Temasek-backed investment firm GenZero and Mizuho Bank join forces to help Asia quit coal

SINGAPORE - Temasek-backed investment company GenZero has signed an agreement with a Japanese bank that will pave the way for more investments to be channelled into ending Asia’s hunger for dirty coal. 

This new partnership between GenZero and Mizuho Bank is one of the first between private sector entities aiming to accelerate the phasing out of coal, the most pollutive fossil fuel, by paying coal plants to close early.

This is financed through the sale of a new form of carbon credits called transition credits. These are generated from the reduction in emissions when coal plants are retired early and replaced with clean energy sources. 

Each credit represents one tonne of planet-warming emissions prevented from being released.

There are at least two other transition credit schemes, one of which is led by a government agency and the other by a philanthropic organisation.

Traction, or the Transition Credits Coalition, was

launched in late 2023

by the Monetary Authority of Singapore (MAS). It has two ongoing pilot transition credit projects in the Philippines.

The Rockefeller Foundation in 2023 rolled out its Coal to Clean Credit Initiative, which has a goal of

retiring 60 coal plants globally by 2030.

Noting that the private sector plays a key role in channelling finance to decarbonisation efforts, GenZero chief executive Frederick Teo said: “The (private sector’s) efforts in building awareness and corporate demand for new classes of credits such as transition credits can help pave the way for more investments into such projects.

“Private sector capital can also augment other sources of finance... to scale energy transition solutions and projects.”

Coal-fired power plants are the single largest source of carbon emissions globally. Asia accounts for 50 per cent of global greenhouse gas emissions, of which a third is from coal plants, noted Mr Teo.

South-east Asia alone has about 2,000 coal plants that are less than 15 years old on average. As they have a lifespan of 40 to 50 years, it makes little financial sense to shut them down ahead of time.

If priced appropriately, proceeds from the sale of such credits can compensate coal plant owners and investors, while funding renewable energy projects.

“This strategic partnership aims to pave the way for investments into transition credit projects and generate greater awareness on the importance of transition credits in facilitating the clean energy transition globally,” said GenZero in a statement on Feb 20.

Mr Shinichi Tsunoda, executive officer and general manager of Mizuho Bank’s sustainable business promotion department, said that transition credits open a path for quickly withdrawing from coal-fired power while avoiding economic drawbacks.

On its end, Mizuho will build awareness of transition credits in Japan, working closely with local partners to build demand for the credits. It will also consider providing debt financing – or loans – for transition credit projects worldwide.

Mizuho and GenZero are among more than 30 members from financial institutions, carbon service firms and non-profits that are part of the MAS-led Traction initiative.

In August 2024, GenZero collaborated with Keppel and Acen, the energy unit of Philippine conglomerate Ayala Corporation, to study the development of a pilot transition credit project in the Philippines.

The project entails retiring a South Luzon coal plant in Batangas city in 2030 – 10 years ahead of schedule – and replacing it with a solar plant and a battery storage system. Closing the plant early would prevent up to 19 million tonnes of emissions.

This is one of two pilot projects in the Philippines under Traction. The second project involves retiring a 232MW coal plant in Mindanao by 2026, five years ahead of schedule.

However, on Feb 17, market data provider Argus Media reported that the Philippines might put on hold plans to retire the Mindanao plant because a hydropower complex that provides a stable supply of electricity to the region will be undergoing maintenance from 2026.

To prevent a shortage in power supply, the Philippines authorities will review plans to retire the coal plant earlier.

In a Traction report released in November 2024, the coalition noted that for transition credits to scale, there is a need to have solutions to address possible risks such as project delays and developments that may invalidate carbon credits, such as ramping up coal elsewhere.

Clear and strong demand for these new credits is necessary to increase the appetite for financing the move away from pollutive coal, the report added.

The partnership between Mizuho and GenZero is an example of the private sector’s involvement in channelling money into decarbonising and protecting people from the dire impacts of climate change. Together, this is known as climate finance.

Globally, discussions on novel forms of financing – such as transition credits – are picking up amid recognition of the urgency of closing the climate finance gap.

At the 2024 UN climate change talks in Azerbaijan, wealthy countries

pledged to provide US$300 billion (S$401 billion) a year by 2035

to help developing nations limit climate impacts and afford solutions to reduce their carbon emissions.

The larger goal is US$1.3 trillion annually by 2035, and the private sector – which holds most of the world’s wealth – is expected to mobilise much of the finance.

Mr Rueban Manokara, global lead of the carbon finance and markets task force at the conservation group World Wide Fund for Nature, noted that the private sector has been heavily involved in financing fossil fuel plants. 

“Therefore, supported by regulations and policy by governments, the private sector is also best placed to drive the clean energy transition. By structuring and offering financing mechanisms, they can incentivise the owners of coal-fired power plants to agree to an accelerated phase-out,” he said.