New Verra Methodology Aims to Create Carbon Credits Through Accelerated Retirement of Coal-Fired Power Plants

On May 6, 2025, Verra’s Verified Carbon Standard (VCS) published a new methodology to generate Verified Carbon Units (VCUs) through an accelerated retirement of coal-fired power plants (CFPPs). The methodology, titled “VM0052: Accelerated Retirement of Coal-Fired Power Plants Using a Just Transition,” allows project developers to close CFPPs sooner than otherwise scheduled and replace the lost electricity generation with electricity from renewable sources. The methodology also utilizes a “just transition” plan to mitigate potential negative impacts from the accelerated retirement of CFPPs.

Applicability Conditions

CFPP Retirement

Several conditions regarding a CFPP must be met for the CFPP retirement to qualify under the methodology. The methodology stipulates that a qualifying CFPP is one that is connected to the grid and has begun construction prior to December 31, 2021. A qualifying CFPP must also be owned by either a regulated utility or an independent power producer and have a single long-term power purchase agreement executed prior to December 31, 2023.

Other criteria include having a positive annual net income at the project validation date and at the accelerated retirement date, and a positive fair market value. The owner and host country of the CFPP must have made various public commitments (including in the host country’s nationally determined contribution) to the transition to renewable energy sources and reduced greenhouse gas (GHG) emissions. The system operator or other relevant authority must also issue a letter affirming that accelerated retirement of the CFPP will not have a material negative effect on consumer prices. The methodology is not applicable to CFPPs that are mine-mouth, captive, or deactivated or repurposed to combust fossil fuels.

Paired Renewable Electricity

A project following this methodology must pair the accelerated retirement of a CFPP with new generation of electricity from renewable sources (such as solar, landfill gas, wind, and biogas power plants). The renewable energy source must cover 10% of the electricity output of the CFPP at the project start date and increase to 40% by the end of the initial crediting period. The source of renewable energy must also be exporting to the grid to satisfy this requirement.

Just Transition

The new methodology requires that a “just transition” plan be in place at the time of project validation. The just transition plan must identify all relevant stakeholders who will be impacted by the project and include a process to assess their vulnerability, build consensus among them, and mitigate their loss of work because of the project. The plan must also include an estimated budget detailing all funding sources — of which none can be from revenue of VCU sales — and their associated risks, along with a procedure for periodic review of the budget and audit of all transactions.

Additionality

A project must demonstrate additionality to satisfy the requirements of the new methodology. To do this, project developers must demonstrate regulatory surplus, complete an investment comparison analysis to demonstrate that the project is financially additional, and submit a common practice analysis evaluating the extent to which accelerated retirement that is not paired with renewable energy replacement has been implemented in the relevant geographic area.

Crediting Period Determination

The period considered to determine the quantity of VCUs that the project developer receives is the shorter of either the “standard crediting period” or the “accelerated retirement period.”

The standard crediting period is either seven years (which can be renewed for up to two additional seven-year periods — maximum 21 years in total) or a fixed period of 10 years (no renewal). Renewal is possible if the project developer demonstrates the validity of the original baseline scenario (or updates the baseline scenario if the original is no longer valid) and submits an up-to-date project description for validation. 

However, the crediting period will be equal to the accelerated retirement period, or the difference between the accelerated retirement date and the baseline retirement date, if such period is shorter than the standard crediting period. The baseline retirement date — which is the date when the plant would have been retired absent the use of the methodology — can be discerned by using any of the following: a phase-out date outlined by local regulations, the end of the plant’s technical life, or even the date when retirement would be chosen for financially attractive reasons.

Quantification of Reduction Standards and Monitoring

The methodology measures net global GHG emission reductions by subtracting project and leakage emissions from baseline emissions. For every net reduction or removal of one ton of carbon dioxide equivalent, Verra issues one VCU.

The term “baseline emissions” refers to the amount of emissions that would have been produced by the CFPP between the accelerated retirement date and the baseline retirement date. Emissions released from renewable sources throughout the scope of the project (such as via landfill gas, geothermal, and hydropower energy), also known as “project emissions,” must be subtracted from the baseline emissions. Finally, “leakage emissions,” which are attributable to the project but occur outside the project boundary, must be subtracted from the previous number. The result, which is the net reduction of GHG emissions, is used to calculate the number of VCUs that the project may be eligible for.

The methodology also requires the project proponent to design and incorporate a monitoring plan, which must contain, among other requirements, the measurement methods, the type of equipment used, and an outline of the procedures used to describe the just transition.

Conclusion

The new Verra methodology offers project developers a structured framework to accelerate the retirement of CFPPs, generating VCUs while transitioning to renewable energy sources. By emphasizing a just transition, it aims to address socio-economic impacts and promote sustainable development.

Project developers should evaluate their current and potential projects to determine eligibility under the new methodology, ensuring they meet the criteria for accelerated coal plant retirement and renewable energy integration. They should also develop comprehensive just transition plans to align their efforts with global climate goals and carbon market opportunities.

This post was prepared with the assistance of Piper Christenson and Sofía Cuevas Dorador.