Scaling Financing for Coal Phase out in Emerging Economies 2025

CFPPs in EMDEs tend to be insulated from market competition by long-term power offtake contracts, meaning they will continue to generate even when cheaper alternatives are available. Many of these countries have also struggled to attract the investments they need to scale up clean energy alternatives capable of replacing the role coal power generation plays in their electricity systems. In 2023, for instance, EMDEs accounted for just 15% of the world’s clean energy investment, despite making up a third of global GDP and two-thirds of the world’s population (these figures do not include China).9 Socio-economic considerations also present important challenges to accelerating coal phase-out. Coal often provides a major source of employment, income and economic activity at a local level. Transitioning away from it requires long-term commitment to growing viable alternatives and creating new economic and employment opportunities for those impacted. A just transition is essential to ensure that workers and communities dependent on coal are supported through this shift, with access to retraining, new jobs and sustainable livelihoods. While ending construction of new CFPPs is key to advancing global climate goals, it will also be necessary to close many already in operation. Operating the existing global fleet of CFPPs to the full extent of their potential lifespans would emit 250 Gt CO2 emissions to 2050, accounting for about half the remaining carbon budget for a 1.5-degree future.10 The International Energy Agency (IEA) estimates that a 160 Gt CO2 reduction is needed in coal emissions to achieve net-zero global emissions by 2050. Some two-thirds of this needs to come from CFPP retirements,11 and over 60% in EMDEs.12 Core challenges in CFPP phase-out FIGURE 2 Addressing impacts on workers and communities through delivery of a just transition Scaling investments in alternative technologies to take over from coal Avoiding energy security/affordability impacts and obtaining buy-in of system operators Building political will and securing buy-in of key interest groupsReputational concerns for investors in coal phase-out transactionsClosing the economic/ valuation gap CFPP early retirement/ repurposing transaction Source: Coal-to-Clean Initiative Scaling Financing for Coal Phase-out in Emerging Economies 6