Tokyo-based banking and financial services company Mizuho Bank and Temasek-owned decarbonization solutions-focused investment platform GenZero announced today a new partnership aimed at developing transition credits to help fund the acceleration of the early retirement of coal-fired power plants.

Coal is by far the largest source of energy-based CO2 emissions globally, according to the International Energy Agency (IEA), accounting for 45% of emissions from fuel combustion in 2022, ahead of oil at 33%. Coal also remains one of the top sources of energy supply globally, at 28% of supply in 2022, slightly behind oil at 30%. In a 2022 report, the IEA estimated that nearly $10 trillion in investments by 2050 in the energy sector alone would be required to finance the transition away from coal-powered electricity.

Transition credits involve a quantitative assessment of the CO2 emissions from the continued operations of a coal-fired power plant, and of the reduction in emissions from retirement, which can be converted into carbon credits.

According to Mizuho and GenZero, transition credits are poised to play a significant role in the acceleration away from coal and towards cleaner energy, with credits being generated based on the emissions reduction achieved by retiring a coal plant early, which can be sold in carbon markets to help plant operators cover the costs of early retirement and securing cleaner power sources.

Shinichi Tsunoda, Operating Officer, General Manager of the Sustainable Business Promotion Department at Mizuho Bank, said:

“Transitioning away from coal-fired power, which is currently a core source of power, is critical to decarbonization in Asia. One of the bigger challenges is the question of who will bear the transition costs and how they will do so. By ensuring fair evaluation of decarbonization initiatives and fair sharing of costs across regions, transition credits open a path for quickly withdrawing from coal-fired power while avoiding economic drawbacks.”

Under the new partnership, Mizuho and GenZero will jointly develop capital raising mechanisms incorporating carbon credits, and further the design of frameworks for transition credits, with Mizuho intensifying its efforts to develop innovative financing methods utilizing carbon credits, as well as working with GenZero to enhance awareness of transition credits among Japanese companies.

The companies added that the partnership is aimed at helping to pave the way for investments into transition credit projects, and to generate awareness on the importance of transition credits in facilitating the clean energy transition globally.

Frederick Teo, CEO of GenZero, said:

“GenZero and Mizuho will leverage our collective expertise and regional connections to collaborate on energy transition opportunities, build greater awareness for transition credits, and unlock opportunities to support coal-to-clean initiatives.”