A different entry point for philanthropies in coal transition

In December 2025, Indonesia quietly dropped its plans to retire the Cirebon-1 coal plant. The plant had been the centrepiece of the Indonesia Just Energy Transition Partnership, a $21.4 billion international deal backed by the US, UK, Japan and the EU and widely described as the most ambitious coal phase-out agreement ever attempted. After three years of negotiations, no retirement deal had been funded. No coal plant in the JETP program had closed. The UK government had called the JETP model "a template on how to support just transition around the world."

Researchers from the University of Sussex published a detailed analysis of what went wrong. Their diagnosis is blunt: across all four JETP countries, the private capital that was supposed to be unlocked by public and philanthropic grants never arrived at the scale envisioned. The theory of change, that concessional money would de-risk deals enough to bring in banks and asset managers, did not hold in practice. The Rockefeller Foundation, one of the most committed philanthropic actors in this space, had backed the associated Coal to Clean Credit Initiative alongside GEAPP, with ambitions to begin signing coal retirement transactions by 2024. That timeline has passed without verified retirements.

None of this reflects a failure of intent. The capital committed has been real, and so has the effort. It reflects something about the instrument: specifically, that retiring a coal contract is a far harder commercial and political act than financing new renewable capacity alongside one. Coal plants in Southeast Asia are almost entirely contracted. Their revenue is locked in through power purchase agreements that guarantee returns regardless of dispatch. Asking an operator to terminate that contract is asking them to walk away from a legal entitlement. The retirement premium required to make that acceptable has proven, repeatedly, too large to assemble.

Philanthropies have been serious actors in coal transition for years, and the range of instruments they have reached for is genuinely broad. First-loss capital in blended finance structures. Concessional loans to make retirement deals viable. Credit enhancement for carbon credit purchase agreements. Grants to fund the structuring work that development finance institutions are not resourced to absorb. The Energy Transition Mechanism, the JETP processes, the transition credit pilots that have moved through validation: none of them would have reached even their current stage without philanthropic capital at key points in the development process.

And yet the gap between committed capital and verified coal displacement remains wide. As we have written elsewhere, the structural conditions that make early coal retirement tractable, a willing operator, a supportive regulatory environment, a complete financing package, a carbon buyer willing to commit upfront, have proven consistently difficult to assemble on the same asset at the same moment. The plants named in announcements are still running. Disbursement has lagged ambition. Some assets have moved from public generation into captive industrial supply, still burning coal, now outside the accounting framework.

The Sussex researchers conclude that philanthropies and governments should shift toward direct grants that allow host countries to build their own transition capacity. That may well be right. But it does not answer a different question: whether a mechanism exists that can work inside existing coal contracts, rather than against them, and create verified displacement without requiring retirement as a precondition.

SPARC is that mechanism.

What SPARC does, briefly

SPARC is a mechanism for disaggregating coal power purchase agreements into defined delivery bands, called SPARC streams, that can be assigned to and fulfilled by renewable generators. The coal operator does not retire. The underlying PPA stays legally intact. What changes is who produces the electricity for a defined portion of the contracted output. A renewable operator takes on a SPARC stream, fulfills the associated delivery obligation with lower-emission generation, and receives the corresponding payment from the original contract.

Each MWh delivered under a SPARC stream creates a registry record: a SPARC, which links that delivery to the originating coal PPA, the delivery party, and the coal-backed emission right associated with the contracted MWh. Where the verified emissions of the delivered MWh fall below that coal-backed emission right, the difference is issued as an ARC, an Avoided Right to emit Carbon. The coal plant generates less. The renewable plant generates more. The gap between what the coal contract permitted and what the renewable delivery produced is a documented, registry-registered fact.

The mechanism is incremental by design. A SPARC stream can cover a single delivery band in a single season. Additional streams can be added over time as confidence builds and renewable capacity grows. Taken to its limit, SPARC can reduce a coal plant's share of its own contracted output to zero, one stream at a time, without ever requiring a formal retirement decision.

This is not a workaround. It is a different framing of the problem. The JETP approach asked operators to surrender their contracts. SPARC asks them to share them. That is a negotiation that can actually happen.

What an ARC actually is

Most voluntary carbon instruments estimate reductions against a modeled counterfactual: what emissions would have occurred if the credited activity had not happened. For coal retirement credits, that modeling is particularly difficult. Once a plant is closed, its future generation must be projected rather than observed. The additionality claim rests on a scenario that, by definition, never played out.

An ARC is built differently. SPARC keeps the underlying coal contract active. When a SPARC stream is fulfilled, a coal-backed contractual MWh is called, delivered, and evidenced through metering. The ARC records the coal-backed emission right that existed under that contract but was not exercised, because the delivery was made by a generator with lower verified emissions. The claim follows a live delivery event. It does not depend on a modeled future operating path.

This matters practically for the audit trail. An ARC carries the originating coal plant and PPA, the specific delivery band, the delivery interval, and the verified emissions of the renewable MWh that fulfilled it. The coal-backed emission right comes from the plant's approved emission factor, a regulatory benchmark, or an ETS allocation: a figure established in a legal document before SPARC existed. The ARC quantity is the arithmetic difference between that figure and the verified delivery. No scenario modeling required. The verification burden falls on records rather than projections.

For a philanthropy that needs to describe its impact to a board, a public reporting framework, or the donors who funded the commitment, that specificity is not a minor detail. It is the difference between saying "we supported a program designed to reduce coal emissions" and being able to say "we hold records of verified coal substitution in a named plant, in a named period, for a documented quantity of tonnes."

How a committed offtaker makes deals possible

Here is where the philanthropy angle becomes most concrete. A renewable developer that has negotiated a SPARC stream agreement with a coal operator needs project financing to build the renewable plant. The SPARC stream payment anchors the power revenue component. ARC revenue, the value of the verified coal substitution records, can be significant to the project's economics, but it requires a credible buyer to be bankable. A lender will not treat projected ARC income as contracted revenue unless a counterparty has actually committed to buying it.

A philanthropy that signs a forward ARC purchase agreement changes that. The commitment is not an immediate capital outlay. It is a conditional one: fulfill verified renewable delivery under a registered SPARC stream, and the resulting ARCs will be purchased at an agreed floor price. From a project lender's perspective, that agreement converts uncertain ARC revenue into something they can underwrite. The deal that could not close without it now can.

The leverage here is real and specific. Philanthropic capital does not go in at the moment of maximum uncertainty, years before any coal has been displaced. It goes in at the moment when a committed forward commitment changes what the market can finance. And when the capital is eventually deployed, it acquires ARCs that already exist, tied to delivery events that have already occurred.

A different integrity story

The additionality question in voluntary carbon markets has become more contested, not less, over the past several years. Scrutiny of credit methodologies has intensified. The question of whether a credit represents a genuine reduction, or an accounting artifact that would have happened anyway, is one that sophisticated buyers, regulators, and journalists now apply routinely. Philanthropies that have purchased or facilitated carbon credits have found themselves drawn into those debates whether or not they sought the exposure.

The ARC additionality story is structured differently from most voluntary carbon instruments, and the difference is worth understanding. The reference point for an ARC is not a modeled future for the coal plant. It is the coal-backed emission right attached to a specific contracted MWh under the SPARC stream. That right is set by a regulatory document: an approved emission factor, an ETS allocation, a host-country benchmark. It exists independently of SPARC. When a renewable generator fulfills the stream with lower verified emissions, the unused portion of that right becomes an ARC.

The credit claim rests on a contractual document and a metered outcome, not on a projection of what a plant would otherwise have done. That is a harder claim to challenge. The reference point is not an assumption. It is a granted emission right evidently not being used.

This does not dissolve all questions around impact accounting. No framework does. But it does mean the integrity of an ARC purchase can be explained and defended on grounds that are concrete rather than modeled, which is a meaningfully different position to be in when the scrutiny arrives.

Scale and the development of the market

Forward ARC purchase commitments can be structured at whatever scale is appropriate. A single commitment covering one SPARC stream ties philanthropic capital to a defined band in a single PPA, a contained and auditable position with a traceable paper trail. A larger portfolio commitment spanning multiple streams and multiple plants creates a diversified set of verified displacement records across the regional fleet.

The near-term role for philanthropic offtake is as an anchor: providing the committed demand that makes early SPARC stream deals bankable while the ARC market develops its own liquidity. As commercial buyers, corporate sustainability programs, and compliance markets engage with ARCs over time, the marginal contribution of philanthropic offtake to bankability declines. Capital can move toward assets where the economics still need an anchor buyer, or step back entirely from streams that the market can now price without support.

The JETP process assembled bilateral political commitment, philanthropic co-financing, and concessional capital aligned behind a single objective. What it lacked was a transaction protocol that coal operators could agree to on business terms. Every JETP structure asked operators to think in binary terms. Keep the contract or surrender it. That framing made the negotiation difficult before it started. It also carried an implicit moral demand: retire because the climate requires it. That puts operators in a defensive posture before any commercial conversation begins. And when negotiations did progress, they stalled on a question nobody could answer cleanly: what is the stranded asset actually worth?

SPARC removes all three obstacles. The PPA stays intact, so there is no asset to value and nothing to surrender. The operator is not being asked to concede anything. They are being offered a commercial arrangement that progressively replaces coal output with verified renewable delivery, turning a stranded-asset liability into a transitioning portfolio. Stream by stream, the coal share of a contracted PPA is displaced from the inside. The ambition does not need to shrink. The entry point needs to change.

SPARC is not a replacement for the capital JETP mobilized. It is the protocol that capital has been missing. Instead of asking operators to exit, it gives them a way to participate. That is what an implementation mechanism looks like for a program that already has the political will and the financing, and has been searching for a way to make the transaction actually happen.