Five Ways to Finance Early Coal Phaseout

This briefing by RMI outlines the concept of a "managed phaseout" for coal power plants, arguing that financial institutions must move beyond simple divestment to actively fund the early closure of plants and the transition to clean energy to ensure the process is just and equitable for workers and communities.

• A "managed phaseout" occurs when a broad group of stakeholders—including plant owners, financiers, electricity buyers, coal sellers, grid operators, local governments, regulators, workers, and communities—agree to shut down a coal plant earlier than planned and replace it with clean energy, a process that requires "compromise and compensation."
• RMI identifies five specific financing mechanisms to accelerate coal retirement: managed transition vehicles, where a plant is sold to a buyer who agrees to shut it down early; coal retirement credits, which pay for avoided emissions; ratepayer-backed securitizations, which use lower interest rates on new loans to fund phaseouts; power hedges, where banks guarantee fixed payments for renewable energy generation to secure cheap loans; and concessional financing, involving grants or low-interest loans from philanthropic foundations or development banks.
• The document highlights real-world applications of these mechanisms, noting that the Philippines has implemented the first managed transition vehicle and Chile has used a system where coal emissions savings are paid via a loan for a new wind farm, reducing the owner's repayment obligations as they stop burning coal.

APA

RMI (2023). Five Ways to Finance Early Coal Phaseout. https://rmi.org/resources/five-ways-to-finance-early-coal-phaseout/

Chicago

RMI. Five Ways to Finance Early Coal Phaseout. 2023. https://rmi.org/resources/five-ways-to-finance-early-coal-phaseout/.

Wikipedia

{{cite report |author=RMI |title=Five Ways to Finance Early Coal Phaseout |date=8 February 2023 |url=https://rmi.org/resources/five-ways-to-finance-early-coal-phaseout/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2023five, author = {{RMI}}, title = {{Five Ways to Finance Early Coal Phaseout}}, institution = {RMI}, year = {2023}, month = feb, url = {https://rmi.org/resources/five-ways-to-finance-early-coal-phaseout/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }