Financing coal phase-out: public development banks' role in the early retirement of coal-fired power plants

This report by the NewClimate Institute and the Institute for Climate Economics (I4CE) examines the role of public development banks in accelerating the early retirement of coal-fired power plants to align with the 1.5°C temperature goal. It outlines specific strategies and instruments for engaging national policymakers, utilities, and independent power producers (IPPs), while warning against risks such as moral hazard, emission leakage, and the indirect support of natural gas capacity.

• Public development banks are uniquely positioned to address barriers to coal phase-out through a range of services including advisory services, technical assistance, and various financing forms, though such engagement risks indirectly supporting new natural gas capacity or creating perverse incentives through transition finance and compensation payments.
• To prevent emission leakage and moral hazard, public development banks must secure firm commitments from partner governments and stakeholders to halt future fossil fuel investments, reduce current pipelines, and ensure phase-out plans survive political turnover.
• When working with national governments, public development banks should help define Paris-aligned long-term low-emissions development strategies, build capacity for coal phase-out targets, provide policy-based lending for institutional reforms, support sustainability-linked sovereign bonds, and collaborate with national development banks.
• Engagement with utilities should avoid asset-level buyouts of coal plants; instead, banks should help utilities evolve their business models to attract private capital for renewables, define strict key performance indicators to avoid moral hazard, and finance energy storage, smart grids, and decommissioning.
• Regarding independent power producers (IPPs), public development banks should only consider buyouts if there is a government commitment to coal phase-out. They should also facilitate the legal review and restructuring of power purchase agreements (PPAs) and use transparent market mechanisms to ensure efficient use of public funds.

APA

NewClimate Institute (2024). Financing coal phase-out: public development banks' role in the early retirement of coal-fired power plants. https://newclimate.org/resources/publications/financing-coal-phase-out-public-development-banks-role-in-the-early

Chicago

NewClimate Institute. Financing coal phase-out: public development banks' role in the early retirement of coal-fired power plants. 2024. https://newclimate.org/resources/publications/financing-coal-phase-out-public-development-banks-role-in-the-early.

Wikipedia

{{cite report |author=NewClimate Institute |title=Financing coal phase-out: public development banks' role in the early retirement of coal-fired power plants |date=7 March 2024 |url=https://newclimate.org/resources/publications/financing-coal-phase-out-public-development-banks-role-in-the-early |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{newclimateinstitute2024financing, author = {{NewClimate Institute}}, title = {{Financing coal phase-out: public development banks' role in the early retirement of coal-fired power plants}}, institution = {NewClimate Institute}, year = {2024}, month = mar, url = {https://newclimate.org/resources/publications/financing-coal-phase-out-public-development-banks-role-in-the-early}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }