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How Climate Finance Can Unlock a Faster Coal Exit

As the climate crisis accelerates, one of the most pressing challenges the world faces is how to phase out coal.

Coal remains the single largest source of energy-related carbon emissions globally. And yet, rather than retiring these emissions-intensive sources of electricity, some governments are moving to extend their operations or roll back regulations: actions that could set back global progress in battling climate change by decades.

Recent estimates show that reversing coal regulations in key countries could increase carbon dioxide emissions by up to 470 million metric tons annually over the next decade.

That’s equivalent to putting an extra 100 million gas-powered vehicles on the road each year.

And the impact goes far beyond carbon: coal-fired power plants can degrade air quality, consume billions of liters of water annually, and cause significant harm to biodiversity.

The consequences are both global and deeply local, felt in rising emissions worldwide and in the realities of communities who live near these plants. This dual burden underscores the central dilemma: while the socio-economic cost of shutting down coal facilities is significant, the climate cost of keeping them running is even greater.

The real challenge, then, is how to retire these plants in a way that is just, particularly in countries where energy security, employment, and financial commitments are closely tied to them. These are genuine challenges that form a complex, ‘wicked’ problem when it comes to early plant closures.

Today, Verra is launching a new tool designed to address this challenge.

Our new methodology, VM0052 Accelerated Retirement of Coal-Fired Power Plants Using a Just Transition, provides a rigorous, standardized way to quantify the climate benefit of retiring coal plants early and replacing them with new renewable energy.

Developed by the Coal to Clean Credit Initiative (CCCI), supported by The Rockefeller Foundation, VM0052 is the first methodology of its kind that enables the generation of carbon credits to incentivize this transition.

The methodology facilitates the calculation of avoided emissions based on a plant’s expected future operations and requires that retired electricity-producing capacity be replaced with electricity from clean energy to ensure real and lasting emission reductions. It also conservatively accounts for any emissions associated with grid power used during the transition period.

In short, it catalyzes credible, measurable climate outcomes.

Equally important, the methodology integrates strong just transition requirements. It includes protections for affected workers and communities, in the form of jobs and access to affordable energy and importantly requires that energy poverty is not exacerbated inadvertently through early plant shutdown.

In other words, we can phase out coal while still advancing economic growth, social welfare, and environmental protection. This methodology proves that it’s not a choice between climate action and development: we can have both.

If deployed at scale, this approach can help shift the political and economic calculus for countries currently locked into coal. Rather than defaulting to continued operations because there is no viable exit ramp, governments and utilities now have a tool to finance that exit, all while benefiting affected workers and communities.

The stakes are high. If every country chose to rely on coal indefinitely, the resulting emissions would almost certainly push global warming past critical thresholds.

But imagine the opposite: countries retiring coal and replacing it with clean energy, using climate finance to support their transition, while ensuring workers and communities are protected, even benefiting from cleaner air and healthier environments.

There is no such thing as a panacea in this complicated space, but this comes pretty close.

Because coal phase-out doesn’t happen through rhetoric alone. It demands policy alignment, financial innovation, and practical frameworks that turn ambition into action.

With this new methodology, one more piece of that puzzle is now in place.

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