DUBAI – COP26, which took place in Glasgow in 2021, was supposed to be the COP that “consigned coal to history” (as one of the conference’s taglines stated). The conference did see a lot of progress on calling time on the world’s dirtiest fossil fuel, with more than 40 countries pledging to phase out coal, and the announcement of South Africa’s Just Energy Transition Partnership (JETP). Now COP28 has moved the dial on coal forward again.

In the interim, talk that COP26 “sounded the death knell for coal” (as PM Boris Johnson said at the time) has rung somewhat hollow. China’s coal consumption has boomed, South Africa’s JETP has been criticised domestically for providing insufficient (4%) of funding via grants, and the world continues to generate around 40% of its power from burning coal. 

However, after little progress of note at COP27 (the final cover text included the same language on the “phase down” of “unabated coal”), at COP28 ten new countries joined the Powering Past Coal Alliance (PPCA): Cyprus, the Czech Republic, the Dominican Republic, Iceland, Kosovo, Malta, Morocco, Norway, the United Arab Emirates and the US. This means that a total of 60 countries in the PPCA have now pledged to align their coal sectors with a Paris-aligned pathway, which means a phase-out by 2030 for OECD countries, and a phase-out by 2040 for non-OECD countries. 

“The move underscores a rapid shift away from coal in many countries despite the energy crisis,” said Anusha Mata, senior policy advisor at E3G, in an interview with Energy Monitor at COP28. “These countries commit to not developing new unabated coal power plants and phasing out existing unabated coal plants to keep the goal of limiting global temperature rise to 1.5°C within reach.” 

The presence of the US is particularly significant, given the country’s position as the third-biggest consumer of coal after China and India. The US joining the PPCA “sends an important signal to other rich countries – Japan, Korea and Australia – that they must follow suit,” says Mata. 

The elephant in the room, however, is the absence of India and China, which are the only countries with a growing coal power station pipeline. Their argument, that they still need coal for energy security and economic development, remains hard to counter for rich countries like the US.

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Other coal announcements at the COP demonstrated how financial institutions are devising mechanisms to allow low and middle-income countries to feel less beholden to coal power as they develop. 

Asian Development Bank facilitates early coal retirement in Indonesia

On 3 December, at COP28, a new plan to retire Indonesia’s 660MW Cirebon-1 coal plant seven years early was announced. The early retirement is the result of discussions with the plant’s owners and the Government of Indonesia under the Energy Transition Mechanism (ETM) programme of the Asian Development Bank (ADB), a multilateral development bank focused on Asia. 

The agreement signed at COP28 by ADB, state power utility company PT PLN, power producer PT Cirebon Electric Power and the Indonesia Investment Authority, states that they have conditionally agreed to bring the end of the plant’s power purchase agreement forward to December 2035 from July 2042.

“This framework agreement is a key development for this transaction and Indonesia’s energy transition that will lead to a significant cut in greenhouse emissions,” said ADB president Masatsugu Asakawa. “We are grateful to the Government of Indonesia and to Cirebon Electric Power for their perseverance and leadership on the energy transition. 

“ADB will continue to work closely with our partners in Indonesia and across the region to demonstrate that coal and other fossil fuel plants can be retired early in a just and affordable manner – a win for climate and a win for communities.”

ADB’s ETM is set to use concessional and commercial capital to retire the plant on an accelerated schedule, and help direct investments toward reliable and affordable clean energy while supporting workers in the coal sector. The ETM is designed to be replicable for other plants in Indonesia and beyond; ADB is currently planning to use the same model in Kazakhstan, Pakistan, the Philippines and Vietnam. 

“ETM is a truly innovative initiative that will help to decommission coal-fired power plants early and replace that with renewable energy, and to make sure there is a just transition for the communities that are affected by the decommissioning,” said Warren Evans, ADB’s climate envoy, in an interview with Energy Monitor at COP28

Evans added that the new programme is the result of a new push from the bank to align all of its financing with climate action. 

“In July this year, ADB reorganised, and basically adopted a new operating model whereby we now look at everything we do through climate change, whether related to decarbonisation, or climate resilience and adaptation,” said Evans. 

In the context of the past year's discussions between multilateral development banks across the world about reform and recapitalisation, Evans said that ADB “takes pride in being the climate bank for Asia-Pacific”.

“If we don't put climate change at the centre of everything we do... the investments we support are not going to be successful,” he said. 

Carbon finance to phase out coal: pilot project announced at COP28

Elsewhere at COP28, US philanthropic organisation the Rockefeller Foundation announced that it would begin to explore a pilot project in the Philippines looking at how to leverage carbon finance to accelerate the retirement of a coal-fired power plant and replace it with renewable energy. 

The Coal to Clean Credit Initiative, launched by the foundation in June, is actively engaging with buyers of carbon credits under the Paris Agreement, with the aim of using carbon finance to incentivise a just transition away from coal plants to clean energy in emerging markets and developing economies. 

The pilot project in the Philippines, focused on the South Luzon Thermal Energy Corporation coal plant, would become the world’s first coal-fired power plant to leverage carbon credits to enable its early decommissioning. The partners behind the project – which also include Filipino energy company ACEN and the Monetary Authority of Singapore – are aiming to retire the plant around a decade early, in 2030. 

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US research organisation RMI is providing technical support for the creation of the methodology, which is currently under review by carbon credit standards agency Verra. Numerous consultations are being held with energy market participants, NGOs and civil society organisations. 

“We have set up a consortium of philanthropy and technical partners, and developed an extremely high integrity, robust methodology to both transition the energy system and ensure that workers and communities are at the heart of the programme,” said Joseph Curtin, managing director on the power and climate team at the Rockefeller Foundation, in an interview with Energy Monitor at COP28.

“Over an 18-month period, we have brought the methodology through five consultations, in a process overseen by a technical working group of experts.

"We see carbon markets as a means of mobilising resources from wealthy countries and companies. 

“Even though renewables are increasingly cost-effective, the truth is that 90% of coal plants are protected from market competition by long-term contractual arrangements. On top of this, we are still in a high-interest rate environment which makes new infrastructure projects difficult.

"Carbon credits hold the possibility of unlocking new capital to fill the massive financing gap that exists if developing countries and emerging economies are to decarbonise coal generation”.