Major global economies aim to stop new private sector coal financing

BRUSSELS/LONDON – Major economies are working towards finalizing a plan to halt new private sector funding for coal projects ahead of this year’s U.N. climate summit, sources with direct knowledge of the matter revealed.

The draft proposal by the Organisation for Economic Co-operation and Development (OECD) would mark the first move by a multilateral institution to curb financing for coal, a significant contributor to climate change. The plan aims to set a “gold standard” policy for financial institutions, instructing them to cease new financing for existing or planned coal projects and to stop funding companies involved in building coal infrastructure.

According to the NGO Urgewald, commercial banks’ lending and underwriting to the coal industry totaled $470 billion between January 2021 and December 2023. The OECD countries, including major market-focused democracies, are preparing feedback on the proposal, which is expected to be put out for public consultation before formal adoption ahead of the U.N. COP29 climate summit in Azerbaijan in November.

While the OECD policy would be nonbinding, it aims to set an international standard for companies’ boards and shareholders. Backers of the proposal include France, the United States, Britain, Canada, and the European Union, as part of the “Coal Transition Accelerator” initiative.

However, Japan, a major coal importer and energy consumer, has been a source of pushback against the proposal. The outcome of the G7 summit next week is expected to influence the aims of any OECD deal, as governments strive to phase out coal in line with climate goals.

With global coal power capacity exceeding 2,000 gigawatts and more in development, the transition away from coal financing presents challenges, particularly for emerging economies with young coal plants. The proposal seeks to address these complexities and accelerate the shift towards clean energy investments.