How to Finance a Credible Coal Transition

Climate Policy Initiative, Climate Bonds Initiative, and RMI have developed guidelines to manage the reputational and financial risks associated with Coal Transition Mechanisms (CTMs). These mechanisms aim to accelerate the retirement of coal plants and the expansion of renewable energy, particularly in emerging markets where 93% of coal capacity is protected from market pressures by regulation or long-term contracts.

• Coal Transition Mechanisms (CTMs) are proposed as tools to enable early and equitable coal retirement and renewable energy expansion, especially in emerging markets. This is necessary because 93% of coal capacity is currently shielded from market pressures by long-term contracts or electricity regulation.
• CTMs face significant reputational risks that may deter financial institutions, as funding these mechanisms can appear as financing coal plants and may increase near-term emissions in investment portfolios. There are further risks if the mechanisms fail to deliver emissions savings or fail to protect impacted workers and communities.
• To mitigate risks, CBI, CPI, and RMI established guidelines requiring CTM transactions to: assess plants for moral hazard and non-additionality; demonstrate long-term emissions savings aligned with Paris goals; include protections for coal workers and local communities; and ensure public disclosure of nonfinancial outcomes.
• Recent efforts to phase out coal include Just Energy Transition Partnerships (JETPs), such as the USD 8.5 billion agreement for South Africa and the USD 20 billion agreement for Indonesia. Specific market-based transactions have occurred in the Philippines via utility ACEN and in Indonesia through a utility leveraging concessional funding.

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} }