Unleashing market forces to scale green industry: The role of Green Market Makers
The 'Green Market Makers' report was launched at the inaugural NYCW Green Markets Day 2024 in New York on 24th Sept 2024. Below are comments from John Podesta, Senior Advisor to the US President for International Climate Policy, made during his keynote speech at the launch event.
"Thank you for that introduction. I want to acknowledge Dave Turk the Deputy Secretary of Energy, and JP Morgan Chase.
Thank you to the Bezos Earth Fund -- and all of today’s partners for putting together this event and shining a light on the critical topic of green markets.
I don’t think I have to remind anyone this meeting is well timed.
We are at the end of a summer defined by the climate crisis.
July 22nd was the hottest day ever recorded by humans on this planet.
The consequences are all around us just last week, a storm dumped 18 inches of rain in the Carolinas torrential rains and floods killed more than 1,000 and displaced hundreds of thousands more in central and west Africa. Fires are right now ravaging Brazil, Bolivia, Ecuador, Peru, Colombia, and Uruguay. Typhoon Yagi killed more than 500 in Southeast Asia.
These tragedies and disasters also directly impact your businesses.
They are the evidence of what we are dealing with today
For example, drought in central America led to the lowest water levels in the Panama Canal in half a century which disrupted global shipping routes and supply chains.
Unprecedented floods in central Europe wiped out bridges and trucking routes.
More than 100 consecutive days of temperatures over 100-degree Fahrenheit in Phoenix put workers and businesses at risk.
To combat these threats, President Biden and Vice President Harris have pursued the most ambitious and successful climate agenda in history – one that is government-enabled, but private-sector led.
Through the Inflation Reduction Act, the largest investment in climate in history, we’ve provided ten-plus years of certainty through expanded and enhanced clean energy tax credits signaling to businesses that they can think big and make long-term decisions.
The private sector – and many of the companies in this room – has responded with more than $270 billion of investment just since the IRA passed more than 415 billion since President Bien and Vice President Harris took office and created more than 330,000 jobs.
We are making significant progress—but it’s time to focus on every aspect of decarbonization.
To achieve our goals to avoid the worst consequences of the climate crisis to bring solutions to market, at speed and at scale we need to address the emissions from heavy industry and long-distance transport.
It’s pretty simple math. These industries are responsible for roughly 30% of global emissions.
We will not meet our goals unless we reduce emissions in these sectors.
But right now, green industrial projects are not coming to the market quickly enough. And we continue to hear that there are struggles with liquidity in some of these markets.
Look at the consequences.
Just a few weeks ago, Orsted scrapped plans for their Flagship One green fuel plant in Sweden.
Lower carbon cement is moving forward but the most ambitious projects to drastically cut emissions are having trouble finding offtake.
I hope you are asking: how can this be?
We know that by 2030, companies like Ford, General Motors, and Volvo have committed that 10% of the steel they purchase will be net zero emissions.
We know that by 2030, Airbus, United, and Delta – just to name a few – have committed that up to 10% of the aviation fuel they buy will be the cleanest on the market.
And we know the Inflation Reduction Act in the United States the Clean Investment Tax Credits in Canada and the EU Innovation Fund and GX in Japan are fundamentally shifting the business case for green commodities.
The demand is there. The purchasers are there. Many of them are in this room. So, what needs to happen?
That’s what I want to focus on today.
One of the most important missing links across green commodities are book and claim systems, or systems that decouple greenhouse gas emissions reductions from physical goods and sell them separately.
Done right, book and claim can uncouple production credits from tradeable goods.
In other words, this detaches the “green attributes” that buyers want to pay for from the physical good being produced.
Consider a corporation that committed to buy green cement – a highly localized good.
They are willing to pay some extra amount for this cement because it is green.
And yet, depending on where this corporation is located, they may not be able to buy from a new decarbonized cement plant without additional and untenable transport costs.
Consider an airline that has agreed to purchase SAF, but finds that the fuel is set to be produced far away from their most popular travel routes.
Or consider an automaker that has committed to purchase green steel but buys steel from an intermediary, not directly from the green steel producer.
In all of these cases, there are willing buyers who want to decarbonize their operations.
They are willing to pay some premium for a decarbonized good within their value chain.
And yet, there is inefficiency that comes merely from the physical asset itself.
We need to help connect the willing capital for green goods with the projects that are making them.
Book and claim systems can help solve this problem.
They would allow purchasers to directly pay the price premium of green commodities – whether or not they are the direct purchaser of that good, and whether or not that is the exact unit of cement or concrete or steel or fuel that will be used in their own operations.
Of course, we want them to take this delivery of green commodities where they can and overtime that will become easier if we increase liquidity in the market now.
Overnight, this would increase liquidity innovative green products would finally have access to the capital they need.
In addition, once sold, the good itself would enter the commodity market.
And finally, this creates a straightforward way for corporations to directly impact their emissions and clean up their own operations.
This creates a straightforward way for corporations to impact their emissions something that we hear and time and time again is a serious challenge for companies currently looking to clean up their supply chains.
So, what do these book and claim systems need to look like?
We aren’t reinventing the wheel.
We can draw on lessons learned in the United States with Renewable Energy Certificates.
There, we have made progress to create a market-based instrument that separates out the attributes of renewable energy, allowing us to better track account for and pay for green electricity nationwide.
I know many private sector and NGO groups in this room today have worked hard to build out these registries – thank you for your work.
Going forward, for each of the “hardest to abate” industries the private sector needs to develop transparent, trusted, and verifiable registries.
These systems must be transparent if they are to be trusted.
These systems must be third-party verified with established certification processes if they are to be reliable.
And these systems must be underpinned by auditable registries if they are to be durable.
I’ve often wondered why God created blockchain. I worried it was for crypto grifters but maybe book and claim is the answer!
In some ways, I see parallels between the need for book & claim systems, and the need for voluntary carbon markets.
In May, the administration released principles in voluntary carbon markets, similar to the guidelines I just outlined.
Like the voluntary carbon markets, book & claim systems are another solution that will help us to crowd in private capital and deliver reliable revenue streams.
And like voluntary carbon markets, if we don’t set strong standards—we risk seeing more greenwashing than we do greening of industries.
Overall, we know the formation of new markets is complicated, and will require a great deal of coordination among your companies, national governments, and international bodies.
We know book and claim systems are not the only barrier to scaling green industry.
We also have to address product standards regulations permitting cost of capital and contracting mechanisms.
This will not be easy but what the successes of the past four years have shown us is: we can do this.
We just need to be honest about where we are and ambitious about how to accelerate our progress. We need to work pragmatically, and across stakeholders, to kick-start markets.
So that is my ask for each of you today and going forward.
Engage urgently on this work.
The right people are here in this room today. So, talk to each other.
Figure out who is not in this room and bring them into this conversation.
And after this week, talk to your boardrooms and C-suite colleagues and explain why this is critical – not just for the global climate fight, but for your bottom lines.
President Biden and Vice President Harris did their part: again, our strategy is government-enabled, but private sector led.
We made unprecedented government investment in these technologies.
Now the private sector needs to take this progress and run with it.
Together, let’s get this done."
Remarks of Senior Advisor John Podesta
Green Markets Day hosted by JP Morgan
Climate Week, New York City
Tuesday, September 24, 2024