How to Finance a Credible Coal Transition

This guide by RMI, developed in collaboration with the Climate Bonds Initiative (CBI) and Climate Policy Initiative (CPI), introduces guidelines for Coal Transition Mechanisms (CTMs). These financial tools are designed to accelerate the retirement of existing coal plants, particularly those shielded from market pressures by regulation or long-term contracts, while mitigating the reputational and financial risks associated with financing coal plant owners.

• Coal Transition Mechanisms (CTMs) are necessary because 93 percent of existing coal capacity is protected from market forces by long-term contracts or electricity regulation, making financial tools essential to accelerate plant closures while maintaining economic and regulatory stability.
• CTMs face significant reputational risks because they can appear to be instruments that finance coal plant owners, which may conflict with the policies of private financial institutions that limit new coal investments. These risks are heightened if the mechanisms fail to produce emissions savings or protect affected workers and communities.
• RMI, CBI, and CPI have established a framework of guidelines to ensure CTMs are credible. These guidelines recommend that transactions demonstrate the value of transition finance by assessing risks like moral hazard and non-additionality, ensure positive climate impacts aligned with 1.5°C goals by managing emissions leakage and lock-in, include provisions to protect coal workers and communities, and maintain transparency through public disclosures.
• Recent examples of coal transition efforts include the South Africa Just Energy Transition Investment Plan, a US$20 billion committed support package for Indonesia's energy and coal transition goals, and a deal by the utility ACEN in the Philippines to sell its remaining coal plant for accelerated retirement.

APA

RMI (2022). How to Finance a Credible Coal Transition. https://rmi.org/resources/how-to-finance-a-credible-coal-transition/

Chicago

RMI. How to Finance a Credible Coal Transition. 2022. https://rmi.org/resources/how-to-finance-a-credible-coal-transition/.

Wikipedia

{{cite report |author=RMI |title=How to Finance a Credible Coal Transition |date=21 November 2022 |url=https://rmi.org/resources/how-to-finance-a-credible-coal-transition/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2022how, author = {{RMI}}, title = {{How to Finance a Credible Coal Transition}}, institution = {RMI}, year = {2022}, month = nov, url = {https://rmi.org/resources/how-to-finance-a-credible-coal-transition/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }