Scaling Financing for Coal Phase out in Emerging Economies 2025

Conclusion CRMs based on financial re-gearing can play an important role in scaling the coal-to-clean transition in EMDEs. Re-gearing CRMs are simple and therefore replicable and have the advantage of offering substantial incentives to transition risk-concerned asset owners to engage in phase-out in the form of early equity payouts, which can also be linked to reinvestment in renewables. This could help boost development of the pipeline of CFPP assets eligible for and interested in early phase-out, a central obstacle to accelerating the coal-to-clean transition. Of course, scaling the coal-to-clean transition as a whole will require the full suite of policies and financing tools available. Governments can do the most to accelerate coal phase-out by sending long-term signals to industry that they are committing to the transition. Regulations and policies that impose costs on asset owners, such as pollution and environmental controls and carbon pricing, will also be key to reduce the value of coal power, as well as policies that address barriers to clean energy scale-up.Financial restructuring can help bring forward retirement dates for many plants, but other financial tools will also be needed. Concessional financing – particularly for smaller and older plants – can help deliver much needed demonstration projects and crowd in private financing. Larger and newer assets, with substantial capital to recoup, will require deployment of additional capital such as transition credits to help them retire early. The approaches suggested in this paper need further consultation and stress-testing. Particularly important will be an exploration of how they might interact with and support investment in renewables and other forms of energy necessary to provide alternatives to coal power in EMDE energy systems, as well as ensuring delivery of a just transition for workers and communities. In the coming months, the World Economic Forum’s Coal-to-Clean Initiative will test and develop these concepts with members of its community, with the aim to develop investible financing vehicles capable of delivering coal phase-out at scale based on the financing mechanisms outlined in this paper. Scaling Financing for Coal Phase-out in Emerging Economies 23