Scaling Financing for Coal Phase-out in Emerging Economies

The report argues that coal retirement mechanisms (CRMs) based on financial re-gearing and loan tenor extension can facilitate early coal plant retirement in emerging and developing economies (EMDEs) with minimal reliance on concessional financing. Through an analysis of 10 plants in the Philippines, the authors demonstrate that these market-based tools can provide asset owners with early equity payouts—averaging 40% of remaining value—which incentivizes transition and mitigates stranded asset risks. While concessional capital is deemed most effective for older, smaller plants, newer and larger plants are better suited for re-gearing. The report concludes that a comprehensive transition requires a combination of these financial tools, transition credits, government policies like carbon pricing, and a focus on a just transition for workers and communities.

• Financial re-gearing and loan tenor extension can achieve carbon abatement impacts roughly equivalent to those provided by concessional financing while offering market returns to investors.
• An analysis of 10 coal-fired power plants in the Philippines showed that maximizing re-gearing without concessional financing could avoid approximately 118 million tonnes of CO2 emissions, with an average abatement of nearly 8 years.
• Financial re-gearing provides a stronger incentive for asset owners than concessional financing alone, delivering an average early payout of 40% of the asset's remaining equity value compared to 15% for concessional-only facilities.
• Newer and larger coal plants (those with operational lives over 16 years and capacity above 400 MW) are more suitable for market-based re-gearing due to their higher remaining equity value and abatement potential.
• Older and smaller coal plants are better targets for scarce concessional financing because smaller amounts of capital can more effectively reduce the overall cost of capital and deliver earlier abatement.
• The report identifies a critical need for government policies to make coal less valuable, such as carbon pricing, pollution controls, and mandated maximum asset lifespans, to encourage asset owners to retire plants early.
• Repowering—replacing coal plants with clean energy technologies at the same site—is highlighted as a way to capture residual value from grid connections and land while improving sovereign engagement.
• Commercial investors face significant reputational risks and 'thermal coal exclusion policies' that may prevent them from participating in phase-out financing unless clear distinctions are made between traditional coal investment and retirement financing.

APA

World Economic Forum (2025). Scaling Financing for Coal Phase-out in Emerging Economies. https://reports.weforum.org/docs/WEF_Scaling_Financing_for_Coal_Phase_out_in_Emerging_Economies_2025.pdf

Chicago

World Economic Forum. Scaling Financing for Coal Phase-out in Emerging Economies. 2025. https://reports.weforum.org/docs/WEF_Scaling_Financing_for_Coal_Phase_out_in_Emerging_Economies_2025.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Scaling Financing for Coal Phase-out in Emerging Economies |date=February 2025 |url=https://reports.weforum.org/docs/WEF_Scaling_Financing_for_Coal_Phase_out_in_Emerging_Economies_2025.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2025scaling, author = {{World Economic Forum}}, title = {{Scaling Financing for Coal Phase-out in Emerging Economies}}, institution = {World Economic Forum}, year = {2025}, month = feb, url = {https://reports.weforum.org/docs/WEF_Scaling_Financing_for_Coal_Phase_out_in_Emerging_Economies_2025.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }