations, 50 or so activists staged a medium-sized protest within the central Blue Zone of the conference.

In typical Cop fashion, the demonstrators donned animal costumes and unfurled a banner reading “Stop Funding Fossil Fuels.” Elsewhere, protestors erected a life-sized inflatable polar bear—“There is ALWAYS a polar bear”, quipped The Guardian.

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