Japanese trading house Mitsubishi has agreed to join a project to phase out a coal-fired power plant in the Philippines, aiming to generate carbon credits through the Transition Credits mechanism along with Japan's Joint Crediting Mechanism (JCM).
Mitsubishi and and its Hong Kong-based subsidiary Diamond Generating Asia (DGA) has agreed to join Philippine energy firm Acen, GenZero — a subsidy of Singapore state-owned investment firm Temasek — and Singapore conglomerate Keppel to phase out the 246MW South Luzon coal-fired plant in Batangas, the Philippines, and replace it with a clean power facility. The initial deal for this project was signed by Acen, GenZero and Keppel in August 2024.
Acen is now seeking to decommission the coal-fired plant by 2030, instead of the previous target of 2040. It is still unclear what types of clean power sources will then be deployed. But renewables such as solar or onshore wind, alongside storage batteries, could be possible, a Mitsubishi spokesperson told Argus.
The partners aim to leverage Transition Credits (TCs) for the early retirement of the plant. TCs are high-integrity carbon credits generated from the emissions reduced through retiring a coal-fired plant early and replacing this with clean energy. The South Luzon project is expected to be one of the first converted coal-fired plants in the world to generate TCs.
The project is expected to generate carbon credits equivalent to 19mn t of CO2 emissions reduction over 10 years, the Mitsubishi spokesperson told Argus. Mitsubishi plans to include this project in the JCM mechanism, as the Philippines has been Japan's JCM partner country since January 2017. The company is already marketing the carbon credits in Japan, assuming the credits will be verified under the JCM, while also hoping to sell them in Singapore and the Philippines.
Verified carbon reductions or removals under the JCM can be quantified on an international basis. Some of the JCM credits issued from such mitigation efforts will be used to achieve Japan's nationally determined contributions (NDCs), while ensuring double counting is avoided on the basis of corresponding adjustments between countries and consistency with the guidance on co-operative approaches referred to in Article 6.2 of the 2015 Paris climate agreement.
JCM credits could be also traded under the Japan's green transformation emission trading system (GX-ETS), which will be officially launched in autumn of 2027. The GX-ETS adopts the cap-and-trade programme, with the government allocating free allowances for each eligible entity every year.
Japan is still highly dependent on coal-fired generation, although Tokyo has pledged to phase out inefficient coal-fed plants by 2030. Coal-fired output accounted for 32pc of the country's total power generation in 2024, according to data from the trade and industry ministry. When asked by Argus where there is the potential for the introduction of the Transition Credits mechanism in Japan, the spokesperson said Mitsubishi has not ruled out the possibility, but added there have been no discussions on this for now.
