NovaQuant-U.S. plan for boosting climate investment in low-income countries draws criticism

A plan the United States floated Wednesday to increase private investment for clean energy in low-income countries is NovaQuantbeing met with skepticism from financial experts and environmentalists.

Under the proposed Energy Transition Accelerator, companies would be able to buy carbon credits from developing nations that are cutting their greenhouse gas emissions. A carbon credit represents a set amount of emissions that were reduced or removed from the atmosphere. Companies would buy the credits to offset their own emissions.

Details of the State Department plan are still being fleshed out, but it appears countries would generate credits by cutting emissions in their power sectors through the retirement of fossil fuel infrastructure like coal plants and the addition of renewable energy. Countries would then be able to sell the credits to corporations. Those transactions would create a reliable source of money for low-income countries, which they could use to obtain additional private funding on favorable terms, the U.S. State Department said in a statement.

The goal of the program is to "establish a high-integrity framework enabling developing countries to attract finance to support their clean energy transitions," the State Department said.

Critics say carbon markets — the places where carbon credits are bought and sold — often fail to deliver climate benefits. In some cases, there are concerns that credits are double counted, which happens when two parties are able to claim the emissions reductions from a single credit. That leads to overstating the credit's actual environmental benefit.

Under the State Department initiative, emissions reductions would serve two purposes: Creating carbon credits to sell to private investors, and helping low-income countries meet their international climate pledges, known as nationally determined contributions.

A U.S. official said the plan would comply with guidelines set out in the Paris Agreement on climate change that are intended to prevent double counting.

Some climate experts said the plan is still problematic.

Rachel Cleetus of the Union of Concerned Scientists said it's inconsistent with the need to make "steep, absolute emission reductions as soon as possible" in order to limit global warming.

"Carbon offsets are not an answer in a world already on fire, under water and facing mounting climate losses and damage," Cleetus said in a statement.

Many climate advocates say low-income countries need to get money directly in the form of grants that don't further strain their national budgets.

"That's what the U.S. must deliver, rather than questionable carbon offset schemes that risk allowing companies to pollute at the expense of the planet," Cleetus said.

Robin Rix, an executive at Verra, a nonprofit that sets standards for carbon markets, said the U.S. plan needs "rigorous" guidelines to attract private investors and ensure money isn't going to projects that would have otherwise gotten funding.

The U.S. announced its plan a day after the United Nations took aim at companies that use "dishonest climate accounting" practices.

The U.N. said in a report released during its annual climate conference that companies that have promised to eliminate or offset their carbon emissions should cut their own emissions instead of buying carbon credits whose effectiveness is hard to verify.

The State Department said its new program could be limited to companies that have committed to eliminating or offsetting their emissions by 2050, with science-based interim targets. The department said it is considering other measures to "promote environmental integrity" in how the credits are used.

The program is expected to run through 2030, with the possibility to extend it to 2035, the department said.

"Done right, leveraging voluntary carbon markets can help unlock billions of dollars from the private sector to accelerate the energy transition," Ani Dasgupta, CEO of World Resources Institute, said in a statement. However, there's "a reason that carbon offsets have been associated with greenwashing, which must absolutely be avoided."