Carbon registry Verra has launched a new rulebook for generating carbon credits from the early phase-out of coal power plants that are replaced with cleaner energy sources.
Carbon credit projects using the methodology will aim to monetise emissions avoided through the retirements of plants ahead of schedule. The sale of offsets will help compensate coal plant owners for the money they miss out on by not keeping the plants running and selling the electricity and offer a new financial incentive for operators, according to the backers of the scheme.
While no such carbon-offset funded closures currently exist, the US-based philanthropy Rockefeller Foundation – which led the development of the rulebook – hopes to sign up 60 coal power plants to the scheme by 2030.
Joseph Curtin, managing director for power and climate at The Rockefeller Foundation, said that “we are closer than ever to unlocking new benefits to people with credits that will help communities transition to clean, affordable energy”.
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But some climate experts have raised doubts over the suitability of tapping into carbon markets to fund the transition from coal and over the integrity of the carbon credits generated.
The methodology does not require project developers to replace all the coal power generating capacity retired and gives them the option of switching to biomass, which has been criticised for its potential negative climate and environmental impact.
Will O’Sullivan, policy advisor at E3G, said that offsets may play a role in finding the money to phase out coal power globally by 2040 but they’re unlikely to be “a silver bullet for an issue that’s fundamentally political”.
“Credits also rest on accurately predicting future emissions, a question this methodology does not fully address,” he added.
‘Just transition’ plans
The scheme’s supporters say the projects will put in place clear safeguards for people affected by the switch away from coal power.
Mandy Rambharos used to work for South African electricity company Eskom, leading its work transitioning away from coal power. Now Verra’s CEO, she said the 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”.
Project developers will have to submit a plan for a ‘just transition’ detailing, for example, how coal workers will be offered compensation, training or new job opportunities.
But money for these activities will not come from the carbon market. Project developers will instead need to find other funders – including governments, philanthropies or private or public banks – willing to provide grants or loans equal to at least 2% of the revenue expected from the sale of carbon credits issued by the project.
A spokesperson for Verra said this approach ensures that funding is in place “when it is needed” in the planning and implementation stages and is not subject to changing market values for the carbon credits.
Faltering coal phaseout
Coal remains the leading source of electricity generation and the biggest single contributor to carbon dioxide (CO2) emissions globally with most coal-fired power plants in China.
But no electricity should be produced from unabated coal power plants by 2040 if the world is to meet the Paris Agreement goal of limiting global warming to under 1.5C, according to the International Energy Agency (IEA).
Starting from 2021, some coal-reliant nations – Indonesia, Vietnam and South Africa – have been involved in multi-billion-dollar Just Energy Transition Partnerships (JETPs) with rich nations in an attempt to accelerate their shift towards cleaner energy sources.
But the programmes have faced multiple challenges delaying their implementation. The latest setback came in March 2025 when US President Donald Trump pulled American support for the initiative.
Carbon credits have long been touted as a potential alternative source of funding for the costly coal switch-off, but the idea has never been tested.
Climate and environmental concerns
Environmental groups previously raised concerns over the use of offsetting mechanisms to finance the retirement of coal plants. They claimed that uncertainties in the calculation of the emission reductions risk generating an excessive number of credits that could ultimately undermine global climate ambition.
A New Climate Institute report last year said it is difficult to predict how long – and at what intensity – coal plants would have kept running for if they had not shut down early by carbon offset sellers.
Verra’s new methodology will apply to grid-connected coal power plants that began construction before the end of 2021 and are locked into a long-term purchase agreement for the electricity produced.
The projects need to pair the phased-out coal capacity with new renewable energy, replacing at least 40% of the generating capacity displaced. That could mean, for example, putting solar panels on the same site of the coal plant or buying renewable electricity from other operators on the market.
“To ensure the highest integrity, beneficiaries of the credits should be able to prove that renewables have directly and incontrovertibly replaced lost coal capacity, rather than being incidental to the replacement”, said E3G’s O’Sullivan.
The methodology offers a list of power sources including solar, wind and hydro, but also biomass power plants which produce energy by burning wood, crops or organic waste.
In certain cases, biomass plants can produce more carbon dioxide (CO2) emissions per unit of energy than coal plants because fuel like wood needs to be burned in higher volumes, according to separate research by Ember and the US-based Partnership for Policy Integrity.
Rockefeller Foundation is working with partners on a first pilot project based on the methodology that would see the closure of the South Luzon coal power plant in the Philippines ten years ahead of its planned closure, replacing it with solar and wind power combined with battery storage.
The project could avoid up to 19 million tons of carbon dioxide (CO2) emissions – similar to one year’s emissions from the whole of Ghana – according to an assessment commissioned by the Rockefeller Foundation and ACEN, the plant’s operator.
The post First carbon credit scheme for early coal plant closures unveiled appeared first on Climate Home News.
First carbon credit scheme for early coal plant closures unveiled
When carbon dioxide (CO2) is released from a factory or power plant, the gas can be captured and permanently stored underground, preventing it from driving climate change.
This is the idea underpinning carbon capture and storage (CCS), a technology that is at the heart of many nations’ net-zero plans.
Influential organisations, including the Intergovernmental Panel on Climate Change (IPCC), describe CCS as “critical” for cutting emissions from key sectors – and for helping to avoid dangerous global warming.
In particular, capturing CO2 is seen as one of the only viable options for decarbonising some of the world’s highest-emitting industries, such as cement production.
The UK, for example, has committed to investing as much as £21.7bn over the coming decades in its nascent CCS industry, as part of the nation’s net-zero strategy.
Yet, in the UK and elsewhere, there has been a backlash against plans for CCS.
Citing high costs, ties to the fossil-fuel industry and a “history of poor performance”, critics describe CCS as a “dangerous distraction” or a “false climate solution”.
Time and again, the outlook for the roll-out of CCS has been scaled back, as the technology has failed to deliver as quickly as expected – and as policy support has wavered.
Furthermore, critics state that the technology remains “unproven” on the scale required to make a meaningful impact on global emissions.
In this Q&A, Carbon Brief explores the role CCS is expected to play in achieving net-zero, its record to date and the reasons it has been criticised, using the UK as an example.
What is CCS?
CCS involves capturing CO2 emissions released from a large source, such as a gas power plant or a cement factory.
The CO2 is separated from the facility’s exhaust stream, generally using a chemical solvent, before being compressed into a liquid and transported via pipeline or vehicle. The CO2 is then stored by injecting it into underground reservoirs, such as depleted oil fields or saline aquifers.
The term “CCUS” is sometimes also used, referring to the “utilisation” of CO2 to make products, including fertilisers, fuels or building materials. Such uses do not necessarily lead to permanent emissions cuts, as the CO2 can end up later being released back into the atmosphere.
(“CCS” is used in this Q&A, unless quoting another organisation that specifically refers to “CCUS”.)
The infographic below shows the stages of capturing CO2 and transporting it to be either stored or used in other applications.
Carbon capture technology was originally rolled out at US and Canadian oil wells in the early 1970s as a way to achieve “enhanced oil recovery”. This involves injecting captured CO2 into depleted wells – a process that stores CO2, but also helps to extract more oil.
This remains, by far, the most significant end use for captured CO2 worldwide, with around three-quarters of it used for this purpose.
Moreover, most of the CO2 currently captured is a by-product of gas purification – the process by which fossil fuels such as methane are separated from other, unwanted substances. Selling this CO2 can make such gas projects more economically viable.
Therefore, as shown in the chart below, which is based on International Energy Agency (IEA) data, the majority of CO2 that is both captured and used today helps the fossil-fuel industry to extract and sell more oil and gas.
CCS was first proposed as a way to deal with CO2 emissions in a 1976 academic article, which imagined injecting the captured gas into the ocean.
It is only since the early 2000s that CCS has gained traction as a proposed climate solution, with a 2005 “special report” by the IPCC exploring the topic. At that time, the authors note there were just three small-scale projects trying to capture and permanently store CO2.
Installing CCS at factories or power plants and permanently storing the CO2 would mean that, in theory, such facilities could continue using fossil fuels without contributing to climate change.
Such applications are often mentioned alongside two related technologies, both of which could be used to “suck” CO2 out of the atmosphere and, thus, deliver “negative emissions”.
One is bioenergy with carbon capture and storage (BECCS). Crops absorb CO2 as they grow and BECCS involves a power plant burning these crops, then storing the resulting CO2.
The other technology is direct air carbon capture and storage (DACCS).
These technologies are classed as “CO2 removal”, as they involve absorbing CO2 from the atmosphere using plants or machines and then storing it permanently.
By contrast, CCS installed at a factory is considered a way to avoid CO2 emitted by that specific facility from entering the atmosphere. This Q&A focuses on such applications, which account for the vast majority of existing and planned CCS.
How much CCS capacity has been built so far?
As of February 2026, there were a total of 75 operational CCS projects around the world. As noted above, almost all of them are at fossil-fuel extraction and processing sites, according to the IEA’s database.
Together, these projects capture 62.5m tonnes of CO2 (MtCO2) each year. This is equivalent to the annual greenhouse gas emissions of Ecuador.
(This compares with the 22 CCS projects, promising to capture 40MtCO2 annually, that were operational or under construction as of 2014.)
As the chart below shows, the amount of CO2 currently being captured and stored is a tiny fraction of the total emissions from fossil-fuel use.
In a 2020 report, the IEA explained that the “story of CCUS has largely been one of unmet expectations: its potential to mitigate climate change has been recognised for decades, but deployment has been slow”.
A wave of interest in CCS in the 2000s, largely from countries in Europe and North America, focused on enabling coal power plants to continue operating with lower emissions.
This interest largely petered out, as plummeting renewable energy costs weakened the case for coal plants with CCS. Today, there are only seven operating CCS-coal plants worldwide – five in China, one in the US and one in Canada.
Yet the Paris Agreement in 2015 – and the national net-zero targets that followed – highlighted the need for deep emissions cuts in sectors that previously expected to continue emitting for decades. This, once again, has fuelled interest in the use of CCS.
In recent years, there has also been growing interest in producing low-carbon “blue” hydrogen from gas with CCS.
Hydrogen is widely seen as key for decarbonising certain sectors – particularly in industry – but analyses suggest that it may be difficult to make sufficient “green” hydrogen using renewable power on the timescales required.
As the map below shows, most CCS capacity is based in the US and Canada, with other major fossil-fuel producers such as Norway, Brazil and the Gulf states also contributing.
A surge of projects have entered the global CCS pipeline in recent years. According to the IEA, 93.7MtCO2 of capture or storage capacity is under construction as of February 2026 and another 1,279.6MtCO2 is in the “planning” stages.
“Planned” projects include any initiative at early concept, feasibility or engineering study stages and the industry has a long history of projects being cancelled or delayed.
Nevertheless, this pipeline of projects could lead to a large expansion of facilities dedicated to permanent CO2 storage that does not involve extracting more oil.
The planned projects – if they are realised – would also include significant growth in sectors where CCS is virtually non-existent, such as steel, hydrogen and cement production, as shown in the chart below.
What role is CCS expected to play in reaching net-zero?
It will be impossible to stop dangerous climate change unless the world reaches net-zero emissions, according to the IPCC. The amount of global warming – and whether the Paris Agreement temperature target can be met – depends on when net-zero is reached.
Many global pathways that have been set out for achieving net-zero, including a majority of the IPCC-assessed pathways where global warming is limited to 1.5C, rely on the use of CCS at fossil-fuel plants and industrial sites.
“These models have been quite instrumental in bringing CCS back onto the agenda,” Lina Lefstad, an ecological economist at Lund University, tells Carbon Brief.
Influential organisations relying on CCS in their net-zero scenarios range from the International Renewable Energy Agency (IRENA) through to the oil company Shell. The IEA has stated that net-zero would be “virtually impossible” without CCS.
These scenarios often include 10s to 100s of times more CCS capacity being built in the coming decades. The IEA includes 1.7GtCO2 being captured by 2035 in its net-zero scenario – nearly 30 times more than is captured today.
(Some of the much higher numbers in scenarios assessed by the IPCC have been dismissed by experts as implausible, especially given the slow rollout of CCS to date.)
When considering CCS for both emissions cuts and removals, Dr Jennifer Roberts, a researcher at the University of Strathclyde and deputy director at the UK Carbon Capture and Storage Research Centre (UKCCSRC), tells Carbon Brief the situation is clear:
“From an IPCC climate modelling perspective…reaching net-zero without CCS is far more expensive, disruptive and potentially out of reach.”
This does not mean that it would be impossible to reach net-zero without using CCS. However, net-zero scenarios that use little or no CCS rely on dramatic changes elsewhere, such as much lower global energy demand.
Net-zero scenarios often include a crucial role for CCS in “hard-to-abate” sectors, referring to activities that lack available, low-cost options to fully decarbonise. In particular, CCS is widely seen as vital for decarbonising parts of heavy industry.
The IPCC sixth assessment report (AR6) summary for policymakers calls CCS a “critical mitigation option” for some sectors, including cement and chemicals. The technical summary of the AR6 Working Group III report says that “CCS will be required to mitigate remaining CO2” in industrial sectors.
The IEA describes CCS as “virtually the only technology” that can significantly cut cement emissions, which account for around 7% of the global total. (Much of this CO2 comes from chemical processes, meaning it would still be released if the industry was electrified.)
Yet, the understanding of “hard-to-abate” emissions is changing, as alternatives to CCS become cheaper and increasingly available. As a result, CCS has become a less attractive option in some sectors, as well as being seen as less vital in some others.
Carbon Brief analysis shows that the IEA has reduced its outlook for CCS in the power sector by a third, c