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Financing the coal-to-clean transition on the agenda at COP29

The Coal Transition Commission published its first report at COP29 proposing actions to accelerate the coal-to-clean energy transition.
Financing the coal-to-clean transition on the agenda at COP29
(Image: Stock)

The Coal Transition Commission, tasked with developing recommendations for driving coal phase-outs, published its first report at COP29 proposing actions to accelerate the coal-to-clean energy transition.

The Commission, chaired by France and Indonesia, was formed at COP28 to mobilize public and private financing for coal phaseouts, while also emphasizing the need for a just transition that alleviates poverty.

To this end, the Commission has released the report, Accelerating Coal-to-Clean Energy Transitions: First Report and Recommendations of the Coal Transition Commission, to guide governments, policymakers and financial institutions in creating an enabling environment for coal phase-outs.

The key recommendations include:

  • Governments must develop plans for coal phase-out that exclude new coal, giving investors confidence to mobilize behind the transition.
  • Finance for the coal-to-clean transition will need to be significantly increased with private finance playing a key role. Financial structures need to be developed that cover the costs of the coal transition and ensure private investors make reasonable returns.
  • Governments and technical bodies should continue to develop mechanisms to blend public and private finance and should explore the potential of high-integrity coal-to-clean carbon credits.
  • A pipeline of priority projects should be established to accelerate implementation, focusing on early retirement and repurposing for flexibility.

The price of phasing out coal

The report launch, as well as the challenges associated with coal phase-outs, were discussed at a COP29 session, ‘Delivering coal-to-clean transitions: Progress in the first rear of the Coal Transition Accelerator’.

The consensus expressed during discussions is that while phasing out coal must be a priority, ensuring it is done in a just and inclusive way is critical, although expensive.

According to Kevin Magron, French Climate ambassador: “Phasing out coal is difficult. It will cost an estimated $60 billion annually to reduce emissions from coal-fired power plants in emerging and developing countries outside China alone, according to the IEA.”

The financial cost is indeed significant, and is often coupled with a social cost for countries still heavily reliant on coal.

Dr Crispian Olver, executive director of the Presidential Climate Commission of South Africa, provided more detail on this, referring to South Africa as “the poster child for the transition out of coal.”

South Africa produces 80% of its power from burning coal. This means, explained Olver, that coal phase-out presents a variety of economic and social issues.

With 10,000 workers in the coal value chain, added Olver, “it’s politically impossible to talk about transition without putting in place the mechanisms for a just transition.”

Those mechanisms, he said, include building a green industrial value chain, providing skills for the labor force of the future, and putting the necessary social support mechanisms in place before decommissioning – all of which increase the tally associated with coal phase-out.

According to Rick Duke, US deputy special envoy for climate, ensuring these costs are covered is a matter of rational decision-making.

“It is not possible to succeed in this energy transition in any country…unless and until there are reforms that allow for rational decision-making in the power sector about capital investment.”

Duke put it simply, if the utility sector continues to subsidize coal power in the pricing system, then cheaper, renewable electrons won’t be purchased.

“You have to have those boring but essential reforms to power sector decision-making as a prime mover to make this happen.”

Originally published by Pamela Largue in Power Engineering International.