ACEN: Transition credits gaining momentum in Philippines

MANILA, Philippines — Ayala-led ACEN Corp. is upbeat on the country’s progress in using transition credits to reduce carbon emissions, but calls on the government to intensify efforts in establishing the necessary policies.

“Well, it’s progressing nicely. I say there’s a good momentum,” ACEN president and CEO Eric Francia said in a recent interview, banking on the partnership between the Philippines and Singapore.

The two countries inked a memorandum of understanding (MOU) on carbon credits in August, signifying their desire to work together to achieve national climate goals while fostering sustainable development.

This is aligned with Article 6 of the Paris Agreement, an international treaty on climate change mitigation adopted in 2015.

“The transition credits will have to be under Article 6 of the Paris Agreement so that we can attain the highest quality and integrity for the credits,” Francia said.

Transition credits are a new type of carbon credit earned from the reduction in greenhouse gas emissions when coal plants are decommissioned ahead of schedule and replaced with clean, renewable energy sources.

To further advance their net zero goals, buyers such as governments and companies may purchase these credits to lower their carbon footprint.

The Paris Agreement enables countries to transfer carbon credits to help one or more countries meet their climate targets.

“We need the credits to be of high value to support the coal-to-clean transition because we need to take care of keeping the coal plant, the community, workers, investors, lenders and customers,” Francia said.

“All that will require subsidy through the transition credits. The quality of the transition credits will need to be high so you get the proper value to pay for all these requirements,” he said.

But Francia said the MOU between the two countries is “not enough” to support the use of transition credits in the Philippines, highlighting that the next crucial step is to establish an implementation agreement.

“The Philippine government will need to set up its carbon framework and policies. We need to have the proper registry, carbon registry and accounting system,” he said.

Francia clarified that setting up a carbon policy should not be mistakenly equated with implementing a carbon tax, which he said could be “quite controversial.”

A carbon tax is a government-imposed price that charges businesses for each ton of carbon emissions they emit, making carbon-intensive fuels more expensive.

Singapore, Francia said, has opened its carbon tax borders to the international market, allowing carbon taxpayers to purchase high-quality carbon credits from other countries to offset their obligations.

“That’s what we’re planning to tap as a source of demand for these transition credits. That’s why we need that G2G (government-to-government) agreement so that our credits will qualify as marketable to Singapore’s carbon taxpayers,” he said.

Earlier, ACEN signed a deal with GenZero and Keppel Ltd. to explore the utilization of transition credits for the early retirement of its 246-megawatt South Luzon Thermal Energy Corp. coal plant in Batangas.

This project involves the development of end-to-end technological solutions to replace the baseload plant with a mid-merit integrated renewables and energy storage system.

Mid-merit power plants typically operate during periods of moderate demand to help bridge the gap between peak and base generation sources.

As the listed energy platform of the Ayala Group, ACEN is boosting the country’s energy transition with its target of achieving 20 gigawatts of attributable renewable capacity by 2030.

To date, the company has a global generation portfolio of 6.8 GW, consisting of fully operational assets, projects under construction and committed projects.