15 November 20223 minute read

New private sector efforts to unlock finance to accelerate reduction in greenhouse gas emissions

On November 9, 2022, US Special Presidential Envoy for Climate John Kerry, the Rockefeller Foundation, and other funds announced a partnership to work toward creating an Energy Transition Accelerator (ETA) to stimulate private capital investments in clean energy and emission-reduction projects in developing countries.

According to the International Energy Agency, investments in clean energy and emission reduction projects must reach $4.2 trillion by 2030 to combat climate change, with more than half of that investment needed in emerging and developing economies. The ETA is intended to address some of that need.

Goal of the partnership and the ETA

The partnership’s goal is to establish a framework that will enable developing countries to attract finance to support their clean energy transitions. The ETA will help national and subnational jurisdictions scale their operations and produce verified emission reductions resulting in marketable, saleable carbon credits –credits that, it is hoped, will channel market forces to attract finance for clean energy projects in these jurisdictions, using the credits or the proceeds from their sale as collateral. The partnership believes this will incentivize projects that produce deep and rapid verified emission reductions.

Coupling the verified emission reduction with benefits to local economies and communities

The ETA will be coupled with safeguards and guidelines to support local economies and communities, such as requirements that projects create local jobs and provide training. Additionally, and to promote environmental integrity, only companies committed to achieving net zero no later than 2050 will be allowed to use or retire credits from the ETA.

Other provisions of the ETA will establish strong transparency requirements and address how companies’ investments in verified emissions reductions through the ETA could be recognized. For example, the ETA may allow companies to use the carbon credits to support their emission reduction targets above interim targets, contribute to climate finance or other voluntary goals, or contribute to a project country’s Nationally Determined Contribution (NDC) target under the Paris Agreement.

The final ETA requirements and use criteria, including how to ensure alignment with current industry practice, will be developed in consultation with 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.

Going forward

DLA Piper plans to follow ETA developments and provide further alerts on this topic.  To learn more about the implications of the ETA for your business, please contact DLAPiperCommodities@dlapiper.com.