New Report: How to Retire Early: Making Accelerated Coal Phase-out Feasible and Just.
Rocky Mountain Institute, Carbon Tracker Initiative, and the Sierra Club are excited to share our new report, How to Retire Early: Making Accelerated Coal Phase-out Feasible and Just.
The report reviews the crumbling economics of the world’s coal plants, and proposes financial tools to accelerate their closure while saving customers money and enabling a just transition for workers and communities. The report is particularly timely, as the strategies we propose offer a highly impactful way to use Covid-19 recovery packages to “build back better.”
The report finds that renewable energy and storage are now so cheap that switching the world from coal to clean power would pay for itself by 2022 and would save over US$100 billion annually by 2025. It further finds that it is now cheaper to build new renewables and storage than to continue to operate 39% of existing coal capacity worldwide. This number will rise to 73% in 2025, as the cost of renewable energy and storage technologies continue to plummet. And that doesn’t even account for dismal environmental, health, and climate impacts of continuing to run these dirty coal plants.
However, economics alone won’t close these plants, because long-term contracts and noncompetitive tariffs insulate 93 percent of global coal plants from competition with cheaper and cleaner renewables. To address this problem, we propose that governments and public finance institutions create voluntary, incentive based finance programs to accelerate coal phase-outs. These programs should achieve three objectives: 1) refinancing coal plants to fund the coal transition and save customers money, 2) reinvesting in clean energy to replace the retiring coal, and 3) providing financing for a just transition for workers and communities.
Finally, the report explores several innovative financing tools that can be used to achieve these objectives, including refinancing, securitization, debt forgiveness, and carbon bonus programs. It finds that where coal plants are not competitive with clean alternatives, these objectives may be achieved without additional public money. Using these tools to close plants that remain competitive may require additional public resources. We conclude that OECD countries should fund these programs at home, and along with international financial institutions, should also provide resources to fund such programs in developing countries.