KPMG at Davos: Banks Are Key in Coal to Clean Energy Move

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Michael Hayes, Global Climate Change and Decarbonisation Leader at KPMG, says rallying banks is key to a just transition from fossil fuels to clean energy

The transition from fossil fuels to clean energy hinges on the mobilisation of money from the world’s biggest financial institutions, according to a KPMG expert.

Michael Hayes, Global Climate Change and Decarbonisation Leader at KPMG, has written a blog outlining how the Coal-to-Clean Finance Initiative could address the current imbalance.

He says accelerating a “just transition” while meeting rising energy demand is a “major global challenge”.

He adds: “The Coal-to-Clean Initiative is rallying diverse financial players to fund the early retirement and repurposing of coal-fired power plants in emerging markets.

“As business leaders, we must step up, not as spectators, but as active participants in shaping a sustainable future.”

Michael Hayes, Global Climate Change and Decarbonisation Leader, KPMG

Encouraging and daunting

Michael says he returned from COP29 in Baku with a sense of “cautious optimism”.

He adds that he is encouraged by the growing leadership of businesses in driving the energy transition.

The encouragement is, however, set in a challenging global context.

Figures from the Energy Institute reveal global fossil fuel use hit record highs in 2023, while renewable energy sources have grown rapidly over the past decade, according to the International Energy Agency (IEA).

While renewable capacity is forecast to treble by 2030, Michael asks: “How do we accelerate a just transition from fossil fuels while meeting rising energy demand?”

Coal

The ‘ground-breaking’ Coal-to-Clean Initiative

One major development that is being driven forward by KPMG and others is the Coal-to-Clean Initiative.

Michael says: “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.”

He adds: “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 ground-breaking due to its potential for carbon abatement.”

It is designed to enable banks, development banks, philanthropies and corporations to participate in scalable financing solutions that align with their own just energy transition goals and catalyse transformative impact.

Michael says: “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.”

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Addressing the financial gap in emerging markets

While emerging economies contribute 65% of the world’s population and a third of global GDP, they receive only 15% of global clean energy investments.

The Coal-to-Clean Initiative aims to address this imbalance, says Michael, who adds: “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.”

He says politicians will face some tough decisions in the coming months and years, but business leaders have a role to play and “can make a real difference”.

Wind turbines

Finance – the missing link

Despite the concerning outlook, progress has already been made on coal retirement, with initiatives including Just Energy Transition Partnerships showing the way.

Michael says: “The missing link, in my view, is the collective consensus on how 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 successfully launched, including the Coal-to-Clean Initiative’s Toolkit and Decision Tree.”

Coal-to-Clean Initiative: the path forward

He hopes the WEF Annual Meeting in Davos will be a milestone moment in advancing the coal-to-clean agenda and act as a starting point for something transformational.

“Bringing so much talent and influence together to drive positive change can only be good.

“Our aspirations are clear. We want to rapidly incentivise 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.”


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