Global fossil fuel investors could be putting as much as $1 trillion in funds at risk, as the costs of wind and solar continue to fall, challenging the business cases of hundreds of coal power stations around the world.

The warning has been issued in a new report by analysts Carbon Tracker, which found that more than half of the world’s fleet of coal-fired generators are already generating power that is more costly than new-build renewable energy projects.

The analysis also found that it is global governments that may be the most at risk of losing out on investments, with coal generators at a high risk of becoming “stranded assets”, and private investors walking away from new projects.

The falling costs of wind and solar will see the technologies become the cheapest source of electricity, cheaper than either existing or new-build fossil fuel plants across all global markets as early as 2030.

“Renewables are outcompeting coal around the world and proposed coal investments risk becoming stranded assets which could lock in high-cost coal power for decades,” Carbon Tracker’s co-head of power and utilities Matt Gray said.

“The market is driving the low-carbon energy transition but governments aren’t listening. It makes economic sense for governments to cancel new coal projects immediately and progressively phase out existing plants.”

Carbon Tracker found that half of Australia’s coal fleet is already producing power that is more costly than new-build wind and solar projects.

In a stark warning to the Australian government, Carbon Tracker said that governments seeking to underwrite new coal generation projects could ultimately lead to customers paying more for power.

“Several governments around the world continue to incentivise and underwrite new coal power because market regulations put coal at an unfair economic advantage,” Carbon Tracker said.

“In some regulated and semi-regulated markets they also allow the high cost of coal to be passed on to consumers through bills, or they use taxpayers’ money to subsidise coal operators so they can sell power for less than it costs to produce.”

The Morrison government has set aside $10 million to fund feasibility studies into new generation infrastructure across Queensland, including $4 million that has been earmarked to pay for the completion of a feasibility study into a new coal-fired power station in the town of Collinsville.

Carbon Tracker recommended that governments commit to no longer providing support for new projects, and to ensuring that renewables and fossil fuel generation projects are able to compete on a level playing field, which would see renewables projects deliver the lowest cost source of power.

“Failure to take these steps will exacerbate stranded asset risk and could result in overcapacity. This in turn will suppress power prices, create a negative investment signal for renewable energy and ultimately stifle the transition to a low-carbon economy,” Carbon Tracker warns.

Carbon Tracker said that the falling costs of wind and solar generation is a positive development for efforts to limit global emissions to a level consistent with keeping global warming to around 1.5 degrees.

As much as 80 per cent of the world’s coal power stations will need to close by 2030 to reach the 1.5°C goal, which is included within the Paris Agreement.

The report found that almost 500GW of new coal-fired generation capacity is planned, or currently under construction, representing US$638 billion (AUD$1.02 Trillion) in investment.

Carbon Tracker warns that most, if not all, of this investment is at significant risk of becoming stranded, and that governments and investors may never recoup these investments.

“Investors should be wary of relying on continued government support for coal when a phase-out will save their voters billions and make their economies more competitive,” Carbon Tracker’s co-head of power and utilities Sriya Sundaresan said.

Some of the world’s largest investors have already made moves to reduce their exposure to the coal market.

The world’s largest investment manager, BlackRock, announced in January at it would withdraw its investments in thermal coal producers.

Last month, JPMorgan Asset Management, which manages investments totalling $2.7 trillion, also announced it would join the Climate Action 100+ initiative and would make $200 billion available to “clean financing”.

The banking giant announced that it would no longer provide new finance to new or existing coal-fired power stations unless they were paired with carbon capture and storage.