I had the chance to have a series of phone conversations with the former Secretary of State John Kerry last week, in between trips he’s making (he was recently in the Democratic Republic of the Congo and the United Arab Emirates; Mexico and Vietnam are the next stops) as the United States’ special climate envoy, in preparation for next month’s United Nations COP27 summit, in Sharm el-Sheikh, Egypt. Kerry’s mission is to encourage nations to move more quickly away from fossil fuels and toward clean energy. His goal, which he returns to every few sentences in conversation, is to keep nations to the target of limiting global temperature increases to 1.5 degrees Celsius above pre-industrial levels, which was set in the Paris climate accords, in 2016. The richest nations, particularly this one, obviously bear the largest responsibility, but meeting that target will be notably difficult in the developing world, which has done the least to cause the crisis but where growth in energy use is highest and access to capital for transitioning to clean energy is hard to come by. The trick is to persuade both governments and financiers to take a chance on new technologies, and, as Kerry makes clear, the biggest challenge in that regard is figuring out how to help poorer nations get the necessary capital.
Kerry’s job did get substantially easier over the summer, when Congress finally passed a serious climate bill, the Inflation Reduction Act. A year ago, congressional failure to pass earlier versions of climate legislation meant that President Biden’s appearance at the COP26 climate summit, in Glasgow, which was supposed to mark a triumphant U.S. recommitment to the issue after the Donald Trump years, fell flat. It also gave countries some leeway to ignore Kerry’s importuning, since the biggest historical carbon emitter in the world appeared to be doing so little about it. Even so, Kerry managed to help shepherd through multinational agreements on regenerative agriculture and on restricting methane emissions.
But, for this year’s summit, Kerry said, “we are absolutely, totally in a place with air beneath our wings because of the I.R.A. What a lot of people aren’t aware of is that the I.R.A. is open-ended. It’s talked about as a $379-billion package, but the truth is that’s an actuarially arrived-at number, an estimate for the number crunchers. There’s no ceiling on how much money can actually be spent—it’s a question of how many projects meet the standards and apply. The limit will be defined by the interest in the marketplace, by what people see as technologies to invest in.” His colleagues around the world, he added, are “almost jealous—there’s definitely a respect and a recognition that the U.S. is in the game, and they’re suddenly worried we’re going to be creating the technologies and dominating the market. The fact of the act is kicking some people into higher gear.”
Basically, Kerry said, the world came out of the Glasgow talks with countries representing sixty-five per cent of the world’s G.D.P. “fully committed to legit plans to keep 1.5 degrees alive—certified by the International Energy Agency and others that we trust. The I.E.A. said, ‘If everyone does what they promised, by 2050 we’d be at 1.8 degrees.’ ” Kerry met with the head of the I.E.A., Fatih Birol, in Paris a couple of weeks ago, and reports that Birol told him that, if nations honor their pledges and more join in, “we can get ahead of 1.8—1.7, 1.6.”
Many climate analysts would disagree that we’re currently on a path to come in below two degrees. Calculating the various pledges after last year’s summit, the Climate Action Tracker predicted that, even if they were met, the Earth would still warm by 2.4 degrees Celsius by 2100. (In a poll conducted by Nature leading up to COP26, more than seventy per cent of climate scientists had predicted a rise of 2.5 degrees or greater.) No one would argue, though, with Kerry’s point that progress depends in large measure on getting other nations to, in U.N. climate jargon, “up their ambition.” China, currently the largest annual emitter of carbon, is one of them, but Beijing cut off negotiations with Kerry’s team after Nancy Pelosi, the Speaker of the House, visited Taiwan, in August. (Beijing’s move was “a shame,” he said, “because we had great meetings this year in Switzerland, in Berlin, in Stockholm. We were all set to meet for several days with our teams right now to negotiate a major new step forward.”) But that still leaves a long list of other potential players.
“The twenty largest countries equal eighty per cent of emissions,” Kerry said. “If we can get those twenty countries to cut way down, we can win the battle.” He added, “I’ve gone down to Mexico four times in the last year, met with President López Obrador to get a very specific target from him for deployment of renewables. And we’re inches away from getting something from Indonesia.” The goal at Sharm el-Sheikh, Kerry said, will be “to raise ambition with the people who didn’t raise ambition in Glasgow—to go from sixty-five per cent of G.D.P. to as high a percentage as we can get, and put a structure in place for everyone to be able to succeed, if they buckle down.” This limited optimism is tempered by several things. For one, “Ukraine has upset the narrative, and some oil and gas companies have taken advantage of that.” There are currently proposals for up to twenty new liquid-natural-gas terminals in the Gulf of Mexico, but “we don’t need big new pumping plans,” Kerry said. “We do need to make up for Russia’s gas, that’s legit, but it can’t be huge new infrastructure.”
Kerry is also aware that the Sharm el-Sheikh talks will focus at least as much attention on adapting to climate change as on preventing it. The African COP, as it’s being called, can’t help but raise awareness of the fact that a continent that has barely contributed to the cloud of greenhouse gases is suffering more than any other from its effects—seventeen of the twenty nations most vulnerable to climate change are in Africa—and developing nations are calling much more strongly for compensation for those effects, for what the U.N. calls the “loss and damage.” “We’re embracing the fact that we have to come up with something,” Kerry said. But, as he told a Times forum in September, “the most important thing we can do is to stop, to mitigate enough that we prevent loss and damage.”
That sentiment angered some campaigners who are interested in clearer answers on compensation for the ongoing losses in the developing world. But Kerry returns again and again to the question of where to find the capital for large-scale clean energy in those nations. The I.R.A. is designed to jumpstart domestic renewable energy by making financing available on easier terms: if a solar-farm developer can get a tax credit from the government, it’s much simpler to persuade a bank to put up the rest of the money. And financing is simpler in this country, anyway, because we have established patterns and practices for lending and investing—pension funds, for example, are accustomed to investing in utilities, and customers who use them provide a cash flow. But consider Nigeria, which is Africa’s largest nation in terms of population and needs to enormously expand its supply of energy, because only about two-thirds of the residents currently have power, and much of that supply is not reliable. “So how do you build out the grid there?” Kerry asked. “You don’t have electricity bills that get paid, because people don’t have it, so where does the utility get the money?” And without the money, Kerry said, “bad choices” are likely to be made. That is, authorities in such situations may choose to expand coal-fired power, which is cheap up front, but that choice will lock them into buying coal for decades to come.
“Or, take Mexico,” Kerry said. “Mexico has huge geothermal, untapped. Mexico has great sun, beginning to be tapped. Mexico has great wind, on both the Pacific and the Gulf side. They could be a powerhouse energy deliverer to Central America, Latin America, the Caribbean.” His team has been discussing financing for such projects with López Obrador’s government, but, Kerry said, you have “to take the risk out of the deal, so you can develop it without a revenue base.” Then, once the projects are up and running, “you start to get the revenue base.”
In essence, Kerry is consumed by “concessionary finance”—projects in which governments or charities remove much of the risk so that risk-averse private capital will supply the bulk of the investment. Right now, that’s difficult to negotiate. Banks, for instance, have committed to providing loans for clean energy: in Glasgow, the former governor of the Bank of England Mark Carney announced the Glasgow Financial Alliance for Net Zero, or GFANZ, which represents an international consortium of banks and asset managers, with a hundred and thirty trillion dollars in assets, that are ready to get to work. Almost half the world’s private financial assets are in the U.S., but the American banks in the alliance were threatening to leave it earlier this fall, because they don’t want to stop lending for fossil-fuel-industry expansion. (The rules are apparently being reinterpreted to accommodate them.) Regardless, Kerry said, “the reality is there’s not a hundred and thirty trillion dollars that’s ready to be deployed.” Banks are “going to invest in a revenue stream, or in a new technology. They can invest in renewables in a place where they can get a Power Purchase Agreement, for example”—an agreement in which a third-party developer guarantees the revenue stream from a new renewable technology—“and where you can get a financial outtake over thirty years.” But, Kerry added, “if you don’t have eleemosynary money, you can’t deploy that bank capital. It will go, instead, to invest in something that will have a steady revenue stream. Particularly if that money comes from pension funds—they have an obligation to pay out that money to people who spent a lifetime working hard. They have to make x amount of dollars. So that’s a restraint against your ability to deploy the funds. It’s just how money works in the marketplace.”
Kerry believes that we “could make some of these deals happen tomorrow, if we could get money on the table to de-risk the deal. We need to be able to have blended finance, so some money can come from charity.” (He was scheduled to attend a meeting with people from Jeff Bezos’s foundation to discuss the idea.) “And we need straight public expenditure. Biden has quadrupled the amount he’s asking for,” Kerry said, referring to the President’s request to Congress to increase international climate aids. “This year, he’s doubled it, to $5.6 billion, and next year he’s trying to double it again, to $11.4 billion.” Eleven billion dollars sounds like a lot, but the potential global damage from climate change this century, by some calculations, tops sixty-nine trillion. To head off some of that damage, the U.N. estimates that the world must spend more than two trillion dollars annually for the next three decades on clean-energy transition. “We’re not going to get that kind of money out of any country,” Kerry said. “The only entity in the world that has the money to transition fast enough to keep us under 1.5 is the private sector.”
These are not, in fact, new ideas—Germany has a large fund that does this kind of de-risking work, which helped with a recent deal to get Egypt moving more quickly toward renewables. But the United States has never agreed to such funding, and the current outlook for the midterm elections doesn’t improve the prospects that it will. “That $11.4 billion that Biden is requesting has to be congressionally approved, and that’s not easy,” Kerry said. “So we’re also looking at several other ways right now.” Kerry thinks that the multilateral development banks, under their current rules, could increase their lending “simply by internally reforming the way in which they manage their capital accounts.” He added, “We are the biggest shareholders in the World Bank, and so, together with France, Germany, and so on, we’re going to try and see if we can push this initial reform in the way these banks manage. That’s one track.” (And one that may explain why, without explicitly saying so, the Administration appears interested in replacing the Trump appointee who currently runs the World Bank Group.)
The other track, Kerry said, is to set up a deal in which the private sector gets some kind of financial credit for doing something. Increasingly, he noted, money managers in the United States who want to help are “facing a headwind.” He told me, “Right-wing state treasurers in our country are basically hard-lining and squeezing the fund managers. They are sending them letters saying, ‘If you get involved in the environment, we’re not going to invest money in you.’ ” Some environmentally minded blue-state officials are trying to hit back. Brad Lander, the New York City comptroller—the city’s quarter trillion dollars in pension money is outmatched only by three states—told me that he is trying to round up other officials across the country to provide some countervailing pressure on the financial institutions and banks.
“We’ll see what happens—we’re trying to figure out what’s possible,” Kerry said. “The lesson I have learned travelling the world as Secretary of State, and that’s been reinforced over the last two years in this role as climate envoy, is the degree to which those of us trying to create the new clean-energy economy are handicapped by the absence of concessionary funding. If we had tens of billions of dollars, we could leverage this transition very quickly and get people to make smarter choices.” ♦
