CAT Mechanisms (LINGO Incentives)

A CAT Mechanism provides an additional revenue stream that compensates existing coal-fired power plant owners for the income forgone from early plant closure, improving the economics of such early retirement. Since COP26, several initiatives have been launched to foster coal asset retirement and conversion including the Coal Asset Transition Accelerator (CATA) by the European Climate Foundation, the Coal Transition Accelerator, by Malaysia and France, and the Coal to Clean Credit Initiative by the Rockefeller Foundation.

The Asian Development Bank’s Energy Transition Mechanism (ETM) program is facilitating the early retirement of the Cirebon-1 coal-fired power plant in Indonesia, moving its closure from 2042 to 2035. This initiative, formalised through a nonbinding framework agreement signed at COP28, aims to reduce greenhouse gas emissions by over 15 years and demonstrates how coal plants can transition to clean energy affordably and justly.

The Energy Transition Act in New Mexico, US has facilitated the early decommissioning of the San Juan coal plant, enabling its replacement with renewable energies. A $361 million securitization bond will finance 650 MW of solar energy, 300 MW of energy storage, and 24 MW of demand response. Additionally, the bond allocates $19.8 million to state transition funds to assist displaced workers and local communities, along with $20 million for severance packages and job training for affected employees.

Resources :

• RMI (2021) Financing the Coal Transition, Report, November 2021
•  ADB (2023) New Agreement Aims to Retire Indonesia 660-MW Coal Plant Almost 7 Years Early, Press Release, September (2023)
• The Rockefeller Foundation & GEAPP (2023) Design the World’s First ‘Coal-To-Clean’ Credit Program in Emerging Economies, Press Release, June (2023)