To achieve net zero by 2050, Asia has to shutter at least two coal-fired power plants each week from now to 2040.
Despite early coal retirement programmes launched in Indonesia, the Philippines and Vietnam by the Asian Development Bank (ADB) and other international organisations of late, it has been challenging to slow coal development and production in these three countries, which account for over 80 per cent of Southeast Asia’s planned capacity.
For the region’s first early phase-out deal in Indonesia, costs have ballooned from ADB’s previous estimate of US$300 million to some US$1.3 billion, after taking into account the need to fully replace foregone coal power with reliable renewable energy.
To offset some of the costs involved in prematurely replacing the region’s relatively young coal fleet with clean energy, Singapore’s central bank has mooted a novel class of carbon credits, known as “transition credits”.
The Transition Credits Coalition (Traction), convened by the bank, also released its latest interim report on the financing mechanism last Thursday at the COP29 climate summit in Baku. The report details the next steps in its efforts to help Asia leave coal behind and gathers insights from its more than 30 members and experts involved in coal transition and carbon markets. A key priority would be to understand buyers’ considerations and what attributes they want transition credits to have.
The central bank is now working towards a playbook that can be used across the region by next year’s COP summit.
In August, the Philippines-based energy firm ACEN inked an agreement with two Singapore-listed entities, Temasek-owned GenZero and conglomerate Keppel, to develop a scalable model to wean the region off coal using transition credits. Two Philippine coal plants – including ACEN’s South Luzon Thermal Energy Corporation (SLTEC) in the coastal town of Puting Bato West which is barely a decade old – were chosen to pilot the new financing mechanism.
The video explains how transition credits could replace the decommissioned SLTEC coal plant with renewables and battery storage by 2030 – a decade earlier than promised – as well as concerns that remain around its ability to facilitate an equitable clean energy shift for local communities.
If you enjoyed the video and want to learn more about Southeast Asia’s quest to phase out coal using transition credits, read our full special report here.
