Some world and industry leaders see the carbon credit market as an essential component to solving complex climate funding issues, while others see it as greenwashing which obfuscates more intensive decarbonization goals. There are also major political sticking points. From one perspective, it is a form of injustice that the developing world, which has contributed the least to global greenhouse gas emissions, is now being asked to carry the burden of decarbonizing their own economies before they’ve had the chance to fully develop, while rich countries with a long history of carbon-based economic development can continue to enrich themselves off of fossil fuels. From another perspective, carbon credit schemes are an efficient, cooperative, and mutually beneficial way of financing decarbonization in countries that cannot afford to do so on their own.
Because of such debates, agreements over a global carbon credit scheme have been slow to develop. While such a system has been a hot topic at COP27, not a whole lot of progress has been made on the actual logistics or rules of such a system. Key sticking points include rules concerning credit trades between countries and whether there should be a centralized governing body to oversee the market. The European Union supports such a system, while the United States has lobbied for a more diffuse, decentralized approach. But the clock is ticking. “Countries will need to decide on those methodologies next year or risk running into a 2023 deadline when carbon-cutting projects registered under old U.N. rules have to apply to be part of the new system,” Reuters recently reported.
Last week, United States climate envoy John Kerry was heckled when he unveiled a new carbon credit scheme at a packed COP27 event. During his presentation, an audience member cried out that it was a “false solution.” The system, known as the Energy Transition Accelerator was developed in conjunction with the Rockefeller Foundation and the Bezos Earth Fund, and proposes to finance the phase-out of coal-fired power and avoid green-washing loopholes by barring fossil fuel companies from buying the credits. He did not clarify, however, how they could be prevented from doing so on the secondary market.
According to Rachel Kyte, co-chair of the Voluntary Carbon Markets Integrity Initiative, the United States’ proposal is a “massive distraction” from ongoing efforts to establish a global agreement on carbon credits. “There has been an extraordinary effort to build the rules [of the carbon credit market]. You can’t short-cut that,” she said.
Any carbon credit scheme worth its salt will have to have major safeguards to prevent green-washing on the part of large fossil fuel companies looking to purchase a “green” label without earning it. Ultimately, a carefully curated system with accountability measures could indeed “catalyze” the green energy transition as John Kerry has argued.
