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Singapore Mulls ‘Transition Credits’ to Hasten Coal Phase-out

The Monetary Authority of Singapore (MAS) and global consultancy firm McKinsey have released a working paper proposing the creation and sale of transition credits as a financial tool to expedite the early retirement of coal-fired power plants. The initiative aims to narrow the economic gap associated with the premature closure of coal plants and pave the way for cleaner energy sources. During a launch event, MAS Deputy Managing Director Leong Sing Chiong noted the significance of establishing effective and scalable financing mechanisms to facilitate the phased transition away from coal plants, stressing the importance of this transition in achieving sustainable energy goals across Asia. The paper underscores the need for additional financing mechanisms to bolster the economic feasibility of retiring coal plants ahead of schedule, as well as attracting substantial private capital investment. It outlines a strategy that employs high-integrity carbon credits, known as transition credits, generated through the reduction of emissions resulting from early coal plant retirements. These credits, if of high integrity and aligned with the Integrity Council for Voluntary Carbon Markets’ (ICVCM) Core Carbon Principles, could help offset the economic challenges associated with early plant closures. “While the paper does not attempt to develop a new carbon credit methodology for the early phase-out of coal plants, it says such a methodology should include commitments by the host jurisdiction not to build new coal plants and provide for the accurate measurement and monitoring of actual emissions reduced,” the report noted.

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