14 October 2025 – Proposals to use coal offsets to finance the early retirement of coal power plants in Asia cannot guarantee emissions cuts, and risk an increase in global emissions, according to new analysis published today by Reclaim Finance and the Center for Energy, Ecology and Development (CEED) in the Philippines [1]. To keep warming under 1.5°C and even 2°C, countries outside of the OECD need to stop using coal by 2040 to meet global climate goals, but there are currently nearly 2,000 coal power plants still operating across Asia. Reclaim Finance and CEED are urging policy makers to prioritize the rapid growth of sustainable sources of power and regulations that force coal closures, rather than relying on risky offset schemes.
Coal transition offsets (also known as coal transition credits) are being promoted by the government of Singapore, the Rockefeller Foundation, financial institutions, and the offsetting industry to help finance the early retirement of coal plants, especially in Asia, to limit global warming. Yet our analysis, drawing on two pilot projects, finds offsets are unlikely to be an effective solution for reducing climate emissions.
Evidence from two coal plants in the Philippines currently piloting coal transition offset schemes developed by the Monetary Authority of Singapore’s Traction initiative and the Rockefeller Foundation’s Coal to Clean Credit Initiative (CCCI) revealed confusing claims about the expected lifespans of the plants – and about the level of expected emissions if the plants were not retired [2].
Reclaim Finance and CEED argue that this confusion makes it impossible to accurately assess the emissions saved by the proposed early retirement of the two plants. Calculations of the number of offsets that can be sold from a plant closure will always be uncertain, but because the actors involved in deciding this number have an interest in maximizing the volume of offsets created, the number is likely to be inflated.
The report shows that these issues have been common to previous offsetting schemes, where claimed emissions cuts have been found to have no basis in actual emissions saved. It warns that the vested interests of the participants in the offsets market make over-estimates and exaggerations almost inevitable and says there are inherent flaws in the concept of offsetting.
Offsets are simply not the answer when it comes to retiring coal-fired power plants. Indeed, there is a real danger that these offset proposals could result in increased emissions. Policy makers must learn from the failings of previous offsetting scandals and face the reality that they do not deliver. They should instead focus their efforts on sector-wide reforms that mandate transitions out of coal and remove barriers to the rapid acceleration of solar power with batteries and other sustainable power options.
Patrick McCully, Reclaim Finance senior energy analyst
The offsets generated by retiring the coal plants would be bought by companies and national governments to help meet climate targets, instead of reducing their own emissions. Given that many of the offsets are unlikely to represent real emission reductions, this will increase global emissions.
Reclaim Finance and CEED argue that coal-dependent countries, including the Philippines and Indonesia, have huge potential to develop renewable energy supplies, but exploiting this at the rate necessary will require policy changes including enabling investments in electricity grids and improvements in permitting processes.
They urge policymakers to prioritize rapidly accelerating the deployment of sustainable energy in the near term, and mandating the transition away from coal, rather than relying on voluntary efforts to buy out the investors in individual coal plants. As renewable power dominates power supply, it is likely to make coal generation increasingly uneconomic and so cheaper and politically easier to shut down.
