New report explores integrity requirements for transition credits

The Integrity Council’s Continuous Improvement Work Program (CIWP) on Transition Credits has published a report examining how to assess the integrity of transition credits. The report explores the opportunities, risks and integrity requirements associated with emerging transition crediting approaches.

Phasing out coal-fired power is one of the most significant challenges in the global energy transition, particularly in emerging and developing economies where coal makes up a significant portion of the energy mix. In Asia, for example, coal accounts for 60% of energy consumption, and the average age of Asia’s coal plants is less than 15 years, meaning most have decades of operational life remaining.

Transition crediting approaches, which seek to generate carbon credits from the early retirement of fossil-fuel power plants and their replacement with cleaner energy, have emerged as a mechanism to help accelerate this transition.

Given their novelty and complexity, transition credits also raise important questions around how to ensure integrity. The Integrity Council convened a multi-stakeholder, expert working group to provide an initial assessment of how high-integrity principles should apply to transition crediting approaches, and to identify where the CCP Assessment Framework may benefit from further development.

Summary of key findings

Transition credits represent a credible category of carbon credits, but may benefit from targeted guidance to ensure high integrity. The working group found that while transition credits do not constitute a new asset type, their unique characteristics mean that tailored definitions, requirements and guidance can be beneficial in ensuring environmental and social integrity.

A robust and operational definition of ‘just transition’ is essential. The group emphasised that just transition is a core integrity requirement for transition crediting approaches. It recommended that the Integrity Council develop a broad, whole-system definition of just transition and undertake a review of its safeguards framework with an eye to how it applies to transition crediting approaches.

Methodological clarity is needed across key integrity risks. The report highlights the need for clear guidance on renewable energy pairing, additionality, leakage management and interactions between project-based and jurisdictional approaches.

Policy alignment and assurance will be critical as transition crediting approaches evolve. The work program identified the importance of host-country policy consistency, including pledges not to build new fossil-fuel power plants, and the need to ensure that validation and verification bodies have the competencies required to appropriately validate and verify transition crediting approaches.

What happens next?

The recommendations of the CIWP will inform future development of the CCP Assessment Framework as it applies to transition crediting approaches. They do not constitute an endorsement of any specific methodology, nor do they have immediate implications for ongoing assessments.

The Integrity Council will continue to engage with stakeholders and experts as evidence, market practice and policy contexts evolve, to ensure that emerging activity types are assessed rigorously and consistently against high-integrity standards.