HOW TO
EXIT COAL:
10 Criteria for Evaluating
Corporate Coal Phase-Out Plans

A briefing for financial institutions

HOW TO EXIT COAL:
10 Criteria for Evaluating Corporate Coal Phase-out Plans
Authors:

Patrick McCully, Reclaim Finance
Sonja Meister, Urgewald

THE TEN CRITERIA FOR CREDIBLE COAL
COMPANY PHASE-OUT PLANS
1. All coal expansion plans must be cancelled.

Contributors

Yann Louvel, Alix Mazounie, Lucie Pinson, Reclaim FinanceHeffa Schücking, Lydia Kroll, Urgewald

2. 80% of the global coal fleet and all thermal coal facilities in the OECD, Eastern
Europe and Former Soviet Union must be closed by 2030, and all globally by 2040.
3. Phase-out plans must include facility-by-facility closure dates.

Page editing:

4. Coal facilities must be closed and not sold to new owners.

Jordan Jeandon, Graphic designer

5. Coal power plants must be closed and not converted to fossil gas, biomass or
fossil-based hydrogen.

Publication date:
October, 2021

6. Claims of future retrofitting with carbon capture and storage must not be
used to delay coal plant closures.
7. Plant closures must be accompanied with just transition plans, and all worker
and environmental obligations funded and implemented.
8. Companies must pledge not to challenge the phase out of coal facilities
through investor-state dispute settlement mechanisms.
9. Companies must stop all lobbying activities against government action on
climate.
10. A Science-Based Target or net-zero commitment is not an acceptable
substitute for a credible coal phase-out plan.

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Emissions from coal-fired power stations are still the single greatest threat to ourclimate. Both the IPCC and the International Energy Agency show that to meet theParis Agreement’s 1.5°C target, construction of new coal infrastructure must halt
immediately, and the great majority of the world’s coal mines and power plants
must be retired by 2030.
Ensuring such a rapid phase out of the global coal industry requires immediate
action from the financial industry. This briefing aims to assist financial institutions
in evaluating the coal phase-out plans of clients involved in the thermal coalsector.

“Phasing out coal fromthe electricity sector isthe single most important
step to get in line withthe 1.5 degree goal.
Antonio Guterres,
UN Secretary General,
March 2021

Since the adoption of the Paris Agreement hundreds of financial institutions havecommitted to restricting their support to the coal industry. However companies
with non-existent or inadequate plans to phase out their coal operations, andeven those building new power plants and mines, continue to have access toinsurance, investments and banking services.
As is explained in Urgewald’s Global Coal Exit List (GCEL)1 and Reclaim Finance’s
Coal Policy Tool,2 financial institutions must immediately stop providing services
to companies that:• Develop new coal power plants, mines or other associated infrastructure;
expand the lifetime of existing plants; or acquire new coal facilities;• Generate more than 20% of their revenues or electricity generation from coal;• Produce more than 10 million tonnes of coal per year or have more than 5 GW
of coal-fired capacity.
Once these thresholds have been applied to their portfolios, financial institutions
should insist that all remaining coal companies under these thresholds adopt a
coal phase-out plan by January 1, 2022.
A small number of financial institutions have adopted policies that state they will
require their coal clients to adopt phase-out plans, but provide little detail on which
specifications these plans must meet. Evaluating whether coal phase-out plans
are sufficiently ambitious, concrete and credible will be challenging, especially for
financial institutions with large portfolios. It can be expected that many companies
will put forward plans that are vague or inadequate. This briefing therefore
provides financial institutions with clear-cut criteria to thoroughly evaluate theirclients’ coal phase-out plans, and closely monitor their implementation.3
All these criteria must be applied at the corporate group level and must include
all subsidiaries, affiliates and joint ventures. If a company fails to adopt a
credible phase-out plan that meets these criteria by January 1, 2022, financial
institutions should suspend all new financial support to the company. After thisdate, the financial institution should start a new engagement process leading toa permanent cessation of all financial services if a credible transition plan is not
adopted by January 1, 2023.

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1. ALL COAL EXPANSION PLANS MUST BE CANCELLED
The company must cancel all plans to expand
coal power or coal mining, or to develop newcoal infrastructure. Companies must also
refrain from buying additional coal assets.
The IEA’s Net Zero by 2050 roadmap showsthat there is no room in the 1.5°C carbon
budget for any new coal infrastructure.

scrapped in recent years, the 2021 Global
Coal Exit List (GCEL) shows that over 440
GW of new coal-fired power capacity and
1,800 million tons per annum of new thermal
coal mining capacity are still in the pipeline.
If realized, these projects would increase
the world’s coal power capacity by 21% andthermal coal production by 26%.

Since the Paris Climate Agreement was
signed, the world’s installed coal-fired
capacity has grown by 157 GW, an amountequal to the operating coal plant fleets ofGermany, Russia, Japan and Turkey combined.
And while many new coal projects have been

Out of the 1,030 companies listed on the2021 GCEL, 503 companies are still planningto develop new coal power plants, new coalmines or new coal transport infrastructure.4

No Room in the Carbon Budget
for Any New Fossil Infrastructure
Research from Oil Change International shows that fully exploiting existing developed
fossil reserves would far exceed the global carbon budget that allows even a 50%
chance of staying under 1.5°C. This means that there is no room for any expansion offossil fuel extraction, and that a large proportion of existing developed reserves will
have to be left in the ground.5 Studies have similarly shown that “committed emissions”
from existing fossil fuel-consuming infrastructure in the power and industrial sectors
exceed the 1.5°C budget.6

2. 80% OF THE GLOBAL COAL FLEET AND ALL
THERMAL COAL FACILITIES IN THE OECD, EASTERNEUROPE AND FORMER SOVIET UNION MUST BE
CLOSED BY 2030, AND ALL GLOBALLY BY 2040
Climate Analytics states that “to keep the door
open for staying under the Paris Agreement’s
1.5°C limit, countries will need to plan to retire alarge number of existing coal power plants early,
reduce the capacity factor of those that remain,
and refrain from building new coal capacity.”

The think tank Climate Analytics has
calculated the rate of coal power phase outs
needed in different regions of the world foralignment with the IPCC’s 1.5°C scenarios.7
This analysis shows that coal power mustbe phased out by 2030 in the OECD, Eastern
Europe and the Former Soviet Union; and by
2040 at the latest in the rest of the world.
These dates were reiterated by UN Secretary
General Guterres in March 2021.8

The IEA’s World Energy Outlook 2020 showsthat “sub-critical” power plants (33-37%
efficient) must be completely phased out, andsupercritical plants (42-44% efficient) mostly
phased out, by 2030. The IEA’s 2021 net-zero
pathway also states that the least efficient coalplants need to be phased out by 2030.9

It is crucial to note that while Climate Analytics
shows coal power in some countries continuing
until 2040, 80% of the global reduction incoal generation needs to happen this decade.

Rapid decline in coal generationneeds to start immediately
Some parts of the world have seen positive trends on coal over the past decade.
Between 2010 and 2020, coal generation fell by 58% in the US and by just shy of 98% in
the UK.10 In the EU, coal generation almost halved in the decade after 2010 with a 20%
drop between 2019 and 2020.11
Elsewhere in the world, however, the trajectory for coal generation is wildly incompatible
with 1.5°. Mainly because of a boom in coal plant construction in China, global coal
generation continued increasing rapidly after 2010 to reach a peak in 2018. By 2020 it
had dropped back to just over its 2010 level, but the IEA estimates that it will rise by 5%
in 2021 and a further 3% in 2022, potentially exceeding the 2018 record high.12
Financial institutions need to play their part in turning around this alarming trend ofincreasing coal generation as soon as possible by ensuring that all their coal clients
have phase-out plans in line with Climate Analytics’ 2030/2040 regional phase-out
dates.

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4. COAL FACILITIES MUST BE CLOSED AND NOT SOLD
TO NEW OWNERS
local communities and the environment as the
successor company may not take responsibility
for the environmental damage done by its
predecessor or for prior commitments toworkers and local communities, especially inthe case of bankruptcy. It is therefore imperativethat coal phase-out plans include commitments
to close power plants, mines and other coalinfrastructure.

The company must guarantee that its coalphase out results in real emission cuts and notin continued operation of power plants andmines by new owners.
When divesting from coal, operators may seek
to not close power plants or mines but instead
to sell them to other companies. Selling afacility to another owner does not result inemission cuts. It also may increase risks for

Emissions under new ownership

3. PHASE-OUT PLANS MUST INCLUDE FACILITY-BYFACILITY CLOSURE DATES
the timing by which just transition plans (seecriteria 4 below) need to be adopted. Clear
timetables for individual plant closures will
also enable financial institutions and relevant
authorities to monitor that the company iscomplying with their commitments.

Phase-out plans must include clear timetables
for individual facility closures.
Clear timetables for plant closures
are necessary to ensure that workers,
communities and governments are aware of

Keeping communities and investors
in the dark about facility closures

Unipro, the Russian subsidiary of German utility Uniper, operates 11.2 GW of lignite,
hard coal and gas-fired power plants in Russia. Uniper is reportedly exploring the saleof these plants to help meet its decarbonization goals. But selling the plants to newowners, who will presumably seek to keep them open for as long as possible, will notdecrease emissions.14
ENGIE reduced its coal generating capacity by more than 75% between 2015 and 2019.
This rapid decarbonization of its portfolio, however, did not cut emissions as it was
only achieved by selling 14 coal plants to other utilities.15 In September 2021 ENGIE
announced that its Brazilian subsidiaries were selling — but not closing — a 857 MW
coal plant in the state of Santa Catarina, so as “to accelerate its transition to a carbonneutral world”.16
Multinational mining company Anglo American has been producing coal in South
Africa since 1945. Instead of retiring its coal mines and addressing the immense local
pollution and health problems they have caused, Anglo American in June 2021 simply
spun off its polluting coal assets into a new company: Thungela Resources. According
to a report by Boatman Capital Research, “Thungela’s environmental liabilities could be
three times greater than currently reported and are more than the value of the entire
company.”17

It is not sufficient for phase-out plans to give only final exit dates. French company
ENGIE, for example, has announced that it will exit coal by 2025 in Europe and 2027
elsewhere, but has not provided affected communities or investors clarity on which
units will be closed down by when.13
The 2021 update of the Global Coal Exit List shows that 49 out of 1,030 coal companies
have announced a coal exit date, and that only 32 out of these 49 have set dates thatare Paris-aligned. None have produced an asset-by-asset closure timetable.

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5. COAL PLANTS MUST BE CLOSED AND NOTCONVERTED TO FOSSIL GAS, BIOMASS, OR
FOSSIL-BASED HYDROGEN
Any form of fossil fuel-based hydrogenproduction comes with a high carbon
footprint. Conventional “gray” hydrogen is
produced from fossil gas using a process
called “steam reforming”; “blue” hydrogen is
produced with the same process, but withthe addition of carbon capture and storage.
The ensuing climate impacts are due to thefugitive emissions from the extraction andtransport of the fossil gas, the CO2 released
when splitting off hydrogen from methane,the large amounts of energy required for the
carbon capture process, and the fact that the
carbon capture process cannot capture all theCO2 emissions from the reforming process.
A recent study showed that the greenhousegas footprint of blue hydrogen is more than
20% higher than burning natural gas or coalfor heat.21

Fossil gas plants have less direct CO2
emissions than coal, but high indirect climate
impacts due to methane leakage during theextraction, processing and transport of gas.18
There is no room in the global carbon budget
for any further expansion of gas power. The
IEA’s net-zero pathway is clear that no newinvestments in fossil gas infrastructure areneeded. It shows gas use in the electricity andheat sectors falling by 9% between 2020 and
2030, and by 87% from 2020 to 2040.19
Converting coal power plants fully or partly tobiomass will likely lead to increased emissionsof CO2 per KWh as a result of the lower
energy density of wood, emissions along the
supply chain, and/or less efficient conversionof combustion heat to electricity. The timeneeded to reabsorb the extra carbon released
can be very long, so that current policies risk
exacerbating rather than mitigating climatechange.20 And using biomass at an industrial
scale to produce electricity often entails thelarge-scale destruction of forests and has
serious impacts on biodiversity.

Only green hydrogen, which is produced
using renewable energy for the electrolysis
of water, comes with very low emissions.
However due to its high energy consumption,
green hydrogen should be dedicated forindustrial processes which are otherwise
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difficult to decarbonize and electrify, and longterm energy storage. Some companies may
seek to persuade their investors that they will
convert coal plants to gray or blue hydrogenas a “bridge” to eventual conversion to greenhydrogen. However, this creates a risk — ashas happened with fossil gas investments —that supposed short-term “solutions” become
locked in and turn into long-term problems

Converting polluting stranded coal assets –to polluting stranded biomass and gas assets
ENGIE has announced plans to convert four of its remaining coal plants — three in Chileand one in Portugal — to gas and/or biomass. Sourcing wood pellets for fuel in Chile
would exacerbate the pressure on natural forests and could lead to expansion of largescale eucalyptus and pine plantations. The proliferation of these highly flammable andwater-intensive monocultures is exacerbating chronic drought and devastating fires inChile.22 Converting coal plants to biomass would continue to impair the air quality in acountry which already contains 10 of the 15 most polluted cities in Latin America.
ENGIE’s most recent coal plant in Chile, which was built in 2018, will be converted tofossil gas. Pego in Portugal could also be converted to gas if social opposition defeats
ENGIE’s current biomass conversion plans.23 Coal-to-gas conversion only risks turning
one type of stranded fossil fuel asset into another. In Chile, a coal-to-gas conversion
would likely depend on fracked gas, either from Texas and shipped as LNG, or from
Vaca Muerta in Argentina, and transported through pipelines. Either option would be
extremely carbon intensive.24

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6. CLAIMS OF FUTURE RETROFITTING WITH CARBONCAPTURE AND STORAGE MUST NOT BE USED TO
DELAY COAL PLANT CLOSURESCCS will be technically and economically
viable in the foreseeable future.25 The 2021
net-zero pathway of the IEA, which is in
general relatively bullish on the potential of
CCS, projects an amount of coal with CCS in
2030 equal to only 3% of current power sector
coal consumption.

Claims that coal plants will be decarbonizedby coupling them with carbon capture andstorage (CCS) are illusive at best. The handfulof attempts to retrofit coal plants with CCS
have proven highly expensive and havecaptured far less carbon than projected. Thereis no indication that power plants fitted with“

Most people would rather direct their
passion and money toward creatinga new world than toward retrofitting
the old one, at least when the old
one is as deeply flawed and widely
unloved as your average coal plant.

”

Barbara Freese
Coal: A Human History
2003

The expensive fiascos of coal company CCS efforts
Enchant Energy was set up to acquire the more than 40-year old San Juan Generating
Station (SJGS) in New Mexico and to retrofit it with carbon capture technology. To help
pay for the cost of capturing the CO2, it would be sold for pumping into old oil fields toincrease their output in a process known as enhanced oil recovery - therefore forcing
more carbon out of the ground.
The cost of power from the 847 MW coal plant is already more expensive than clean
alternatives, even before taking into account the capital and operational costs of the
proposed CCS retrofit.26
Enchant has been unable to find private investors to fund its $1.5 billion venture. It is
now asking the federal Department of Energy for $1 billion to get its project off theground.
The 240 MW Petra Nova CCS project at an NRG Energy coal plant in Texas came on-line
in 2017, but was abruptly shut down in 2020, apparently because of poor economic
and technical performance.27 Petra Nova at least operated for a few years — Southern
Company’s notorious Kemper coal CCS project in Mississippi was scrapped before
completion, but after eating $7.5 billion in ratepayer and federal government funds.28

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7. PLANT CLOSURES MUST BE ACCOMPANIED WITHJUST TRANSITION PLANS, AND ALL WORKER AND
ENVIRONMENTAL OBLIGATIONS FUNDED AND
IMPLEMENTED
It is particularly important that coal plantclosure plans include adequate funds forcleaning up coal ash ponds. Coal ash is a toxic
mixture of fly ash, bottom ash, boiler slag andflue gas desulfurization slag which is typicallydisposed into leaking storage ponds andlandfills. It contains carcinogens, neurotoxins,
developmental toxins and other dangerous
chemicals. In the US, 92% of coal ash ponds arepolluting the underlying groundwater to levels
that exceed federal drinking water standards.
Implementing proper clean closure plans
prevents further groundwater pollution andeliminates the risk of catastrophic spills due tofloods and extreme weather events.30

Companies must commit to negotiating with
unions, communities and local governments
comprehensive and transparent asset-by-asset
just transition roadmaps for existing coal.29
Without extensive planning and rehabilitation
efforts by coal companies, plant and mineclosures can cause massive dislocations toworkers and leave local communities exposed
to severe environmental hazards.
Just transition plans must include commitments
to comprehensive and early assessment oflocal/regional economic impacts, needs andopportunities, and clear plant and/or mine leveltransition planning. Such plans should addressenvironmental remediation responsibilities aswell as obligations to assist workers throughretirement, training and transition assistance.
Financial institutions can play a role generating
funds for paying coal facility closure costs andimplementing just transition plans throughrefinancing coal company obligations (See box“Securitization”).

The win-win-win of coal closure securitization
Some US states are starting to use a financing tool called “securitization“ that creates
the possibility for a rare win-win-win: as a coal plant retires, consumers pay lower
electricity rates, utilities benefit from new clean energy capacity, and workers andcommunities receive funding. Under securitization, bonds are issued to refinance utility
debts for old coal plants. The savings on debt repayments can be used to help workers
and communities, and utilities can reinvest their capital in cheaper clean energy assets.
In December 2020, Michigan utility Consumers Energy received regulator approval touse $688 million in securitized bonds to retire the D. E. Karn coal plant — a plan thatwill save customers $124 million. Consumers Energy has committed to procuring new
clean energy, to training and transitioning current employees to new positions, and to
redeveloping coal sites for uses that benefit local communities.33

Similarly, coal mine closure plans need toinclude funds to properly rehabilitate old minesites. In the past many old mines have simply
been abandoned posing numerous threats topublic health and safety, including open mine
shafts, mine fires, land erosion and subsidence
and severe and long-term water pollution fromacid mine drainage.31

Abandoning mines, abandoning
workers and the environment
The collapse of the US coal mining industry has caused a string of major bankruptcies. In thefirst phase of bankruptcies from 2015 to 2018, major mine operators like Alpha, Arch andPeabody sold off their least profitable mines. In many cases, the mines were given for freeto the new owners, and in some cases the new owners were actually paid to take the mines.
Even though many of the new owners did not pay a cent for the mines, they havepredictably been unable to turn a profit and several are now facing liquidation
themselves. ERP, for example, was formed in 2015 for the sole purpose of acquiring
mines out of the Patriot Coal bankruptcy. Now, ERP is insolvent, has laid off all its
workers, and is failing to meet its environmental obligations. The estimated cost ofcleaning up the ERP sites is at least $230 million, while its permits were only bonded for$115 million, and the bond provider appears unable to pay the full amount.32

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8. COMPANIES MUST PLEDGE NOT TO CHALLENGE
THE PHASE OUT OF COAL FACILITIES THROUGHINVESTOR-STATE DISPUTE SETTLEMENT MECHANISMS
The threat or use of investor-state disputesettlement (ISDS) mechanisms may havea chilling effect on government coal exit
policies. The Energy Charter Treaty (ECT) is alegal framework from the 1990s. It bypasses
national laws and allows companies in theenergy sector to sue states for compensation
for actions — like a state-mandated coalphase out — that have supposedly “damaged”
investments. The ECT is at least partiallyapplied in 53 states, including the EU
and its member states. The total sum ofcompensation claims successfully made byinvestors against states has surpassed €46
billion.34

Companies can go to national courts if they
believe coal exit policies are unlawful orwish to challenge compensation amounts.
They should not use arbitration proceduresthat have been shown to be biased in favorof corporate plaintiffs. If companies opened
coal power plants in recent years against
the backdrop of overwhelming scientificevidence that new coal power plants are notin line with the Paris Agreement, they mustcover the costs for the early closure of theplants and not impose them upon taxpayers.
In August 2021, the Court of Justice of theEuropean Union shared the opinion that ECTcases brought between EU members would
not be compatible with EU law. It is expectedthat the court will make a legally binding rulingwith the same outcome in 2022. This would
mean that the European Commission andmember states would be legally obliged tostop intra-EU disputes under the ECT and that
RWE’s and Uniper’s claims (see box) are illegal
under EU law.35

The German government’s coal exit plan
foresees €4.35 billion in compensation
payments to coal companies — an amount€2 billion higher than the compensation
believed to be adequate based on economic
criteria. This high payout was clearly intended
to preempt claims under the ECT and othertreaties containing ISDS provisions.

9. COMPANIES MUST STOP ALL LOBBYING ACTIVITIESAGAINST GOVERNMENT ACTION ON CLIMATE
to end all funding for coal industry andanti-climate lobbying groups. Financial
institutions must also ensure that thesecommitments are followed.

Coal companies have a long history of fundingorganizations that lobby against climate
and environmental regulations.37 Financial
institutions must ensure that their clients’coal phase-out plans include commitments

Big coal and the big climate lie
Robert Brulle, a professor emeritus at Drexel University in Philadelphia, has shownthat coal companies have long been active in fighting against climate regulations. He
describes oil and gas companies as “more of a marginal player” by comparison.
“The coal mining industry — the utilities that were burning it for electricity, along withthe railroads who were hauling it — and manufacturing industries like steel were thefirst corporate forces to become climate deniers and try to block action on climate
policy,” said Kert Davies, founder of the Climate Investigations Center. “They fought thehardest because they had the biggest existential threat.”
The coal industry tried to reinvent itself in the early 2000s with the concept of “cleancoal” based on CCS and other technological advances. The biggest proponent of thisidea was the American Coalition for Clean Coal Electricity. In 2009, this coal industry
front group was caught sending Congress fraudulent letters opposing climate legislationand pretending to be from veterans, women’s, and civil rights groups.38

Lawsuits vs 1.5°C
The German city-state of Hamburg introduced stricter environmental regulations forthe proposed Moorburg coal power plant in 2009. In response, the project’s developer,
Swedish utility Vattenfall, filed an ISDS claim under the ECT which demanded €1.4
billion in compensation for lost “future profits”. Fearing that they might lose the case,the city government agreed to drop its additional environmental requirements andissue permits for the 1,600 MW plant. Vattenfall commissioned the plant in 2015 — andthen closed it in July 2021 as part of the German coal exit.36
German utilities RWE and Uniper announced in early 2021 that they would sue theDutch government under the ECT for the forced closure of their power plants under
the country’s 2030 coal exit law. RWE is seeking €1.4 billion in compensation. Uniper
will likely seek a similar sum. If successful, these lawsuits will have a chilling effect on
government efforts to introduce climate legislation in line with the Paris Agreement.
RWE and Uniper commissioned their coal power plants in 2015 and 2016, at a time when
it was sufficiently clear that the age of coal was over. The company’s owners should bear
the economic consequences of the company’s bad decision-making, not Dutch taxpayers.
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10. A SCIENCE-BASED TARGET OR NET-ZERO
COMMITMENT IS NOT AN ACCEPTABLE SUBSTITUTE
FOR A CREDIBLE COAL PHASE-OUT PLAN
company has developed sufficiently robust
plans to meet its stated target or whether
these plans are actually Paris-compliant.39
SBTI targets are not an acceptable substitutefor an asset-based coal phase-out plan. It istherefore all the more disappointing that
the UK insurer Aviva has decided to exempt
companies that sign up to the SBTi from its
coal exclusion policy.

The Science Based Targets initiative (SBTi)
is supposed to encourage companies toincrease their climate ambition. However, the
SBTi’s criteria have significant weaknesses,
in particular because they don’t yet requirecompanies to adopt 1.5°C pathways or to seta coal phase-out date.
SBTi only assesses companies’ ambition
statements. It does not validate whether a“…we have no more atmosphericspace for coal. All the rest of thecoal that is on this planet has to stayunderground.

”

Christiana Figueres,
former head of UNFCCC
July 2020

Science-Based Targets vs Climate Science
The inadequacies of the SBTi are starkly revealed by its validation of RWE’s climate
targets. RWE is using this validation to gloss over the fact that its coal exit plans are notcompatible with the goal of limiting global warming to 1.5°C.
With an installed coal capacity of 10.8 GW, RWE is one of Europe’s largest coal plant
operators and CO2 emitters, and Europe’s largest lignite producer. While the company
is ramping up investments in renewables, coal still accounted for 30% of its electricity
production in 2020. Nearly 80% of RWE’s electricity in 2020 was produced from nonrenewable sources.40 RWE plans to continue running its largest lignite-fired power
stations in Germany until 2038, and will thus still have 4.3 GW41 of coal-fired capacity online in 2030. Financial institutions with robust coal divestment policies have therefore
already excluded RWE from their portfolios.

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GOOD PRACTICESThankfully, there is an increasing number of good policy examples forfinancial institutions to follow on coal. Worldwide, over 50 financial
institutions have committed to fully exit both coal mining and power by
2030 in Europe and the OECD, and by 2040 in the rest of the world. Somehave set earlier deadlines, such as French bank and insurer Crédit Mutuel(worldwide coal phase out by 2030) or the Italian Bank UniCredit (coal exit
by 2028).42
La Banque Postale Asset Management requires divestment fromcompanies that have not published a plan to phase out coal by 2030
in Europe and the OECD, and by 2040 worldwide. It requires phase-out
plans to be based on the closure, not sale, of coal facilities and insists thatclients consider the social impacts of such closures.43 Crédit Mutuel also
requires coal phase-out plans based on the closure of coal facilities.
In 2020, the Norwegian asset manager Storebrand became one of the firstmajor investors to divest from companies, including the giant US coalburning utility Southern Company, for their involvement in anti-climate
lobbying.44

CONCLUSION
Pressure is only going to grow on the world’s financial
institutions to phase coal out of their portfolios. In theirturn, financiers will seek to pressure coal companies
to develop transition plans. And coal companies will
likely respond with transition plans that are vague andunambitious and far from what is needed to meet the
1.5°C imperative. Financiers need to use their influence
to demand robust phase-out plans that include the ten
criteria listed here and so ensure that coal transition plans
lead to rapid closures, real-world emission reductions,and a just transition for workers and communities.

More than 25 financial institutions request companies to publish a coaltransition plan by specific deadlines, and more than 10 have made theadoption of such a plan a mandatory requirement to continue theirfinancing and/or investments. No financial institution, however, haspublished a policy with a sufficiently comprehensive and detailed
explanation of what these transition plans should include.

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DECISION FLOW CHART FOR COAL PHASE-OUT PLANS

5. The company plans to close its power plants and not convert
them to fossil gas, biomass or fossil-based hydrogen?

[NB The “company” refers to the group level and includes any subsidiaries, affiliates and joint ventures]
No• Company’s- coal share of revenue ≥ 20%• Company’s- coal share of power production ≥ 20%• Company’s- annual thermal coal production ≥ 10Mt pa• Company’s coal-fired generation capacity ≥ 5 GW

Yes

6. The company does not use claims of future retrofitting withcarbon capture and storage to delay coal plant closures?
No

Yes

Exclusionfrom funding

Yes

No

7. The company guarantees that plant closures will be accompaniedwith asset-based just transition plans? And that all worker
and environmental remediation obligations will be funded andimplemented?

1. The company has plans to expand coal power generation,
infrastructure, exploration or mining activities?
The company has plans to buy existing coal assets?

No
Yes

Yes

No

2. By 2030, the company plans to close all thermal coalfacilities in the OECD and Eastern European and Former
Soviet countries and to reduce coal generation globallyand to close all the least efficient plants by 2030. By
2040 it plans to close all thermal coal facilities globally?

No

8. The company pledges to not challenge the phaseout of coal facilities through the Energy Charter
Treaty or other investor-state dispute settlement
mechanisms?
No

Yes

9. The company has stopped all lobbying
activities against government action on
climate?

3. The company has phase-out plans
which include facility-by-facility closure
dates?
No

No

Yes

Suspension of financial services at end of
2021. Permanent cessation of financial
services if criteria is not met by end of 2022
22

Yes

10. The company is not usinga Science-Based Target or
net-zero commitment as a
substitute for a credible coalphase-out plan?

4. The company plans to sellcoal facilities and not to close
them?
No

Yes

No

Yes

Suspension of financial services at end of
2021. Permanent cessation of financial
services if criteria is not met by end of 2022

Yes

Coal phase-out
plan approved.
23

References
1. Coalexit.org
2. Coalpolicytool.org
3. It is unacceptable for financial institutions to claim that they insist their clients have transition
plans, but — as is the case with NatWest - fail to publish any information on the requirements
these plans must include (see “NatWest: clarity on oil, gas and coal policies required ahead of
COP26,” blog post, Reclaim Finance, April 2021).
4. “NGOs Release the 2021 Global Coal Exit List: 1,000 Companies Driving the World Towards
Climate Chaos”, Urgewald, 7 October 2021.
5. “Big Oil Reality Check: Assessing Oil and Gas Company Climate Plans”, Oil Change International,
September 2020.
6. “Committed emissions from existing energy infrastructure jeopardize 1.5 °C climate target”,
Nature 572, 2019.
7. “Global and regional coal phase-out requirements of the Paris Agreement: Insights from the
IPCC Special Report on 1.5°C”, Climate Analytics, September 2019. Climate Analytics assessed
the median age of coal plants in different regions and assumed that phase outs would need tobe the most rapid in the regions with the oldest and least efficient coal plant fleets. They define
the coal phase-out date as the “year in which the underlying pathway for coal use in electricity
generation without CCS reaches reductions of 90% or more below 2010 levels.”
8. “Secretary-General urges countries to end ‘deadly addiction’ to coal”, UN News, March 2021.
9. “Net Zero by 2050: A Roadmap for the Global Energy Sector”, Summary for Policymakers, IEA,
May 2021, p. 19.
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13. “ENGIE 2020 Financial Results”, February 2021. Some of the world’s biggest private financial
institutions are exploring the creation of climate “bad banks,” funds created to buy out coalmines and power plants and then close them down. While funds of this type may be needed,
the proposals that have emerged so far seem more tilted towards creating profits for financiers
than ensuring rapid emission reductions. (See e.g. “Think Hard Before You Invest In a ‘Climate
Bad Bank,” Kate McKenzie, Bloomberg Green, 18 June, 2021; “5 rules to make sure coal-plantbuyouts benefit the public, not the big banks,” Justin Guay, Canary Media, 7 September, 2021).
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development: implications for policy”, Energy and Emission Control Technologies, October
2015.
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stations”, Ember, December 2019.
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Chilean plants would be LNG.
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the Climate Crisis”, CIEL, 2019; “A Review of the Role of Fossil FuelBased Carbon Capture andStorage in the Energy System”, Tyndall Center for Climate Change Research, December 2020.
26. “Coal-fired carbon capture projects are waste of tax dollars”, IEEFA, June 2021.
27. “Mothballing of Petra Nova carbon capture project shows likely fate of other coal-fired CCS
initiatives”, IEEFA, August 2020.
28. “DOJ opens investigation into Kemper plant as Southern warns of possible ‘material impact”,
Utility Dive, 2 May 2019; “Piles of Dirty Secrets Behind a Model ‘Clean Coal’ Project”, New YorkTimes, 5 July 2016.
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Europe Beyond Coal, November 2019.
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32. “The Coal Mining Industry Is Collapsing, and Communities Are at Risk from Abandoned Mines”,
Sierra Club, November 2020; “Reclaiming Abandoned Mines: Turning Coal Country’s Toxic
Legacy Into Assets”, The Revelator, March 2021.
33. “Securitization in Action: How US States Are Shaping an Equitable Coal Transition”, Rocky
Mountain Institute, March 2021; “Harnessing Financial Tools to Transform the Electric Sector”,
Sierra Club, November 2018.
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35. “Companies cannot use ECT to sue governments for climate progress, top court says,”
ClientEarth, 2 September 2021.
36. “Case Studies: Investor-State Attacks on Public Interest Policies”, Public Citizen, March 2015;“Moorburg CHP Plant”, Vattenfall, accessed 18 July 2021.
37. See e.g. “Coal’s Lonely Lobbyists”, Climate Investigations Center, August 2016.
38. “Exxon knew — and so did coal”, Grist, 29 November 2019.
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40. “RWE Annual Report 2020”, RWE, March 2021, p. 48.
41. “RWE: Vom Winde verweht”, Greenpeace, March 2021.
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Performance”, Crédit Mutuel, February 2020.
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44.“Major investment firm dumps Exxon, Chevron and Rio Tinto stock”, The Guardian, 24 August2020. See also https://influencemap.org/company/Southern-Company.

Credits
Alan Stark | XTUV0010 | Roman Ranniew | Marcus Kauffman | Kelly Lacy | Ludvig Hedenborg | Tom
Fisk | Pexels | Unsplash

1. 3

HOW TO EXIT COAL:
10 Criteria for Evaluating
Corporate Coal Phase-out Plans
Reclaim Finance is an NGO affiliated with Friends of the Earth France. It was
founded in 2020 and is 100% dedicated to issues linking finance with socialand climate justice. In the context of the climate emergency and biodiversity
losses, one of Reclaim Finance’s priorities is to accelerate the decarbonizationof financial flows. Reclaim Finance exposes the climate impacts of somefinancial actors, denounces the most harmful practices and puts its expertiseat the service of public authorities and financial stakeholders who desire toto bend existing practices to ecological imperatives.
Urgewald is an environmental and human rights organization thatchallenges banks and corporations when their activities harm people andthe environment. Our guiding principle: Whoever gives the money bears the
responsibility for the business. Additional reports and information on our
campaigns can be found at urgewald.org and coalexit.org.

contact@reclaimfinance.org

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