Scaling Financing for Coal Phase out in Emerging Economies 2025

Foreword The task of transitioning from coal to cleaner energy sources has never been more urgent. With coal power generation in 2024 expected to have reached record levels according to the International Energy Agency (IEA), the path to a low-carbon future depends on accelerating this shift. Yet, financing coal phase-out remains one of the most complex and pressing climate challenges of our time. This paper, developed through expert consultations under the World Economic Forum’s Coal-to-Clean Initiative, offers critical new insights into scaling financing solutions for coal retirement in emerging and developing economies (EMDEs). It highlights the important role coal retirement mechanisms (CRMs) based on financial restructuring can play in helping retire some plants early. These mechanisms offer a simple and replicable approach, providing strong incentives for asset owners concerned about transition risks. By enabling early equity payouts – potentially tied to reinvestment in renewables – re-gearing CRMs can make the business case more attractive and help expand the pipeline of coal-fired power plants (CFPPs) willing and eligible for early retirement, a key bottleneck in accelerating the coal-to-clean transition. Of course, financial restructuring is just part of the suite of financial tools and policies which will be needed to accelerate this transition. Governments can play a crucial role by setting clear long- term goals backed by policies which impose costs on asset owners and address barriers to clean energy scale-up. Meanwhile, concessional financing remains key to crowding in private capital, particularly given that few demonstration projects exist, while larger and newer coal assets, which still have substantial capital investments to recoup, may require mechanisms like transition credits to facilitate early closure. Further testing and discussion of these approaches are crucial to scaling the coal-to-clean transition. The World Economic Forum’s Coal-to-Clean Initiative looks forward to working with its community to develop the broad suite of financing tools and policies, and the investible financing solutions needed to accelerate coal phase-out, while ensuring energy security and safeguarding the rights and interests of workers and communities.Scaling Financing for Coal Phase-out in Emerging EconomiesFebruary 2025 Espen Mehlum Head, Energy Transition Intelligence and Regional Acceleration, Centre for Energy and Materials, World Economic ForumMike Hayes Global Climate, Decarbonization and Renewable Energy Lead, KPMG Scaling Financing for Coal Phase-out in Emerging Economies 3