The US is creating a carbon-offset plan for corporations that would fund developing countries' moves to clean energy

• The top US climate envoy John Kerry has announced an effort to let corporations use carbon offsets.
• The plan would create revenue to fund developing countries' moves toward clean energy.

SHARM EL-SHEIKH, Egypt — The US wants to unlock tens of billions of dollars in private capital for the clean-energy transition in developing countries by scaling up carbon offsets for corporations trying to meet their climate goals.

The voluntary program, the Energy Transition Accelerator, would allow companies that finance the retirement of coal plants and that fund renewable-energy projects to count resulting reductions in greenhouse-gas emissions toward their own climate goals.

"No government in the world has enough money to get this job done," the US's top climate envoy, John Kerry, said Wednesday during an event at the UN's COP27 climate summit in Sharm el-Sheikh, Egypt, flanked by supporters from Microsoft, Pepsi, the Rockefeller Foundation, and the Bezos Earth Fund. "This is a critical tool that will supplement, not replace, other sources of climate finance."

The idea is already dividing climate groups, with one activist shouting at Kerry for "promoting false solutions" before security officials escorted the man away from the event.

Voluntary carbon markets allow polluters to buy credits that are supposed to represent one ton of carbon-dioxide emissions either avoided or removed from the atmosphere. But numerous investigations have found that projects from protecting forests to building renewable energy didn't reduce emissions or would have been completed anyway without issuing credits, ultimately negating their climate impacts.

"Carbon markets have, at best, a fraught record of delivering real carbon reductions, and there are a number of ways that this program could go wrong," Cherelle Blazer, Sierra Club's international climate and policy-campaign director, said in a statement.

Kerry acknowledged that past abuses had discredited the use of carbon credits but said the initiative wouldn't repeat those mistakes. There will be strict standards to ensure that companies don't buy carbon credits instead of decarbonizing their own operations and supply chains, he said. The US will also consult with organizations that are trying to improve the scientific integrity of carbon credits.

Fossil-fuel companies can't participate and companies must have their net-zero goals verified by the Science Based Targets initiative, which requires companies to aim for a 90% or more emissions cut before relying on carbon offsets to compensate for the rest. The UN Tuesday published its own guidance on corporate net-zero claims to police "greenwashing."

"While the announcement proposes some improvements to the current market — like supporting adaptation and excluding fossil fuel providers — it should not be branded as a climate-finance tool if it's being used to generate carbon offsets," said Jonathan Crook, a policy expert at Carbon Market Watch, a watchdog group. "Buying emissions reductions from developing countries is not the same thing as channeling climate finance and raises questions about who can count the reductions."

The announcement arrived on "finance day" at COP27 and after a UN-backed report estimated that developing and emerging economies, other than China, needed $1 trillion a year from rich countries, development banks, and investors to achieve the Paris-agreement goals of limiting global warming to 1.5 degrees Celsius compared with preindustrial times. (The planet has already warmed about 1.2 degrees since preindustrial times.)

Passing the 1.5-degree threshold would mean catastrophic damage to humanity and the environment, including deadly storms, heat waves, and drought.

More than a decade ago, rich nations promised to put up $100 billion a year by 2020 for poorer nations to build out clean-energy and other infrastructure that reduces emissions and is more resilient to the impacts of the climate crisis. That promise hasn't been kept, with adaptation finance still needing to be an estimated five to 10 times as much as it is now, according to the UN.

Developing countries also want compensation for the loss and damage they've experienced as a result of the pollution rich countries caused after more than a century of using fossil fuels to industrialize their economies.

These enormous funding needs can't be met with public finance alone, Kerry said, adding that's why voluntary carbon markets should play a role. He said the Energy Transition Accelerator didn't absolve any nation or company from its obligations. Kerry said he hoped the plan could be developed over the next year, in time for the UN's 2023 climate summit in Dubai, United Arab Emirates.

African nations unveiled their own carbon-market initiative Tuesday, with an aim to supply 300 million carbon credits each year by 2030 and raise up to $6 billion. Damilola Ogunbiyi, the CEO and special representative of the UN secretary-general for Sustainable Energy for All, said the market could spur investment in clean energy on the continent, where so many have no access to electricity, including 90 million in her home country of Nigeria.