Innovative finance tools can help ensure workers aren’t left behind in shift away from coal: report
Coal Transition Commission recommends early planning, targeted funding to ensure ‘just transition’ towards clean energy
The Coal Transition Commission, co-chaired by the French and Indonesian governments, has released a report highlighting the financial challenges and opportunities in transitioning away from coal power. The report identifies unclear cost scopes, difficulty funding non-revenue-generating activities, and fiscal constraints as the main obstacles to a "just transition" towards clean energy.
Despite these hurdles, Farah Heliantina, an assistant deputy from Indonesia's Coordinating Ministry for Economic Affairs, noted that falling costs of renewables and storage create opportunities to accelerate the shift away from coal to more affordable, resilient and cleaner power systems.
The commission recommends targeted funding instruments aligned with specific coal transition activities, such as worker retraining, severance, and transition governance. These funds can be sourced from governments, multilateral development banks (MDBs), and philanthropic organisations. Innovative financial solutions, including transition credits, transition bonds, sustainability-linked loans, and debt-for-climate swaps, are suggested to bridge funding gaps.
These mechanisms, while complex to structure, offer flexibility in delivering fiscal space for just transition activities and reducing debt burdens.
The report emphasizes the importance of a diversified financing strategy that supports workers and communities in energy policies. Governments should allocate revenues from carbon pricing towards just transition costs and collaborate more deeply with financial institutions to accelerate the deployment of innovative finance mechanisms.
Early transition planning and comprehensive cost assessments are also recommended to prioritize interventions and integrate social objectives into broader energy plans. The Coal Transition Commission has also released a catalogue of programmes allocating over US$23 billion globally to the transition and a toolkit for policymakers, asset owners, and utilities to assess readiness and navigate transition projects.
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