Powering the Future: New Methodology Concept for Early Phase-out of Coal Plants and a Just Transition to Renewable Energy Generation

Coal-fired power plants are one of the major sources of base power supply globally, but also the largest source of GHG emissions. Transforming such an industry can seem insurmountable. According to Decommissioning US Power Plants, the mean cost to retire a coal-fired plant was $117,000 per mega Watt and up to $466,000, requiring millions of dollars to prematurely close plants. But viable solutions have been mapped out. By using a range of existing and innovative new finance instruments to encourage their early replacement with renewable energy, we can accelerate our journey towards a net-zero world, while ensuring that those communities that are currently dependent on coal power plants are supported through the transition.

A proposed methodology concept released today by Gold Standard, supported by robust sustainable development contributions that ensure a just energy transition, will encourage the early phase-out of coal fired thermal power plants, and their replacement with renewable energy. It is also intended to further explore other fossil phase-out options towards grid decarbonisation. Gold Standard will start work on the methodology and guidance immediately and welcomes feedback and input from stakeholders.

Margaret Kim, CEO of Gold Standard said:

“The IPCC’s latest report released this week reiterates what we already know; we need to do more, faster. NGOs including Gold Standard have been stepping in for failed climate policy for decades and we are still aiming to catalyse ambitious climate action. Our new methodology concept for coal-directed power plants – like all methods under our standard - is designed to mobilise finance to where it is most needed to create climate security and sustainable development for all”.

According to the World Resources Institute, the IPCC report released in March 2023 suggests that the number one solution for climate change mitigation is to retire coal plants, and second is to invest in clean energy and efficiency. And it is imperative that this is done in a manner that is just and equitable for all stakeholders. The Gold Standard methodology concept aims to address all these areas, while also being agnostic to sources of sustainable finance. This sets it apart from other fossil fuel decommissioning initiatives.

1. Robust safeguarding and pairing with renewable energy replacement – It’s one thing to take a coal-fired plant offline, but it’s critical to ensure energy security for local populations while avoiding leakage. While being cognisant of local technical and policy barriers for renewable energy deployment, this proposed methodology builds pathways to catalyse clean, efficient energy sources as part of the decommissioning plan.
2. Suitable for multiple forms of financing – This methodology is designed to be applicable for carbon crediting but also beyond, able to flex the detailed requirements for the relevant form of finance. For example, a bond which has a portfolio of coal power plants could apply a Gold Standard impact fund framework to issue a ‘just transition bond’ for decommissioning.
3. Considered as part of a just transition – As part of Gold Standards dual commitment to climate mitigation and sustainable development, we are working to ensure that communities who are reliant on fossil fuel-based economies are not harmed by, and rather benefit from, mitigation efforts. We are in the early stages of exploring with multilateral development banks and policy leaders how to create frameworks that consider multiple factors critical to a just transition, including employment and training, social equity and community engagement, energy access, investment and development, environmental impact, and more.

In addition to launching this proposed methodology, Gold Standard is collaborating with a number of working groups in order to support the aim of decommissioning existing coal power plants. This includes supporting the Glasgow Financial Alliance for Net Zero (GFANZ) with their Managed Phaseout of Coal Power Generation in APAC work group, which aims to develop robust and credible voluntary guidance to address challenges in coal decommissioning, providing clarity and confidence to those participating in managed phase outs.

You can view the full methodology concept here. Gold Standard is welcoming views from stakeholders through a public consultation for the next 30 days.