Scaling Financing for Coal Phase out in Emerging Economies 2025

Implications for coal phase-out financing 2.3 Summary of key insights FIGURE 9 Source: Coal-to-Clean InitiativeCRMs leveraging large concessional financing are costly and have limited scalabilityLoan tenor extensions and financial re-gearing deliver equivalent abatement impact to concessional financing Financial re-gearing-based CRMs rely on simple, widely understood financing concepts, increasing replicability and scalability across EMDEs Financial re-gearing offers higher payouts to asset owners compared to concessional financing, enhancing incentivesNewer, larger CFPPs are better suited to market-based CRMs given large remaining equity value and abatement potentialOlder, smaller CFPPs are preferable options for concessional financing given that less concessional capital goes further The analysis suggests very high costs of early CFPP retirements which leverage large concessional financing in the capital stack. Even for the relatively small sample of the global CFPP fleet examined in this analysis, the potential to scale coal phase-out in this way is limited. At the same time, the analysis demonstrates that loan tenor extension and financial re-gearing can have similar impact to concessional financing in terms of abatement, while crucially providing market returns to investors. This points to the need to further explore whether opportunities to re-gear and extend payback periods can apply to a broader set of CFPPs across EMDEs. If this is the case, there could be a greater role for such re-gearing-based CRMs alongside other financial tools and policies in delivering coal phase-out at scale. In addition to reducing concessional finance requirements, re-gearing and loan tenor extensions are tried and tested financing methodologies familiar to commercial financing institutions everywhere. This simplicity means such approaches are more likely to be scalable and replicated. Analysis from the Philippines also demonstrates that financial re-gearing can deliver substantial early payouts to asset owners in return for engaging in early retirement, which are higher than payouts delivered using concessional financing only. Maximizing possible re-gearing for each plant (with no concessional financing) delivers an average early payout of 40% of the remaining equity value of the CFPP , in contrast to a 15% payout for a debt facility in the scenario with the highest concessional capital only. This is an important advantage, given the currently limited pipeline of CFPP assets viable for early retirement with willing asset owners, which acts as a major constraint to scalability. A financial re-gearing approach also has the advantage of not using concessional funds to pay out the asset owner. Scaling Financing for Coal Phase-out in Emerging Economies 15