Public Development Bank Support For Early Coal Retirement

To mitigate the worst impacts of the climate crisis, most coal power plants must retire before the end of their lifetime. Firm government commitments are needed to stop future coal investments and phase out existing coal power generation. Public development banks (PDBs), mainly multilateral development banks (MDBs) and bilateral development finance institutions, are key in addressing barriers to coal phase-out. However, they must avoid setting perverse incentives that would keep coal plants online, and ensure transition finance does not undermine climate objectives by locking in business-as-usual pathways. As their shareholders, G20 governments must ensure PDBs have the mandate and resources to: e Assist countries in defining Paris-aligned long-term low-emissions development strategies and energy planning; e Provide technical assistance to governments to build the capacity to plan and implement early retirement; e Provide financial support (e.g. policy-based lending) and technical assistance to support ambitious energy policy and institutional reforms; e Provide technical assistance to support the issuance of sovereign bonds that contribute to transforming economies towards low-emissions and climate-resilient systems. They should also encourage PDBs to engage with power producers as follows: Utilities e Not pursue the buyout of utility-owned coal plants but instead support utilities in changing their business model to enable them to attract private capital to finance renewable energy; e Help utilities address financial barriers like cost recovery and restructuring balance sheets; e Support utilities with improved integrated resource planning and scenario modelling. Independent power producers (IPPs) e Only consider buying out IPPs under limited circumstances (i.e., when there is a government phase-out commitment); e Facilitate legal review of power purchase agreements (PPAs) and support competitive and transparent market mechanisms to terminate, replace, and restructure PPAs.