Report on Transition Credits for Coal Plant Phase-Out and Sustainable Development Goals

Context and Background

The global effort to address the climate crisis faces a significant challenge: financing the transition from fossil fuels to clean energy. This is particularly difficult for poorer countries dependent on coal power for economic growth, as shutting down high-output coal plants involves complex, long-term contracts and substantial costs.

A promising solution has emerged in the form of transition credits, a new category of carbon credits designed to facilitate the early closure of coal power plants and promote clean energy generation.

Transition Credits and Their Role in Achieving SDGs

Transition credits enable governments or companies to indirectly reduce their carbon emissions by purchasing credits that represent the avoided emissions from early coal plant closures. The funds generated are then used by coal plant owners to retire these plants and replace them with renewable or clean energy sources.

This mechanism aligns closely with several Sustainable Development Goals (SDGs), including:

• SDG 7: Affordable and Clean Energy – by promoting renewable energy adoption.
• SDG 13: Climate Action – by reducing greenhouse gas emissions.
• SDG 8: Decent Work and Economic Growth – by supporting just transition for workers.
• SDG 10: Reduced Inequalities – by assisting developing countries in sustainable development.

Calculation of Transition Credits

The Rockefeller Foundation’s Coal to Clean Credits Initiative (CCCI) has developed a methodology to quantify the carbon emissions avoided by retiring coal plants early. For example, a pilot project in the Philippines estimates an avoidance of approximately 19 million tons of CO₂ emissions.

Utilization of Revenue from Transition Credits

The revenue generated from transition credits is allocated to address the needs of all stakeholders involved in coal power plants:

1. Buyout of existing long-term contracts with power purchasers.
2. Subsidies for renewable energy storage to ensure grid reliability, as renewables are often cost-competitive but require additional support for storage solutions.
3. Just transition costs, including support for the workforce (typically 200-250 employees per plant) and local communities affected by plant closures.

This comprehensive approach ensures that stakeholders are left in an equal or improved position, supporting SDG 8 (Decent Work and Economic Growth) and SDG 11 (Sustainable Cities and Communities).

Eligibility Criteria for Coal Plants

Transition credits target coal plants that are:

• Operational in developing and emerging markets.
• Not scheduled for retirement under normal circumstances.

Most coal plants in Asia are approximately 15-16 years old, with a technical lifespan of 40-50 years, and are bound by long-term power purchase agreements. Without transition credits, there is currently no financially viable way to retire these plants early and replace them with clean power.

Incentives for Purchasing Transition Credits

Buyers of transition credits are typically countries or companies with carbon reduction targets. For instance, corporations operating in countries like the Philippines seek mechanisms to source clean electricity and contribute to decarbonization efforts.

Transition credits create a pathway for corporate and national entities to engage in the decarbonization of power systems in emerging markets, fostering a cleaner power system globally.

Moreover, countries that have exhausted much of their carbon budget hold a moral responsibility to support faster decarbonization in developing regions by enabling financially viable solutions such as transition credits.

Conclusion

Transition credits represent an innovative financial mechanism that supports the early retirement of coal power plants in developing countries, thereby advancing multiple Sustainable Development Goals. By addressing economic, social, and environmental factors, this approach facilitates a just and equitable transition to clean energy, critical for global climate action and sustainable development.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 7: Affordable and Clean Energy – The article discusses transitioning from coal power to clean and renewable energy sources, directly relating to ensuring access to affordable, reliable, sustainable, and modern energy.
2. SDG 13: Climate Action – The focus on reducing carbon emissions through transition credits and early closure of coal plants addresses combating climate change and its impacts.
3. SDG 8: Decent Work and Economic Growth – The article mentions the just-transition aspect, including employment considerations for coal plant workers, linking to promoting sustained, inclusive economic growth and decent work for all.
4. SDG 10: Reduced Inequalities – By supporting poorer countries and emerging markets to transition from coal to clean energy, the article touches on reducing inequalities between developed and developing countries.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 7 Targets:
   • Target 7.2: Increase substantially the share of renewable energy in the global energy mix.
   • Target 7.a: Enhance international cooperation to facilitate access to clean energy research and technology.
2. SDG 13 Targets:
   • Target 13.2: Integrate climate change measures into national policies, strategies, and planning.
   • Target 13.3: Improve education, awareness-raising, and human and institutional capacity on climate change mitigation.
3. SDG 8 Targets:
   • Target 8.8: Protect labor rights and promote safe and secure working environments for all workers.
4. SDG 10 Targets:
   • Target 10.b: Encourage development assistance and investment in least developed countries to address inequalities.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Carbon Emissions Avoided (Indicator for SDG 13.2) – The article mentions calculating the amount of carbon emissions avoided by early closure of coal plants, e.g., 19 million tons of CO2 in the Philippines pilot project.
2. Number of Coal Plants Retired Early (Indicator for SDG 7.2) – Tracking how many coal plants are closed early and replaced with clean energy sources.
3. Employment Impact (Indicator for SDG 8.8) – Number of workers affected by coal plant closures and measures taken to support just transition for these workers.
4. Financial Flows for Clean Energy Transition (Indicator for SDG 7.a and 10.b) – Amount of funding mobilized through transition credits to support clean energy projects in developing countries.

4. Table: SDGs, Targets and Indicators

Source: context.news