Home » Global Leaders Push to End Private Funding for Coal Projects

Global Leaders Push to End Private Funding for Coal Projects

OECD Proposes New Standards to Curb Coal Financing

by Adenike Adeodun

Some of the world’s major economies are working to finalize a plan to halt new private-sector funding for coal projects. This initiative aims to be ready before this year’s UN climate summit, according to sources with direct knowledge of the matter.

The draft proposal by the Organisation for Economic Co-operation and Development (OECD) seeks to set a “gold standard” for financial institutions. It instructs investors, banks, and insurers to stop new financing for existing or planned coal projects and end funding to companies building coal infrastructure. This move would be the first of its kind by a multilateral institution to curb coal financing, one of the largest contributors to climate change.

Commercial banks lent and underwrote $470 billion to the coal industry between January 2021 and December 2023, according to a report by the NGO Urgewald. The OECD proposal aims to redirect such funds towards the early retirement of coal plants and financing clean energy to replace lost coal capacity.

France, the United States, Britain, Canada, and the European Union support the proposal. This initiative, called the “Coal Transition Accelerator,” was conceived by France at last year’s COP28 climate summit. It also aims to reduce the cost of capital for clean energy investments and has support from coal-reliant emerging economies like Indonesia and Vietnam.

However, Japan, the world’s third-biggest coal importer, has shown resistance. Japan relies on coal for more than a quarter of its energy. The biggest pushback on the OECD proposal has come from Japan, with some sources indicating the proposal might be watered down.

The OECD policy, while non-binding, aims to set an international standard for companies’ boards and shareholders. Previous OECD guidelines on issues like child labor have influenced multinational companies in countries lacking formal laws.

G7 leaders, including those from France, the US, and Japan, will discuss their coal phase-out efforts at a summit in Italy next week. The outcome of this summit could impact the final shape of the OECD proposal. Governments, including the G7, have already banned or limited public funding for coal power to meet climate goals. However, most coal funding now comes from the private sector.

The global coal power capacity stands at over 2,000 GW, with another 500 GW in development, mainly in China. For emerging economies with young coal plants, like India and Vietnam, early retirement is complex due to the need to recover upfront investments over a plant’s lifespan, typically around 40 to 50 years.

The OECD’s proposed guidelines aim to halt new private sector financing for coal projects and redirect funds towards clean energy. With significant support and some opposition, the final details of the proposal will be crucial in determining its impact on global coal financing and climate change efforts.



Source: Mining Weekly

You may also like

Leave a Comment

The African Miner is the vanguard of the mining industry, delivering world-class insight and news.

Latest Stories

© 2024 The African Miner. All Rights Reserved.