Coal-fired power generation accounts for 36% of total global generation and pumps over 10.3 gigatonnes of carbon dioxide into the atmosphere every year.
The World Economic Forum (WEF) recently published a paper titled “Scaling Financing for Coal Phase-out in Emerging Economies,” highlighting the urgency of investing in alternatives and decreasing coal-related emissions in EMDEs to keep the average warming of 1.5°C within reach.
The paper notes that despite the environmental, climate, and health dangers posed by coal, many countries have been slow to transition due to the ready availability and affordability of coal power, as well as its capacity to provide baseload power generation.
Therefore, phasing out coal and scaling investment in replacement technologies requires building replacement capacity and investing in grids to secure buy-in from system operators and plant owners, as well as upfront investment in jobs and communities and to rapidly grow overall energy demand.
It however explains that while coal phase-out must be accelerated to achieve global climate targets, failure to deal with energy security and affordability concerns or provide impacted workers and communities with new jobs and economic opportunities will only serve to slow the pace of the transition.
The paper, based on ten coal-fired power plants (CFPPs) in the Philippines highlights potential tried and tested financial engineering approaches namely financial re-gearing and loan tenor extension to help retire some kinds of plants early, without using large amounts of concessional financing.
According to the WEF, these approaches could facilitate an early payout to the CFPP owner in return for early retirement, equivalent to between 20% and 40% of the asset’s remaining value which could be linked to renewable investment and commitment that funds will not be reinvested in fossil fuels.
Moreover, accelerating the coal-to-clean transition will also require a broader set of government policies and financial tools, including commitments to transition, policies, and regulations that make coal less valuable and more costly going forward.
