How to Finance a Credible Coal Transition

The document outlines the role of Coal Transition Mechanisms (CTMs) in accelerating the shift from coal to clean energy, particularly in emerging markets. It highlights the challenge that 93% of coal capacity is shielded from market pressures by regulation or contracts, necessitating blended finance and CTMs to manage early retirement. To address reputational risks—such as the appearance of financing coal or failing to protect workers—the authors propose a framework focused on assessing moral hazard, ensuring Paris-aligned emissions savings, supporting just transition provisions, and maintaining transparency through public disclosures.

• A vast majority of global coal capacity is not subject to market-driven phase-outs because 93% of it is protected by long-term contracts or electricity regulation.
• Coal Transition Mechanisms (CTMs) are proposed as tools to enable early and equitable coal retirement and renewable energy expansion, specifically to mitigate short-term losses of early retirement and maintain social and regulatory stability in emerging markets.
• CTMs face significant reputational risks, as funding them may appear as financing coal plants and could increase near-term emissions in investment portfolios, potentially deterring financial institutions.
• The developed guidelines for credible CTMs focus on four primary areas: assessing risks like moral hazard and non-additionality, ensuring long-term emissions savings aligned with Paris goals, protecting workers and communities for a just transition, and ensuring public disclosure for accountability.

APA

Kahn, R. (2022). How to Finance a Credible Coal Transition. Climate Policy Initiative. https://www.climatepolicyinitiative.org/how-to-finance-a-credible-coal-transition/

Chicago

Kahn, Rob. How to Finance a Credible Coal Transition. Climate Policy Initiative, 2022. https://www.climatepolicyinitiative.org/how-to-finance-a-credible-coal-transition/.

Wikipedia

{{cite report |last1=Kahn |first1=Rob |title=How to Finance a Credible Coal Transition |publisher=Climate Policy Initiative |date=21 November 2022 |url=https://www.climatepolicyinitiative.org/how-to-finance-a-credible-coal-transition/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kahn2022how, author = {Kahn, Rob}, title = {{How to Finance a Credible Coal Transition}}, institution = {Climate Policy Initiative}, year = {2022}, month = nov, url = {https://www.climatepolicyinitiative.org/how-to-finance-a-credible-coal-transition/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }