The report highlights that development finance institutions (DFIs) are uniquely positioned to play a role in the early phase-down of coal
plants due to their specific mandate focused on development and provision of public goods. Additionally, their capacity to offer concessional finance and handle considerable risk makes them well-suited for involvement in the transition away from coal-based power generation. Concessional finance, in particular, shows promise in helping governments fulfill their responsibilities by addressing various barriers, including governance issues, inefficient subsidies, and inadequate planning in the power sector.

Yet, despite some initial efforts, DFIs have not been extensively involved in directly addressing the decarbonization of coal plants. This limited engagement is influenced by factors such as the availability of concessional finance resources, the expertise and capacity within DFIs, and the lack of willingness from governments and operators to initiate coal phase-down and seek support from DFIs.

Key policy recommendations in the report include:

1. Prioritizing a fair, systematic, and inclusive reduction of existing coal infrastructure as a central component of DFIs' climate strategies. 
2. Assisting in creating an environment conducive to the phase-down of coal plants and influencing other financial institutions to participate in coal plant decarbonization efforts.
3. Developing scalable strategies for coal plant phase-down centered around concessional and grant financing mechanisms.

Early Phase-Down of Coal Plants: The Role of Development Finance Institutions

Boston University Global Development Policy Center