(CNN) US climate envoy John Kerry announced a new, controversial plan Wednesday to raise cash for climate action in the developing world -- by selling carbon credits to companies wishing to offset their polluting emissions.
Speaking at the COP27 climate summit in Egypt, Kerry said the initiative, which he said should be "up and running" within a year, would help finance energy transition in vulnerable countries. He said that Chile and Nigeria were two countries that had already expressed interest in the scheme.
But the plan has already attracted criticism because of the way it will be financed -- with money raised in sales of carbon credits, which allow companies to pay for someone else to cut their planet-warming emissions, instead of cutting their own.
The idea that rich countries must help poorer nations finance their efforts to get rid of fossil fuels and transition into renewable energy is a key part of the Paris Climate Agreement -- but in terms of real money, little has materialized so far.
Facing economic turmoil, high inflation and soaring energy prices, many governments find it difficult to secure taxpayer money for climate projects in distant countries.
The Kerry team is also aware that securing billions of dollars in international climate aid is an uphill battle in the US Congress, which must approve it through budget appropriations.
If US President Joe Biden intends to deliver on his pledge to shore up around $11 billion in funding, the administration must look to other avenues -- including leveraging the private sector — to get it done, said Gina McCarthy, Biden's former national climate adviser.
"It was very clear to me that President Biden made a commitment to really accelerate the kind of resources to the developing world, but it's equally clear Congress had no interest in moving that forward," McCarthy told CNN last week. "That could be part of the dilemma in the US; while the administration understands we have a commitment, you don't have a Congress that seems willing to move forward."
That's why Kerry is tapping into the private sector. The scheme was announced in partnership with the Rockefeller Foundation and the Bezos Earth Fund, and Kerry said Bank of America, Microsoft, Standard Chartered Bank and PepsiCo were among companies that were already showing "strong interest" in the initiative. He added that fossil fuel companies were not involved in the plan.
While calls to provide more money to vulnerable countries are now stronger than ever, Kerry's plan has not been received well by some advocates and experts.
Many argue the concept of offsetting carbon emissions amounts to little more than "greenwashing." The key concern is that if companies are allowed to purchase carbon credit offsets, they'll be less willing to cut their emissions.
United Nations Secretary-General Antonio Guterres warned on Tuesday that "shadow markets for carbon credits cannot undermine genuine emission reduction efforts."
"Targets must be reached through real emissions cuts," Guterres said, adding: "Fossil fuels must be phased out and renewable energy scaled-up."
Kerry said after his announcement that he had met with Guterres on Wednesday and that the UN chief was supportive of the initiative as long as there were "safeguards" involved.
Rachel Cleetus, policy director and lead economist for the Climate and Energy Program at the Union of Concerned Scientists, said the proposal was "no substitute" for the "real public finance" that developing countries need.
"Carbon offsets are not an answer in a world already on fire, under water and facing mounting climate losses and damage," Cleetus said. She added that low- and middle-income countries need "grants-based public finance from richer countries ... rather than questionable carbon offset schemes that risk allowing companies to pollute at the expense of the planet."
Kelly Stone from ActionAid USA said the "US has already repeatedly failed to meet their obligations" to provide climate finance to poorer countries.
"Now is the time for the US to take responsibility for how much it has contributed towards climate injustices," she said.
CNN has asked the Kerry team for comment on the criticism, but has not yet received a response.
The International Energy Agency (IEA) said last month that governments must triple their annual clean energy investments to $4 trillion by 2030 if the world is to achieve net-zero emissions by 2050. There is a significant financing gap: the IEA said it expects global investments in low-carbon energy to increase to $2 trillion a year until the end of the decade -- up 50% from today's spending.