Investment in new coal-fired power plants persists globally despite misalignment with a net-zero economy and the falling costs of renewable energy technologies. This knowledge brief highlights the political and economic dynamics underpinning recent investments in coal-fired power in 18 high-impact countries (HICs), defined as the countries with the highest absolute gaps in access to electricity. South Asian HICs Bangladesh, India and Pakistan have received the majority of finance commitments to new coal plants since 2013, and African HICs Madagascar, Mozambique, Malawi, Niger and Tanzania all host active coal plant development.

For the 18 HICs analysed, international public finance has comprised the highest proportion of finance committed to new coal-fired power plants since 2013. This compares to renewable power plants, where nearly 60 percent of finance for new projects has been committed by domestic private investors in the same period. Financial institutions based in China account for 40 percent of the total USD 42 billion in finance committed to coal-fired power plants in HICs between 2013 and 2019. Though Chinese institutions are the largest coal investors in HICs, privately held financial institutions based in the US currently account for 58 percent of all investment in the global coal industry (Urgewald 2021).

Countries receiving coal power finance face substantial socio-economic and environmental risks associated with the newly commissioned, carbon-intensive assets. For instance, infrastructure constraints and lower than expected demand in Bangladesh and Pakistan have resulted in underutilization of newly commissioned coal-fired power plants, highlighting the stranded asset risk associated with their construction. Should Sub-Saharan African nations continue to develop new coal-fired power generation capacity, they are likely to face similar challenges and costs. Further, the long development timelines associated with thermal power generators and their supporting infrastructure make it impossible for coal to increase electricity access to meet Sustainable Development Goal 7’s (SDG7) target of universal access by 2030. Distributed renewable energy generation provides the most efficient path to scale up access to electricity in the near-term.

This knowledge brief is part of the Energizing Finance research series.