Climate finance at scale to implement NDCs: decarbonizing the power sector

• The NDC and climate finance tool on the website forwardglobalinstitute.com/dashboard can be used to implement this approach and tailor assumptions to a particular country’s preferences and circumstances.
• For large net benefits and effective, Paris Agreement–aligned implementation of NDCs, a granular system-wide country plan (rather than a project-by-project approach) that matches an optimal fossil fuel phaseout pipeline with a simultaneous renewables phase-in pipeline is essential.
• One source of finance is de-risking and leveraging the impact of greater flows of international public financing that should be forthcoming based on net benefits to larger developed countries from EMDE decarbonization. A second source is additional private finance generated from a new high-integrity carbon offset market that monetizes identifiable, additional, and permanent avoided emissions.
• Tying the coal phaseout to renewables crowds in additional private finance, and repurposing fossil fuel subsidies can further reduce the burden on additional public financing.

Empirical analysis shows that the global and country-level benefits of a bundled fossil fuel phaseout and renewable replacement are large, and the opportunity costs of phasing out fossil fuels are relatively low. Net benefits to some of the larger developed countries provide a strong justification for greater international public financing. Simulations based on recent data show that, if the G7 countries and the EU were to cover 25% of the total costs of replacement renewables, storage, and grid investments plus closure-related opportunity costs from the phaseout of largely coalfired power plants in India, Indonesia, Türkiye, and Vietnam, their own net benefits would be in the order of US$3 trillion.