Verra has finalised a methodology for generating a novel class of carbon credits from retiring coal plants early and replacing them with cleaner energy sources or rather renewables. These are the transition credits. Carbon credit projects potentially using the methodology aims to monetise emissions avoided through the retirements of plants, earlier than planned. Offset sales will compensate plant owners for lost revenue from halted electricity production, creating a new financial incentive for early closure.

It is pertinent to mention that no such carbon-offset funded closures currently exist, and that the States based philanthropy giant Rockefeller Foundation in partnership with CCI ( Coal to Clean Credit Initiative) was responsible for the development of that rule book. Rockefeller Foundation also mentioned that he hopes to onboard 60 such power plants by 2030. Quoting Joseph Curtin, managing director for power and climate at The Rockefeller Foundation - “we are closer than ever to unlocking new benefits to people with credits that will help communities transition to clean, affordable energy”.

Also to quote Verra’s chief executive Mandy Rambharos- “To meet global climate goals, we need to do more than slow emissions – we need to rethink the very systems that produce them,” ; “Our new methodology empowers energy providers to make that shift in a way that doesn’t leave workers or communities behind and doesn’t inadvertently exacerbate energy poverty.”

Some scholars have raised concerns about using carbon markets to finance the transition from coal and about the integrity of the carbon credits produced. According to the International Energy Agency (IEA), while transitioning from coal to cleaner energy sources is essential for meeting global climate targets, such initiatives must be approached with caution to ensure they deliver real and measurable emissions reductions. The IEA warns that carbon credit schemes linked to coal plant closures must include stringent verification mechanisms and robust oversight to prevent the risk of greenwashing. Without clear safeguards, there is a danger that these transition credits could fail to produce genuine climate benefits or might inadvertently extend the lifespan of fossil fuel infrastructure by providing financial incentives that delay a complete move to renewables.

However, we think it is a good initiative. Creating transition credits to incentivise the early closure of coal plants addresses a critical gap in climate financing, offering a practical solution to accelerate the shift towards renewable energy. By compensating plant owners for lost revenue, the scheme makes early retirement financially viable, which could significantly cut emissions in the near term. Moreover, the focus on just transition plans demonstrates a commitment to ensuring that workers and communities are not left behind, making this approach both pragmatic and socially responsible.