Jakarta’s Just Energy Transition Partnership (JETP) has suggested that emissions reductions from the early retirement of coal-fired power plants be issued with carbon credits, and that funds are needed to facilitate the program. JETP secretary, Paul Butarbutar, noted that grants, concessional loans and public funding, including through the purchase of carbon credits, were all part of the JETP funding prepared by Indonesia’s partner countries. But what type of carbon credits can be issued for early coal phases outs as currently no methodology exists? At COP27 last year the Rockefeller Foundation, Bezoz Earth Fund and the US State Department, launched the Energy Transition Accelerator (ETA) which aims to work with others to develop a new type of carbon credit to accelerate energy transitions. Amongst other things the ETA seeks to support the renewable energy transition by financing the decommissioning of operational coal plants through the sale of carbon credits associated with the phaseout to corporations. A recent report by a UK thinktank, Universal Owner Initiatives, however, suggests that the initiative could substantially backfire. First they argue that in a worst-case scenario, an unintentional rise in coal market value spurred by the ETA could extend the lifespan of existing plants and de-risk new coal construction projects. The outcome of this would be a staggering 22 billion tonnes of CO2 increase against a baseline of non-intervention. Secondly, if the ETA opts to use the least stringent method for emissions avoided calculation, they risk inflating their estimate for emissions avoided by one-third and compromising the credibility of ETA offsetting claims. Universal Owner Initiatives stated that “if partner governments use it to issue carbon credits, the ETA will be left open to greenwashing accusations”, calling instead for a form of discounted offsetting to provide a “more realistic” estimate.
