Financing New Coal-Fired Power Plants

Guidance note
Reading time: 8 minutes
24 October 2011

The Climate Group has developed and issued a Guidance Note on financing new coal-fired power plants (CFPPs), which was created with expert advice from BNP ParibasCredit AgricoleF&C Asset Management, HSBC and Standard Chartered.

This is the first time a group of financial institutions has collectively developed guidance to address the single largest source of man-made carbon emissions, coal-fired power generation.

Coal remains the fuel of choice in many regions of the world due to its economic and energy security advantages, but deployment of the best available CFPP technologies could raise generation efficiency from today’s global average of 34% to as much as 50%. Banks can help accelerate uptake of the best technologies by stipulating emissions intensity ceilings that become progressively tougher between now and 2050.

The International Energy Agency (IEA) has set out how global carbon emissions from coal-fired power generation must fall by 2050 if atmospheric CO2 is to stabilize at 450 ppm and limit dangerous climate change. While CFPPs built today should only employ the best available technologies, the Guidance Note recommends much tougher CFPP emissions intensity limits from 2020 onwards to get on to a 450 ppm pathway.

The Guidance Note recommendations will be reviewed regularly as lessons are learned from the experience of banks putting policies into practice, and as CFPP technologies improve, circumstances in individual countries change, and the outlook for large-scale deployment of carbon capture and storage (or an equally efficient emissions reduction technology) clarifies.

The financial institutions involved will be developing their own policies on finance for new CFPPs, in line with the Guidance Note recommendations.

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