About a third of coal-fired power plants (CFPPs) that are either operational or in development across Asia are eligible to generate “energy transition credits” — a form of “high-integrity” carbon credits.
The Monetary Authority of Singapore (MAS) mooted the “transition credits” concept in 2023 as a “complementary financing instrument” that could incentivise CFPP owners to retire their assets early and replace them with renewable energy.
Proceeds from such energy transition credits can bridge cost gaps, “especially where renewable-plus-storage is more expensive than fossil fuel or coal-based local utility tariffs”, according to a summary published by MAS on Nov 10. These proceeds can even go beyond short-term compensation to support long-term community resilience, such as re-employment, upskilling and business support.
MAS released key insights from its upcoming final report on transition credits at the opening day of COP30 in Belém, Brazil. This marks the latest update since MAS’s multi-stakeholder initiative Transition Credits Coalition (Traction) published an interim report at COP29 in Baku, Azerbaijan last year.
Traction, which was launched at COP28 Dubai in 2023, claims Asia holds “substantial potential” for generating high-integrity energy transition credits, but success depends on addressing “region-specific needs” and ensuring energy reliability, access and affordability.
Traction believes a third of CFPPs across 15 Asian markets are potentially eligible to generate energy transition credits, representing around 1 gigatonne of carbon dioxide equivalent (GtCO2e) of emissions reductions annually.
These CFPPs must meet a set of criteria to verify their integrity. For example, to demonstrate permanence of emissions reduction, the CFPP owner must have a public commitment to not build new CFPPs and not increase existing CFPP capacity.
According to Traction, this potential pipeline of CFPPs needs to be further refined by considering “asset-level attributes” — such as the impact on emissions reductions and jobs — and “market-level attributes”, such as market readiness for phasing out coal and generating carbon credits.
State-owned and captive coal plants can be included, further expanding this pipeline, but Traction says further studies are needed to account for specific considerations, such as government commitments and industry end-use needs.
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The coalition of over 30 partners also claims “demand momentum” for energy transition credits is growing, supported by “structured participation pathways” that help prospective buyers “engage with confidence”.
“Energy transition credits offer climate and socioeconomic impact, and can form a credible component of a buyer’s diversified carbon credit portfolio strategy. Mechanisms such as advanced market commitments and buyer coalitions can help aggregate demand, enable risk-sharing, lower due diligence costs and send a clear offtake signal to support a pipeline of high-integrity projects,” reads a paragraph from the six-page summary.
Traction’s final report will be available on MAS’s website on Nov 12 at 9pm, Singapore time. The coalition’s members include Temasek, DBS, Oversea-Chinese Banking Corporation (OCBC), United Overseas Bank (UOB), Standard Chartered, Bank of America, Citi, the Asian Development Bank, World Bank Group and the World Wide Fund for Nature (WWF) Singapore.
The final report marks the completion of Traction’s mandate. According to MAS, the next phase will focus on translating Traction’s “foundational work” into “concrete projects and transactions”, with “continued focus” on integrity, transaction scalability and demand-building. This will be led by key partners like the Rockefeller Foundation and the Kinetic Coalition.
The Kinetic Coalition is a global alliance of more than 20 major companies, including Amazon, Mastercard, McDonald’s, Netflix and Pepsico.
Nat Keohane, president of environmental non-profit Center for Climate and Energy Solutions (C2ES), which leads the Kinetic Coalition, says the alliance “can further advance [Traction’s] work to help deliver abundant, affordable clean energy systems around the world”.
“The demand for clean energy around the world is real and growing. It’s essential we drive investment towards real solutions that transform energy systems and benefit local communities. Energy transition credits can provide a credible pathway for companies and governments to scale that investment,” adds Keohane.
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The Rockefeller Foundation is a global philanthropic firm and Traction member. Elizabeth Yee, executive vice-president of programmes, says transition credits “are a way to empower communities and countries to make the best energy decisions for their people’s well-being”. “They unlock new possibilities for communities to thrive with abundant, affordable and reliable power and bring a diversity of investors to the table.”
Statement of support
Reflecting the growing momentum in this ecosystem, 21 public and private entities have joined in a statement to participate in energy transition credit projects through offtake, financing and underwriting arrangements.
The signatories, which include DBS, OCBC, UOB, Temasek, Grab, Keppel Electric and the governments of Singapore and the Philippines, say they “stand ready” to support the future development and deployment of high-integrity energy transition credits.
The case for Asia's coal-to-clean transition remains compelling, says Leong Sing Chiong, deputy managing director (markets and development) at MAS. “Achieving scale and impact across Asia will take time and collective action from the ecosystem, given the unique characteristics in Asian markets.”
Leong adds: “Traction's work demonstrates that energy transition credits can serve as a credible financing instrument to accelerate this transition, while ensuring it is inclusive and economically viable. MAS will continue to work closely with industry leaders, financiers and international partners to support the development of high-integrity energy transition credits to facilitate Asia’s transition.”
Read more about the early retirement of coal-fired power plants:
- Mitsubishi joins Acen, GenZero, Keppel’s plan to shut 246MW coal plant in the Philippines (May)
- GenZero, Mizuho Bank ink MOU to mobilise capital for transition credit projects (February)
- JPMorgan pursues deals to finance shutdown of coal-fired power (November 2024)
- Indonesia’s ‘ambitious’ net zero, coal phase-out plans ‘challenging’ in reality: BMI (November 2024)
- Keppel, GenZero, Acen sign MOU to study, pioneer use of transition credits to retire coal plant in the Philippines (August 2024)
- Sembcorp CEO, DBS energy head deliver reality checks on renewables (June 2024)
- HSBC-funded whitepaper proposes ‘repowering’ coal plants to support renewables (June 2024)
- One of MAS’s two coal plant retirement pilots provides first update since COP28 (April 2024)
- Keppel and GenZero sign MOU to accelerate Southeast Asia's clean energy transition (December 2023)
- MAS launches coalition, two pilots to test 'transition credits' for early retirement of coal plants (December 2023)
- MAS launches Singapore-Asia Taxonomy, world's first to include 'transition' category (December 2023)
- 'Transition credits' could sweeten deal for early retirement of coal-fired power plants: MAS, McKinsey paper (September 2023)
- MAS panel discusses ways to phase out coal-fired power plants, adopt alternative fuels, attract private financing (September 2023)
- MAS launches public consultations on coal phase-out, voluntary code of conduct for ESG rating agencies (June 2023)
- Retiring coal-fired power plants is the 'mother of all transitions': MAS (June 2023)
- GFANZ APAC Network launches public consultation on proposal to phase out coal-fired power plants (June 2023)
- MAS to launch consultation on qualifying managed phase-out of coal-fired power plants (May 2023)
