Ten guiding principles for financing coal retirement mechanisms

As COP28 kicks off in Dubai, Reclaim Finance, together with 11 organizations from Southeast Asia, Africa, Europe, and North America, outline ten guiding principles for financing coal retirement mechanisms (CRMs) to ensure that they effectively mitigate climate change.

These principles aim to provide a framework for designing and evaluating CRMs such that they align with 1.5°C pathways, prioritize renewables, avoid false carbon-based solutions and retrofitting delays, secure concessional financing in developing countries among others, and protect local communities impacted by coal’s early retirement. We call for private financial institutions, governments, and international organizations to transcend mere policy rhetoric and implement credible action.

1. All phaseouts must align with 1.5°C no- or low-overshoot emission pathways with limited reliance on negative emissions, such as those described by the International Energy Agency (IEA).
2. All finance for coal expansion, including for new, expanded, or refurbished grid-based power plants, captive plants, mines, and related infrastructure, must stop immediately.
3. Power generation lost from phasing out coal power plants must be replaced by sustainable renewables, in particular solar and wind power (and related grid upgrades with energy storage) and energy efficiency measures.
4. Financiers of CRMs must ensure that there is no emissions leakage.
5. Coal plant closures must not be delayed with the future promise of retrofitting with technologies to supposedly lower their emissions.
6. Donors must provide financing on concessional terms, and private financial institutions and project owners must treat CRMs as vehicles for living up to their climate responsibilities, not as opportunities for gaining public sector-guaranteed bailouts.
7. Where CRMs entail the development of new renewable power capacity, financing must be provided mainly through grants for government- and community-owned decentralized systems, and through concessional loans to private companies.
8. Tradeable carbon offsets must not be promoted or used to fund CRMs.
9. CRM processes must be transparent and accountable to encourage market competition and to avoid corruption.
10. RMs must ensure the remediation of social and environmental harms caused by projects to be retired.

These principles are jointly released by:

• BankTrack (Netherlands)
• Center for Economic and Law Studies, Celios (Indonesia)
• Centre for Energy, Ecology, and Development (Philippines)
• Centre for Environmental Rights (South Africa)
• Oil Change International (USA)
• ReCommon (Italy)
• Shift (Canada)
• Sierra Club (USA)
  
• Transisi Bersih (Indonesia)
  
• Trend Asia (Indonesia)
• Urgewald (Germany)