Berlin, Brussels The United States is working on a plan for the world’s largest companies to help finance the transition from fossil fuels to renewable energy in developing countries. The concept apparently envisages that companies can improve their own climate balance in return for green investments in developing countries. First, the “Financial Times” reported on the new offensive by US President Joe Biden and his climate commissioner John Kerry.
Accordingly, the US government wants to present the idea this week at the world climate summit in Egypt. Kerry and Biden are currently trying to enlist the support of other governments and companies.
The system should initially be voluntary. Nevertheless, the US government apparently hopes to be able to persuade the companies with the world’s highest environmental pollution to do more climate protection.
They could therefore increase their commitment to a more climate-friendly economy without changing their own business models too drastically. They would invest in clean energies and CO2 reduction in developing countries and thereby acquire emission certificates with which they can continue to emit a certain amount of CO2 elsewhere.
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Although this trade in emission certificates is somewhat reminiscent of the trading system with CO2 emissions rights that is widespread in the EU, the US initiative is met with skepticism in Germany and Europe.
Why Europe is skeptical
The principle of trading CO2 certificates is well known in the EU. In principle, companies here have to pay money for every tonne of CO2 they emit. As the number of available CO2 certificates decreases from year to year, companies have to produce more climate-friendly from year to year. This is how Europe wants to make its industry climate-neutral by 2050.
Extending this trading system from the EU to other regions of the world would be the dream of many European climate politicians. Nevertheless, they are skeptical about the US initiative. Because it could make companies climate-neutral on paper, even though they continue to emit CO2.
“Companies have to reduce their emissions if we want to meet the Paris climate targets, not offset them,” says EU climate politician Michael Bloss (Greens). “Instead of relying on a voluntary credit system, the USA should introduce a functioning emissions certificate trading system.”
Kerry’s plan is reminiscent of the so-called Clean Development Mechanism (CDM), an instrument from the previous agreement of the Paris climate protection agreement. The principle: companies from industrialized countries implement projects to reduce CO2 emissions in developing countries and in return receive emission certificates to improve their own CO2 balance. But this approach has not really worked so far.
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“Developing and emerging countries should be rewarded if they reduce greenhouse gas emissions,” economist Axel Ockenfels told Handelsblatt. However, he considers the proposed mechanism to be problematic. So it is not easy to measure emissions that do not take place. “The danger of unhelpful greenwashing in rich countries is real.”
Other experts are also skeptical about the US push. Kerry’s proposed system “looks like a reasonable plan to fund the global South’s shift to zero-carbon technologies,” said Ottmar Edenhofer, director of the Mercator Research Institute on Global Commons and Climate Change (MCC). , the Handelsblatt. “The difficulty, however, will be to ensure that you are not funding a project that would have been implemented anyway.”
Past experience with similar mechanisms is “not encouraging,” said the MCC director. The method proposed by Kerry should only be used “if it is clear that it will actually lead to additional emission reductions”.
According to Edenhofer, this would be the case, for example, “if it finances technical processes for removing CO2 emissions from the atmosphere, such as direct extraction via air filter systems”.
Germany wants the climate club
Hubertus Bardt, Managing Director of the German Economic Institute (IW), emphasizes that a flexible trade mechanism can make climate protection more efficient and therefore more economical. “It’s about time this open point of the Paris Agreement was finally closed. Perhaps the American advance can get things moving,” Bardt told Handelsblatt. However, it depends on many detailed questions. “For Europe, it would have to be clarified how such a system can be integrated into emissions trading and what counts as an additional reduction in emissions,” said Bardt.
Europe insists on binding emissions trading.
(Photo: AP)
The IW managing director points to other models: “An alternative would be a sector-specific climate club, in which certain standards or pricing for emissions in a sector could be agreed and at the same time support for the transformation of the industry in emerging countries could be organised.”
Chancellor Olaf Scholz (SPD) is considered a supporter of the climate club idea. As many countries as possible would therefore form a climate club together and agree on common ways to become climate-neutral by 2050. Instead of waiting for the climate protection negotiations under the umbrella of the United Nations (UN) to lead to reliable results, some large industrialized countries would take matters into their own hands.
However, this idea is currently suffering from a problem: China, the world’s largest emitter of greenhouse gases well ahead of the USA, suspended the climate dialogue with the USA in the summer. They also don’t want to join a climate club that the USA is a member of. However, a climate club without the largest emitter is inconceivable.
Will the US idea go further than the German club plan? Well, Friday, US President Biden intervenes in the climate summit.
More: German UN diplomat defends short-term investments in fossil fuels – and talks into the consciences of industrialized countries