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Paris summit: VCMs are needed to counter lack of public funds, says Kerry

John Kerry
John Kerry says the voluntary carbon market is a necessary way of funding an accelerated energy transition that everyone needs to embrace (Photo: Simon Wohlfahrt/AFP via Getty Images)

The creation of the Voluntary Carbon Markets Integrity Initiative could help to increase the quality of carbon credits and push ahead with the green transition, says US climate envoy John Kerry at the New Global Financing Pact summit.

Voluntary carbon markets are often dogged by negative headlines, but in a barnstorming speech at a side event during the Summit for a New Global Financing Pact in Paris, US climate envoy John Kerry insisted they were a vital part of the climate puzzle in terms of removing emissions and helping developing countries finance their energy transition, and referenced changes that were being wrought to bring more integrity to the market.

“There are forests that are standing today because they were purchased by an offset,” Kerry said. He admitted there had, in the past, been “some abuses” of the voluntary carbon market, but suggested that such incidents would become history with the creation of the not-for-profit Voluntary Carbon Markets Integrity Initiative (VCMI). The transition was the imperative, not dwelling on such issues, he said.

“We are the victims of the way we human beings have chosen to drive a car, eat, do whatever we do with travel, heat our homes and factories,” Kerry said. “For years, coal, oil and gas have made this happen, creating a comfortable life people want.”

But the energy transition now has to happen, he said, highlighting how greenhouse gas emissions were already “transforming life as we know it on this planet and threatening life and civilisation itself”. Yet, how to finance the transition remained a huge issue, he said.

“There isn’t enough money to effect this transition in the public sector,” Kerry said. “What [are] you going to do about it? Just let it be business as usual?” he asked fellow speakers and the audience.

“I refuse to believe we are prisoners of previous choices,” he continued, coming to the conclusion that the voluntary carbon market is one necessary way of funding an accelerated energy transition that we have no choice but to embrace.

“We must be mindful of the mistakes made in the past,” he said, but “let’s not be prisoners of the past. Don’t let the perfect one be the enemy of the good”. And those companies investing in carbon credits are “not getting a freebie, they still have to live up to net zero in 2050”, he added.

‘Smooth transition’

Mark Carney, chair of the Glasgow Financial Alliance for Net Zero and UN special envoy on climate and finance, likewise insisted that voluntary carbon markets can work for the benefit of all. “Done properly, voluntary carbon markets take money from the best resourced companies in the world” and help poorer countries, and indigenous people, he said.

“Done properly, this [market] is central to a smooth transition.” He said the energy transition had to take place in the context of “the system we have, not the system we want”, and with the fact we are quickly running out of time to reduce emissions to avoid the worst impacts of climate change.

“As an impact investor we think carbon credits are interesting,” said Philippe Zaouati, chief executive of Paris-headquartered Mirova, who was also speaking at the event., but he admitted that corporates are “concerned about the integrity of the market”. Zaouati compared it with the green bond market, which he said was helped from the very beginning to be “very strong” as it was led by “one big initiative”, namely the green bond principles created by the International Capital Market Association.

Focused on ensuring integrity and impact, Mirova would only advice the use of carbon credits to certain “select companies”, said Zaouati. The chosen companies must have a Science Based Targets initiative trajectory to net zero and a good environmental, social and governance rating, according to Mirova’s criteria, he explained.

Integrity Council for the Voluntary Carbon Market chair Annette Nazareth and VCMI co-chair Tariye Gbadegesin underlined during the session the work their organisations were doing to increase the integrity of the voluntary carbon markets on the supply and demand sides. “We need end-to-end integrity,” said Gbadegesin, assuring the audience that the two organisations had been “working very closely over the last year” to achieve this goal.

A service from the Financial Times