NOT THIS WAY

The report critiques 'coal transition offsets' (CTOs), specifically those promoted by the Rockefeller Foundation's Coal-to-Clean-Credit Initiative (CCCI) and Singapore's Traction Coalition. It argues that CTOs inherit the systemic failures of the broader carbon offset market, including non-additionality and over-crediting. Through analysis of pilot projects in the Philippines, the document demonstrates how CTOs may not actually accelerate plant closures and can create perverse incentives for policymakers to avoid mandating coal phaseouts. The author recommends shifting focus from individual plant buyouts to systemic energy reforms, such as grid modernization and the renegotiation of power purchase agreements (PPAs) to reduce the financial burden of retiring coal assets.

• The global carbon offset industry has a chronic failure to deliver real emissions reductions, with a peer-reviewed study indicating that less than 16% of all offsets issued up to 2024 likely represent actual reductions.
• Coal transition offsets (CTOs) are subject to the same structural flaws as other offsets, specifically the inability to prove 'additionality'—whether a project would have happened without offset income—and the tendency to overestimate avoided emissions.
• The Verra methodology for coal offsets allows for credits to be issued even if only 10% of a coal plant's output is replaced by clean energy, with the threshold only rising to 40% after a decade, potentially allowing other fossil fuel plants to replace the closed plant.
• Analysis of the SLTEC pilot project in the Philippines suggests that claimed emission benefits are inflated due to unrealistically high assumptions about the plant's capacity factor compared to national averages.
• The Mindanao CFPP pilot project demonstrates a contradiction where the government claims the plant could retire as early as 2026 via an Energy Transition Mechanism (ETM), while CTO proponents claim the plant would otherwise run until 2046 or 2051.
• CTOs create perverse incentives that may discourage governments from mandating coal phaseouts, as such regulations would render the projects non-additional and thus ineligible for offset revenue.
• There is a significant financial contradiction in the CTO model: proponents aim to flood the market with 'billions of tons' of credits while simultaneously requiring premium prices (e.g., over $50/tonne) to make buyouts viable, despite a current average offset price of $4.80.
• The report argues that the most effective way to reduce coal emissions is to remove barriers to renewable energy deployment and push for the renegotiation of power purchase agreements (PPAs) to accept 'haircuts' (lower returns) for investors.

APA

McCully, P. (2025). NOT THIS WAY. Reclaim Finance. https://reclaimfinance.org/site/wp-content/uploads/2025/10/Not-This-Way-why-coal-transition-offsets-are-a-dead-end.pdf

Chicago

McCully, Patrick. NOT THIS WAY. Reclaim Finance, 2025. https://reclaimfinance.org/site/wp-content/uploads/2025/10/Not-This-Way-why-coal-transition-offsets-are-a-dead-end.pdf.

Wikipedia

{{cite report |last1=McCully |first1=Patrick |title=NOT THIS WAY |publisher=Reclaim Finance |date=October 2025 |url=https://reclaimfinance.org/site/wp-content/uploads/2025/10/Not-This-Way-why-coal-transition-offsets-are-a-dead-end.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mccully2025not, author = {McCully, Patrick}, title = {{NOT THIS WAY}}, institution = {Reclaim Finance}, year = {2025}, month = oct, url = {https://reclaimfinance.org/site/wp-content/uploads/2025/10/Not-This-Way-why-coal-transition-offsets-are-a-dead-end.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }