Financing coal phase-out: public development banks’ role in the early retirement of coal plants

Limiting global average temperature rise to 1.5°C requires stopping the construction of new coal power plants, and that many existing plants must retire early before the end of their technical lifetimes. This presents a major challenge as coal supplied more than one-third of global electricity generation in 2023. Several barriers to the phase-out of existing plants prevent market forces in favour of renewables and limit sustainable development gains. The report reviews public development banks' instruments to help address barriers and the associated challenges and risks, including cases on existing phase-out engagements. It underscores the importance of seeking firm commitments from partner country governments and other stakeholders to stop future fossil fuel investments, shrink current pipelines to avoid emission leakage and moral hazard risks, and prevent backtracking on coal phase-out in the event of political turnover.