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ClientEarth Communications

4th December 2023

Financing the Managed Phaseout of Coal-Fired Power Plants in Asia Pacific

The Glasgow Financial Alliance for Net Zero’s (GFANZ) APAC Network released its Final Report on Financing the Managed Phaseout of Coal-Fired Power Plants in Asia Pacific on 3 December 2023 at COP28 in Dubai. The workstream was co-led by DBS and HSBC, supported by the GFANZ Secretariat along with the Asian Development Bank, the Monetary Authority of Singapore and other stakeholders. ClientEarth was pleased to be the legal knowledge partner for the workstream.

Coal power generation is the largest source of carbon dioxide emissions globally. We must accelerate the phaseout of coal power to avoid the most severe impacts of climate change. Unlocking investment to enable the scaling of renewable powerand the accelerated transition away from coal is critical in the Asia-Pacific region, which has approximately 5,000 coal-fired power plant units. This transition is possible only with the buy-in of financial institutions, which have a critical role in financing the decarbonisation of the economy.

The report provides practical, voluntary guidance for net zero-committed financial institutions. The recommendations include the following:

  • Financial institutions should prioritise financing managed phaseout plans that support alignment with a science-based pathway, with proposed emissions reductions as ambitious as possible, with public-sector endorsement or independent verification and in line with timeframes by internationally recognised bodies

  • Financial institutions should assess the relevant entity’s overall transition plan – including but not limited to the specific coal-fired power plant – to gain confidence that a coal phaseout plan will be implemented and effectively mitigate emissions.

  • Financial institutions need to ensure the coal phaseout plans demonstrate an independently verified positive absolute emissions reduction over the expected lifetime of the asset relative to its expected operation and assess what measures are in place to support access to secure, reliable and affordable clean energy replacements for the coal decommissioned.

  • Financial institutions need to ensure their own transition plans, including related targets and fossil fuel-related policies and conditions, will play an important role in their ability to finance credible coal phaseout plans. The report provides guidance for financial institutions to have credible internal policies which would balance directing capital away from coal expansion or coal operation with supporting the financing of credible transitions and accelerated retirement.
The report provides guidance on financing mechanisms to support accelerated phaseout including sustainability-linked bonds or loans with legal guardrails to ensure the phaseout remains credible and prevent greenwashing.

Elizabeth Wu, Legal Consultant in ClientEarth’s Energy Systems, Asia team, said “Accelerated coal phaseout and scaling of clean, accessible and affordable power in the Asia-Pacific region is critical to avoiding the worst impact of climate change. Financing should be anchored in credible, science-based transitions plans and accompanied by legal safeguards to ensure the credibility and effectiveness of planned coal phaseout. This report provides valuable guidance on financing accelerated coal phaseout as part of a rapid and just transition in the region.”

The report was launched during COP28 on 3 December 2023, and is available here.