Emissions Accounting in Managed Coal Phaseout Finance

The document addresses the 'dilemma' where financing the early retirement of coal plants increases a financial institution's portfolio emissions, potentially violating net-zero targets. It proposes four accounting alternatives: rebaselining, sectoral targets, 'bad portfolios', and Net Present Value (NPV) accounting. It also details various financing mechanisms such as Managed Transition Vehicles and repurposing plants, specifically in the context of JETPs in South Africa, Indonesia, and Vietnam.

• Current emissions attribution methods, such as the GHG Protocol and PCAF, cause a financial institution's portfolio emissions to rise when they fund a coal transition mechanism, creating a conflict with interim portfolio emissions targets.
• The 'Rebaseline Emissions Approach' involves recalculating the portfolio's base year emissions to include the acquired coal asset, allowing targets to be adjusted while ensuring a greater volume of absolute emissions are reduced in the real economy.
• A 'Sectoral Target Approach' allows institutions to ringfence coal phaseout investments within a specific sectoral portfolio, preventing these emissions from impacting targets set for other sectors.
• The 'Bad Portfolio' approach involves creating a separate, ringfenced portfolio for high-emitting assets that is excluded from the main portfolio's emissions accounting and targets, as demonstrated by CDPQ's CAD 10 billion transition portfolio.
• The 'Net Present Value (NPV) Accounting Approach' uses a discount rate to calculate the current value of total emissions reductions in the real economy, which can incentivize near-term decarbonization by increasing the relative value of immediate reductions.
• Managed coal phaseout financing is critical for emerging and developing economies (EMDEs) where coal is often newer and more competitive, requiring public capital to support mechanisms like repurposing plants, Managed Transition Vehicles, and carbon markets.
• Just Energy Transition Partnerships (JETPs) in South Africa, Indonesia, and Vietnam are primary examples of where these mechanisms are applied, with South Africa's 2021 JETP earmarking USD 8.5 billion and Indonesia's 2022 JETP intending to raise over USD 20 billion.

APA

Pinko, N., & Pastor, A. O. (2023). Emissions Accounting in Managed Coal Phaseout Finance. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/03/Emissions-Accounting-in-Managed-Coal-Phaseout-Finance.pdf

Chicago

Pinko, Nicole, and Angela Ortega Pastor. Emissions Accounting in Managed Coal Phaseout Finance. Climate Policy Initiative, 2023. https://www.climatepolicyinitiative.org/wp-content/uploads/2023/03/Emissions-Accounting-in-Managed-Coal-Phaseout-Finance.pdf.

Wikipedia

{{cite report |last1=Pinko |first1=Nicole |last2=Pastor |first2=Angela Ortega |title=Emissions Accounting in Managed Coal Phaseout Finance |publisher=Climate Policy Initiative |date=March 2023 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2023/03/Emissions-Accounting-in-Managed-Coal-Phaseout-Finance.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{pinko2023emissions, author = {Pinko, Nicole and Pastor, Angela Ortega}, title = {{Emissions Accounting in Managed Coal Phaseout Finance}}, institution = {Climate Policy Initiative}, year = {2023}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2023/03/Emissions-Accounting-in-Managed-Coal-Phaseout-Finance.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }