This planned compensation globally amounts to USD 200 billion, but it excludes China and India, the two largest users of coal that currently do not have phase-out plans. The study shows that if China and India decide to phase out coal as fast as needed to reach the Paris climate targets and pay similar compensation, it would cost upwards of USD 2 trillion.
"Previously, coal phase out has often been blocked by the interests opposing it. Many countries have put money on the table through 'just transition' strategies which has made coal phase-out politically feasible," says Jessica Jewell, Associate Professor at Chalmers University of Technology, and one of the authors of the study.
"So far these 'just transition' policies are consistent with, or lower than, the carbon prices within the EU, which means they make sense in terms of climate change. But more funding is likely needed if we want to reach the Paris climate target," says Jewell. A big question thus is where such large sums of money would come from. Today about half of all compensation is funded from international sources such as Just Energy Transition Partnerships* supporting coal phase-out in Vietnam, Indonesia and South Africa. International finance might also be needed to support future coal phase-out compensation in major coal consuming countries.