From Theory to Reality: Building Credible Transition Credit Projects

The report details RMI's engagement in a transition credit pilot for the SLTEC coal plant in the Philippines, proposing a structured four-phase approach—Project Screening, Defining Evaluation Scope, Pre-Feasibility Analysis, and Recommendations—to ensure project integrity and financial viability. It highlights the role of transition credits in filling financing gaps for early coal retirement and the necessity of rigorous baseline setting and clean energy replacement planning to avoid moral hazard and leakage.

• Transition credits are designed to monetize emissions reductions from the early retirement of coal assets and their replacement with clean energy, addressing financing gaps where concessional capital from multilateral development banks is limited.
• RMI proposes a four-phase process for evaluating transition credit projects over three to six months: Project Screening (eligibility and constraints), Defining Evaluation Scope (cost categories and clean replacement options), Pre-Feasibility Analysis (quantitative assessment of baselines and revenues), and a final decision phase on project development.
• The SLTEC pilot in the Philippines aims to pull forward the retirement of a 246 MW coal plant from 2040 (established via a previous Energy Transition Mechanism transaction) to 2030. Pre-feasibility analysis suggests this could reduce system-wide emissions by up to 19 million metric tons of CO2.
• For the SLTEC project to be financially viable, transition credit revenues must cover three primary cost areas: foregone cash flows and early retirement costs, the additional costs of building clean energy replacements to maintain reliability, and just transition support for workers and communities.
• The SLTEC case highlights critical risks and requirements for high-integrity credits, including the need for asset owners to have publicly verifiable coal phaseout commitments and the necessity of accounting for 'leakage'—where emissions increase from other grid sources due to the plant's closure.
• The implementation of the SLTEC pilot involves international cooperation, including a August 2024 Memorandum of Understanding between the Philippines and Singapore under Article 6 of the Paris Agreement to enable international carbon trading.

APA

RMI (2025). From Theory to Reality: Building Credible Transition Credit Projects. https://rmi.org/resources/from-theory-to-reality-building-credible-transition-credit-projects/

Chicago

RMI. From Theory to Reality: Building Credible Transition Credit Projects. 2025. https://rmi.org/resources/from-theory-to-reality-building-credible-transition-credit-projects/.

Wikipedia

{{cite report |author=RMI |title=From Theory to Reality: Building Credible Transition Credit Projects |date=2 May 2025 |url=https://rmi.org/resources/from-theory-to-reality-building-credible-transition-credit-projects/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2025from, author = {{RMI}}, title = {{From Theory to Reality: Building Credible Transition Credit Projects}}, institution = {RMI}, year = {2025}, month = may, url = {https://rmi.org/resources/from-theory-to-reality-building-credible-transition-credit-projects/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }