GUIDELINES FOR FINANCING A CREDIBLE COAL TRANSITION

The document establishes a framework for Coal Transition Mechanisms (CTMs) to ensure they deliver real emissions savings, align with 1.5°C goals, and support a just transition. It outlines eight specific guidelines across four 'stage gates': plant eligibility, transition pathways, social protection, and accountability. The framework is illustrated through a real-world case of ratepayer-backed bond securitization in the United States and hypothetical scenarios involving a sovereign sustainability-linked bond in Indonesia and a managed transition vehicle for an Independent Power Producer (IPP).

• To prevent moral hazard and the expectation of future CTM funding for new projects, the authors recommend that eligible coal plants must have reached financial close or a final investment decision prior to December 2021, coinciding with the Glasgow Climate Pact.
• Credible CTM financing requires coal plant owners to commit to no new unabated coal power plant development or procurement globally, beyond those that already reached financial close or final investment decision.
• To ensure climate additionality and avoid the perception of subsidizing the coal industry, the framework requires that the fair value of a coal plant be positive at the time of the proposed transition.
• CTM transactions must demonstrate positive absolute emissions savings over the plant's expected lifetime and include a backstopping commitment to phase out unabated coal by country-specific, 1.5°C-aligned deadlines (e.g., 2030 for advanced economies and 2040 for others).
• To mitigate emissions leakage, the guidelines suggest replacing coal generation with 'clean resources' defined as having a life-cycle emissions intensity of 100 grams CO2 equivalent per kilowatt-hour (g CO2e/kWh) or less.
• A credible CTM must include a just transition plan that addresses the needs of workers, electricity customers, and local communities, incorporating principles of recognition, procedural, distributional, and restorative justice.
• Asset-level just transition plans should include specific components such as providing at least six months' advance notice of closure, conducting environmental and social impact assessments, and implementing remediation and reclamation plans for the site.
• To manage reputational risks and build trust, CTM transactions must provide public transparency and an accountability mechanism to ensure the achievement of intended climate and social outcomes.

APA

Kidney, S., Wetmańska, Z., Buchner, B., First, J., Sen, V., Widge, V., Calhoun, K., Matsuo, T., Obuekwe, C., Slater, E., & Varadarajan, U. (2022). GUIDELINES FOR FINANCING A CREDIBLE COAL TRANSITION. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Guidelines-for-Financing-a-Credible-Coal-Transition.pdf

Chicago

Kidney, Sean, Zofia Wetmańska, Barbara Buchner, Jonathan First, Vivek Sen, Vikram Widge, Koben Calhoun, et al. GUIDELINES FOR FINANCING A CREDIBLE COAL TRANSITION. Climate Bonds Initiative, 2022. https://www.climatebonds.net/files/documents/publications/Guidelines-for-Financing-a-Credible-Coal-Transition.pdf.

Wikipedia

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BibTeX

@techreport{kidney2022guidelines, author = {Kidney, Sean and Wetmańska, Zofia and Buchner, Barbara and First, Jonathan and Sen, Vivek and Widge, Vikram and Calhoun, Koben and Matsuo, Tyeler and Obuekwe, Chiagozie and Slater, Emma and Varadarajan, Uday}, title = {{GUIDELINES FOR FINANCING A CREDIBLE COAL TRANSITION}}, institution = {Climate Bonds Initiative}, year = {2022}, month = nov, url = {https://www.climatebonds.net/files/documents/publications/Guidelines-for-Financing-a-Credible-Coal-Transition.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }