Converting G20 Loans to Grants Can Turn Billions-to-Trillions and Coal-to-Clean

Abstract

In 2021, the world resolved to phase unabated coal-fired electricity down, not out. A common impediment to international climate negotiations and coal-to-clean transitions alike is developing countries’ need for finance from wealthy historical emitters, who acknowledge yet consistently elude the responsibility. The G20 recently pledged to divest public finances from overseas coal-power-plant projects and to enable transitions to low-emission power systems. We estimate the retracted loans at ~$150 billion, and find that existing minilateral frameworks can credibly redirect these funds toward renewable energy. We combine bottom-up and model-based analyses to explore likely impacts on private capital, the global energy system and coal-exit policy diffusion. We find that renegotiating G20 development finance initiatives as grants, not loans, can mobilize Paris-consistent levels of private co-finance and improve the probability of a global coal power phase-out by midcentury tenfold, almost to 50%. However, additional measures are necessary to subdue gas lock-in.

Keywords: public finance, private capital mobilization, international finance, cross-border investment, clean energy finance, coal phase-out, fossil fuel divestment, development grants, climate policy, energy-economic modeling, integrated assessment modeling, policy diffusion, foreign relations, multilateral climate negotiations, minilateral cooperation, emissions gap, socio-political feasibility, just energy transition