Not This Way: Why Coal Transition Offsets are a Dead End
Using carbon offsets to shut down coal plants, as proposed by some governments, banks and others, is likely to fail to reduce global emissions. It will likely replicate all the past problems with offsets, including the generation of huge amounts of fake credits, and will allow polluters to continue business as usual. The immediate policy priority in coal-dependent countries is to accelerate the deployment of sustainable energy and so undercut coal economics, not to buy out coal-plant investors.
Key findings:
- Nearly 40 years of experience with offsetting shows that the great majority of credits do not represent emissions reductions, and that repeated efforts to reform offsetting have failed.
- Offsets are not intended to reduce emissions but to move them between locations. But because offsets are bogus their impact is to increase emissions at the global level.
- Coal offsets would likely repeat the failures of the offset market. Because most coal offsets would likely be bogus, their overall impact would likely be to increase emissions.
- Many of the players involved in designing the coal offsets market are the same companies and others who run the existing offsets market. Their core interest remains generating and trading offsets, not cutting emissions.
Rather than prioritizing raising money to buy out investors in individual coal plants, including with offsets, policy makers and financial institutions should focus on:
- Halting financial services for any new or expanded coal plants, and phasing out all coal finance by 2040, with exceptions for plant closures and just transition activities.
- Prioritizing removing barriers to sustainable energy, for example through regulatory reforms and modernizing grids.
- Do not use public money to fully compensate investors in coal plants that risk becoming stranded assets.
- Pressure coal-plant investors to renegotiate power purchase agreements.
- Adopt regulations to ensure sector-wide coal phaseouts.