ACEN Renewables – using transition credits to accelerate coal closure
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Philippines-based utility ACEN Renewables is planning to use the carbon markets to accelerate its coal plant closure and fund a just transition for workers and the local community. This ‘work in progress’ highlights the practical questions around how to govern and price the just transition in an inclusive way.
Summary
- Electricity demand and emissions have risen sharply in the Philippines and, although the country does not yet have a net zero target, it is committed to phasing out coal.
- Through the world’s first market-based Energy Transition Mechanism (ETM) transaction, ACEN is accelerating the retirement of its last remaining coal plant, the South Luzon Thermal Energy Corporation (SLTEC) plant.
- The transaction has generated proceeds for investments in the company’s burgeoning renewable energy portfolio and it includes just transition provisions to protect the 200 plant workers.
- ACEN is now seeking to sell transition credits – a novel form of carbon credits – to underwrite an accelerated transition and bring forward the plant’s closure from 2040 to 2030.
- The transition credits would compensate for foregone cash flows from the coal-fired plant, fund energy replacement through renewables and support a just transition for workers and affected communities.
- ACEN needs to meet two preconditions to guarantee the sale of credits: an agreement under Article 6 of the Paris Agreement related to carbon trading between the Philippines and Singapore, and securing adequate demand at the right price from buyers.
- The drive to tap carbon credits will be watched closely to see how this often-controversial tool can be deployed with both climate and social integrity.
