From coal to clean: Financing a just energy transition in emerging markets

In November 2024, I returned home from COP29 in Baku with a sense of cautious optimism.

Much of the focus of the meeting in Azerbaijan was rightly on finance for developing nations and much of the media attention was on the failure of wealthier nations to commit enough cash to help mitigate the impact of climate change.

Despite these challenges, I am encouraged by the growing leadership of businesses in driving the energy transition. Two pivotal datasets released during COP underscore the complexity of our energy landscape. Figures from the Energy Institute reveal global fossil fuel use hit record highs in 2023 despite pledges at the previous year’s COP to reduce consumption. Meanwhile, renewable energy sources, like wind and solar, have grown rapidly over the past decade, according to the International Energy Agency (IEA). The same body is forecasting renewable capacity will come close to trebling by 2030, but this is far from a straightforward challenge.

These findings highlight a critical question: how do we accelerate a just transition from fossil fuels while meeting rising energy demand? This question takes centre stage as global leaders convene for the World Economic Forum Annual Meeting in Davos, with the climate crisis a top agenda item.

One major development that I’m proud KPMG is leading in driving forward is the Coal-to-Clean Initiative. Its purpose is to rally diverse financial players to tackle one of the most challenging hurdles in the global energy transition – funding the early retirement and repurposing of coal-fired power plants in emerging markets.

Discussions, directives, and agreements on climate change can often be overhyped and described as ‘milestone moments,’ but I believe the Coal-to-Clean Initiative is truly groundbreaking due to its potential for carbon abatement. The project offers an opportunity for banks, development banks, philanthropies, and corporations to participate in scalable financing solutions that align with their own just energy transition goals and catalyze transformative impact.

KPMG is a leading member of the Initiative, but we’re not starting small. More than 200 coal power producers and financier stakeholders are already on board and engaged in advancing a clean energy transition. The clear goal is to ensure that we maintain the energy capacity needed to continue growing economies and supporting livelihoods while reducing the environmental impact of coal-power generation.

Emerging economies face disproportionate challenges in the energy transition. Despite accounting for 65% of the world’s population and roughly a third of global GDP, they receive only 15% of global clean energy investments. The Coal-to-Clean Initiative aims to address this imbalance. We must provide the right resources and support to ensure that poorer countries and regions can balance economic growth and environmental sustainability.

The Coal-to-Clean Initiative presents the hard facts and realities of our times. We must align efforts globally to limit global warming to 1.5 degrees Celsius by 2030, and this target is looking increasingly precarious. Politicians will face some tough decisions in the coming months and years, but it should not be left to governments to carry the world on this essential journey. As business leaders, we all have a role to play, and we can make a real difference.

Despite the concerning outlook, progress has already been made on coal retirement. Initiatives, including Just Energy Transition Partnerships (JETPs), are evidence that we’re all at least looking in the right direction. The missing link, in my view, is the collective consensus on how we—public and private investors—can finance and scale up the individual coal-to-clean programmes that can make the greatest impact in the shortest time.

One key goal of the Initiative is to build a community of investors committed to unlocking solutions. The initiative also aims to tap into some of the existing programmes the World Economic Forum has already successfully launched, including the Coal-to-Clean Initiative’s Toolkit and Decision Tree.

The Annual Meeting in Davos will, I hope, be a milestone moment in advancing the coal-to-clean agenda and act as a starting point for something quite transformational. Bringing so much talent and influence together to drive positive change can only be good. Our aspirations are clear. We want to rapidly incentivize asset owners to consider early retirement of coal, provide clear market returns to commercial investors, conform with transition finance guidance and deliver coal-fired power plant early retirements, crucially at scale. We also intend to develop a financing blueprint providing an even more detailed roadmap for the delivery of these financing solutions in target markets in mid-2025.

The planet is at a critical juncture. The decisions the public and private sectors make in the coming years will determine whether we can align global efforts to limit warming to 1.5°C. As business leaders, we must step up, not as spectators, but as active participants in shaping a sustainable future. With the right tools, financing and partnerships, I believe we can achieve a just and equitable energy transition that leaves no one behind.