TEN GUIDING PRINCIPLES FOR FINANCING COAL RETIREMENT MECHANISMS

The policy brief argues that existing coal retirement mechanisms (CRMs) in Asia and Africa are failing to translate pledges into funding and effective plant closures. It identifies barriers such as the prevalence of non-concessional loans, the risk of 'emission leakage,' and the moral hazard of incentivizing new coal build-out. To address these, Reclaim Finance and 11 partner organizations propose ten principles, which include an immediate stop to coal expansion finance, the replacement of coal with renewables rather than gas, the prohibition of tradeable carbon offsets, and the requirement for transparent, auction-based retirement processes.

• Current coal retirement mechanisms (CRMs) in Asia and Africa are struggling to convert financial pledges into actual funding and agreed-upon spending plans.
• Specific CRMs have faced significant failures: South Africa's JETP is hindered by power sector crises and utility debt; Indonesia's JETP is criticized for only proposing to retire 1.7 GW of on-grid power while 14.4 GW of 'captive' coal is planned or under construction; Vietnam has not identified plants for closure; and in the Philippines, a major coal developer increased its shareholding in a CIF-ACT project while continuing to build new plants.
• Major barriers to CRM progress include the low proportion of available pledged funds, the use of non-concessional loans that increase national debt, long-term take-or-pay power purchase agreements (PPAs), and investor reluctance to accept 'haircuts' on coal investments.
• The document argues against the use of tradeable carbon offsets to fund CRMs, stating that such offsets negate climate benefits by allowing buyers to avoid reducing their own emissions and are prone to 'gaming' due to subjective counterfactual calculations.
• To prevent 'moral hazard,' the authors propose that any entity actively planning or building new coal projects should be ineligible for CRM finance, and all finance for coal expansion must cease immediately.
• The proposed principles mandate that lost coal power be replaced by sustainable renewables (solar and wind) and energy efficiency, explicitly rejecting high-carbon alternatives like methane gas or blue hydrogen.
• The document recommends that CRM processes use transparent mechanisms, such as auctions, to select plants for retirement to prevent overpriced compensation and reduce corruption.

APA

Reclaim Finance (2023). TEN GUIDING PRINCIPLES FOR FINANCING COAL RETIREMENT MECHANISMS. https://reclaimfinance.org/site/wp-content/uploads/2023/11/PDF-for-publication-Coal-phaseout-principles-formatted.pdf

Chicago

Reclaim Finance. TEN GUIDING PRINCIPLES FOR FINANCING COAL RETIREMENT MECHANISMS. 2023. https://reclaimfinance.org/site/wp-content/uploads/2023/11/PDF-for-publication-Coal-phaseout-principles-formatted.pdf.

Wikipedia

{{cite report |author=Reclaim Finance |title=TEN GUIDING PRINCIPLES FOR FINANCING COAL RETIREMENT MECHANISMS |date=1 December 2023 |url=https://reclaimfinance.org/site/wp-content/uploads/2023/11/PDF-for-publication-Coal-phaseout-principles-formatted.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{reclaimfinance2023ten, author = {{Reclaim Finance}}, title = {{TEN GUIDING PRINCIPLES FOR FINANCING COAL RETIREMENT MECHANISMS}}, institution = {Reclaim Finance}, year = {2023}, month = dec, url = {https://reclaimfinance.org/site/wp-content/uploads/2023/11/PDF-for-publication-Coal-phaseout-principles-formatted.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }