Corporate carbon offsetting has for decades funded projects in forest management, delivering clean-burning cookstoves to rural communities, and building renewable power infrastructure.

Despite these efforts, the world has continued to heat up steadily towards the 1.5°C safety limit for global warming. Market players are now looking to bring carbon markets to bear on one of the biggest contributors to climate change – coal power plants, especially the newer facilities.

Asia’s huge coal fleet is on average 13 years young. If allowed to run to their full 40-odd years lifespan, these units would spew hundreds of billions of tonnes of carbon emissions and seriously dent climate mitigation efforts.

Resourcing financial packages to close coal power generators has proven especially challenging, even as investors are increasingly likely to shun new coal builds.

Carbon credits, each representing a tonne of emissions avoided, could offer a new revenue stream for retirement projects. Instead of monetary returns, funders get the licence to claim progress on their own corporate net-zero pledges. Last month, the US$130 trillion Glasgow Financial Alliance for Net Zero (GFANZ) climate group gave the concept a bump, when it said in a consultation paper that carbon credits could help fund coal retirement in Asia Pacific.

But experts also warn that the sheer scale and complexity of the endeavour means that there is no guarantee that it will work. Initiatives to convert ideas into implementable plans are still in their early stages, while many tough questions remain unanswered.

Asia’s coal phaseout needs repayment-free funding, such as grants and carbon credits, said Agus Sari, chief executive of Indonesian sustainability advisory firm Landscape Indonesia.

“Retirement of coal power plants does not make money, it increases costs,” Sari said. “[If] you have to finance a losing business with loans and equity, how would you pay back the loan, or provide the return on equity?”

Read the full article about carbon credits for coal phaseout by Liang Lei at Eco-Business.