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US pushed behind scenes for approval of corporate carbon offset plan

Advisers to former US climate envoy John Kerry’s heavily lobbied the world’s top corporate climate targets oversight group to reverse its opposition to the use of controversial carbon credits, according to sources familiar with the process.

Officials involved in shaping a US clean-energy scheme to channel funds to developing countries made repeated requests to the leadership of the Science-Based Targets initiative over a period of more than two years.

The push came ahead of a policy decision by SBTi announced last week to allow companies to use carbon credits to offset their pollution.

In the absence of another body or regulator, SBTi has evolved as a verification organisation for corporate climate plans, backed by non-profit groups.

Kerry retired as US climate envoy earlier this year but was instrumental in a plan for poorer countries to issue carbon credits to companies in return for funding to help nations shift away from fossil fuels to clean energy.

The scheme, known as the Energy Transition Accelerator, was supported by Andrew Steer, president of the Bezos Earth Fund, a key financial backer of SBTi, as well as by the Rockefeller Foundation.

Kerry said at a US state department event on Friday that he was “encouraged to hear” that SBTi leaders had signalled “openness” to companies using carbon credits to address some of their indirect emissions.

The event highlighted the US scheme, which has attracted interest from Amazon, Mastercard and Bank of America but is still seeking corporate buyers for its credits.

A move by the SBTi board to back carbon crediting as an alternative to emissions reductions would boost the US-driven project by giving a green light for companies to hit climate goals through the purchase of the credits at scale, rather than focusing on making actual cuts to emissions.

Developers have invested billions of dollars in the global market for voluntary carbon credits, which are meant to represent a tonne of CO₂ removed from or kept out of the atmosphere.

But detractors argue that these unregulated instruments often overstate the greenhouse gases stopped, and justify further emissions by polluters. 

“There are trillions of dollars to be made out of hot air,” said one aggrieved staff member at SBTi.

The staff uproar about the decision-making process, and the perceived influence exerted by the political, corporate and philanthropic backers of the growing carbon credit industry, saw SBTi take a step back on an endorsement of the use of carbon credits last week.

Typically, SBTi requires companies to pledge to cut emissions by at least 90 per cent by 2050, with leeway to invest in permanent carbon removal and storage for the remaining tenth or for that which cannot be reduced by technology.

Sustained pressure on the organisation to endorse carbon offsets had been “about creating a demand-side signal at any cost, [even by] destroying the reputation of SBTi and maybe the last chance of closing the gap to 1.5 [degrees Celsius],” the person said. Countries agreed as part of the 2015 Paris agreement to limit global warming to 1.5C above preindustrial levels, or well below 2C.

Apple, Nestlé and Engie are among the thousands of tech, consumer goods companies and utilities to receive the SBTi seal of approval for their climate plans. The body is also developing standards to check the targets of oil and gas companies and financial institutions.

The push by the US government for SBTi to soften its stance against carbon credits began ahead of the UN COP27 climate summit in Sharm el-Sheikh in November 2022, where the scheme was launched by Kerry, according to people familiar with the thinking of SBTi’s top leadership.

Kerry’s then office asked the group to allow companies to cancel out some of their emissions by purchasing carbon credits, SBTi chief executive Luiz Amaral told staff in October 2022.

Companies including General Motors had raised the SBTi’s opposition to credits in conversations about joining the Energy Transition Accelerator, the US officials had said.

But Amaral also expressed concerns that creating an incentive for companies to buy carbon credits at scale instead of cutting emissions could starve companies’ own climate projects of billions in financing.

The state department also asked SBTi last year to make the purchase of carbon credits compulsory for companies taking part in the net zero verification process, even if these were not used to cancel out the company’s emissions, according to sources familiar with the request.

On Friday, Amaral said that SBTi’s “dedication to science-based decarbonisation, public consultation and standard-setting governance is unwavering. The SBTi standards have not changed,” it said in a statement.

In a governance reshuffle intended to signal independence and to reflect its growth, SBTi incorporated as a limited company last year and added independent trustees to its board.

A number of board members retain ties to companies and philanthropists who have an interest in the development of carbon credit markets.

One independent trustee, Iván Duque, the former Colombian president, also holds an unpaid position on the steering committee of the African Carbon Markets Initiative, which seeks to scale the carbon credit market on that continent. 

Another significant backer of carbon offsets is SBTi board member María Mendiluce, chief executive of We Mean Business, a founding partner of SBTi, according to people familiar with the leadership. 

Representatives for Duque and WMB did not provide a comment.

Top funders of the climate-oriented WMB include Amazon and Masdar, the UAE’s renewable energy company, which have all invested heavily in carbon markets.

A document drafted in October by Nigel Topping, the former WMB chief executive and UN high-level climate action champion at COP26, proposed a “counter narrative” campaign to build confidence in global carbon markets.

This included the need for “clear, simple and legitimate recognition” by SBTi of credits in corporate plans, which the document, seen by the Financial Times, suggests could be promoted by industry groups, commodity traders, airlines and investigative journalists.

Topping is a shareholder of Xpansiv, which runs a global carbon trading exchange, and a director of ICE Benchmark Administration, which provides index services and is affiliated with New York-based Intercontinental Exchange.

The campaign was never officially created following the proposal, Topping told the FT.

Those who held a “puritanical view” against carbon credits should come up with alternative ways to raise the trillions of dollars in financing needed to help the Global South adapt to climate change, he said.

The US state department said the perspectives of SBTi and other organisations had been “critical” to ensure the carbon credit schemes could “mobilise significant capital while maintaining a high standard of integrity”.

“The United States is firmly committed to high-integrity carbon markets as one mechanism for unlocking the finance needed for developing and emerging economies to transition from fossil fuels to clean power and to halt deforestation,” it said.

Additional reporting by Aime Williams in Washington

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