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

The report examines how public development banks can address barriers to coal phase-out through advisory services, technical assistance, and financing. It warns against risks such as moral hazard and the indirect support of natural gas capacity, recommending that banks seek firm commitments from governments to stop future fossil fuel investments. Specific guidance is provided for engaging national policymakers, utilities, and independent power producers (IPPs) to ensure transitions align with 1.5°C goals.

• Public development banks are well-positioned to support the transition to decarbonised electricity systems through technical assistance, advisory services, and financing, though they face risks such as creating moral hazard, inefficient use of public funds, or indirectly supporting new natural gas capacity.
• To prevent emission leakage and moral hazard, public development banks must secure firm commitments from partner governments and stakeholders to cease future fossil fuel investments and reduce current project pipelines.
• When working with national governments, banks should help define Paris-aligned long-term low-emissions strategies, build capacity for coal phase-out targets, provide policy-based lending for institutional reforms, and support sustainability-linked sovereign bonds.
• Engagement with utilities should focus on changing business models to attract private capital for renewables and financing decommissioning and remediation, rather than pursuing asset-level buyouts of coal plants.
• Engagement with independent power producers (IPPs) should be limited to buying out plants only when government commitments to phase-out exist, and should include legal reviews of power purchase agreements (PPAs) and the use of competitive market mechanisms.

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} }