Verra releases carbon crediting methodology for early retirement of coal plants

Verra, the world's largest voluntary carbon credit issuer, has launched a methodology to issue credits from projects that enable the early retirement of coal-fired power plants and their replacement with renewable energy, the organization said in a statement on May 6.

This is a long-awaited methodology to tackle one of the key bottlenecks in the global energy transition, phasing out coal. Notably, coal-fired power plants in developing countries usually have decades of remaining operating lifetime, so it is costly for them to retire these assets ahead of schedule. Meanwhile, building renewable generation capacities, energy storage systems, and retrofitting power grids are also very expensive.

Launching the carbon crediting methodology is critical as it paves the way to raise capital through the carbon markets to expedite this challenging transition.

According to Verra, the methodology code is VM0052, and the methodology is titled Accelerated Retirement of Coal-Fired Power Plants Using a Just Transition.

To issue carbon credits, the methodology is expected to quantify the climate benefits of early coal retirement by comparing actual emissions to what a plant would have emitted over its entire lifetime, Verra said.

Verra added that eligible projects must pair the retired coal capacity with new renewable generation capacity, which refers to capacity newly added to the grid because of the coal plant's early retirement, which is not existing or already operational.

Verra said the methodology is developed under the Coal to Clean Credit Initiative (CCCI), supported by the Rockefeller Foundation.

"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," Verra's CEO, Mandy Rambharos, said in the statement.

This methodology requires providing necessary support to workers and communities affected by early coal plant closures, such as local job creation and essential social safeguards.

The baseline, namely estimated emissions during a plant's entire lifetime, will be calculated based on the plant's actual operating history, Verra said.

Verra said that eligible projects should pair the retired coal capacity with sufficient new renewable energy to ensure real emission reductions and prevent leakage, adding that any emissions from grid electricity used during the coal-to-renewable transition period should be conservatively accounted for.

Verra said that this initial methodology is designed for use in regulated electricity markets but could be extended to certain plants in deregulated markets.

Verra highlighted that the methodology is developed in line with the Core Carbon Principles (CCP) criteria published by the Integrity Council for the Voluntary Carbon Markets (ICVCM).

South Pole as key enabler

South Pole, one of the world's largest carbon project developers, played the end-to-end technical leadership role in developing this methodology, according to its separate statement released on the same day.

"In a first for the carbon market, the methodology applies the same stringent monitoring, reporting, and verification (MRV) standards to the execution of these just transition plans as it does to the emissions reductions themselves—ensuring both environmental and social integrity," South Pole said in the statement.

South Pole supported the end-to-end technical process for CCCI, from initial feasibility assessments and stakeholder consultations to drafting the methodology in line with the requirements from Verra and the CCCI itself, the statement showed.

"This methodology is not just a carbon accounting tool - it's a blueprint for responsibly phasing out coal while unlocking finance for clean energy," said Frédéric Gagnon-Lebrun, Global Senior Director, Policy & Strategy, at South Pole.

"By aligning with national climate targets and ensuring environmental and social integrity, we're demonstrating how carbon markets can support a just and accelerated energy transition," Gagnon-Lebrun highlighted.