Scaling Financing for Coal Phase-out in Emerging Economies

This paper examines how emerging and developing economies (EMDEs) can transition away from coal-based energy with innovative financing strategies to retire coal plants early.

Coal dominates global power generation, accounting for 36% of output, with a higher reliance in EMDEs, where it fuels significant carbon emissions. Addressing the impact of coal is crucial as it risks consuming half the global carbon budget needed to limit warming to 1.5°C. The World Economic Forum's Coal-to-Clean Initiative highlights innovative financing strategies using financial re-gearing and loan tenor extensions, reducing the need for concessional funding from multilateral development banks. A study of 10 plants in the Philippines demonstrates the viability of this approach across EMDEs, especially in ASEAN countries with substantial coal-fired capacity, while ensuring early payouts for asset owners – of up to 20-40% of a plant's remaining value. This can encourage early transitions and reduce the risk of stranded assets.