ADB shuts down funding for coal

Photo Courtesy of Federico Gambarini/DPA/Agence France-Presse  Getty Images

Photo Courtesy of Federico Gambarini/DPA/Agence France-Presse Getty Images

The Asian Development Bank (ADB) has finally approved a new energy policy that includes its exit from coal financing, as it pushes for a low-carbon transition in Asia-Pacific amid worsening climate change.

The Manila-based multilateral bank on Wednesday approved its 2021 Energy Policy that aims to support universal access to reliable and affordable energy services.

“This new policy locks in our strong commitment that ADB will not fund new coal power production,” ADB president Masatsugu Asakawa said.

In a briefing late Wednesday, ADB chief of energy sector group Priyantha Wijayatunga explained that ADB would no longer fund new coal mining, oil and natural gas field exploration, drilling or extraction.

Wijayatunga clarified that support for natural gas and oil will depend on support for energy access, avoiding carbon lock-in, and strict screening criteria.

It was in 2013 when ADB last financed a coal project in Pakistan.

ADB chief sector officer Robert Guild noted that ADB’s prohibition on financing new coal generation extends not just to the plants themselves, but also to dedicated transmission lines serving coal-fired generation plants.

Asakawa emphasized that energy is central to inclusive socioeconomic development, but the expansion of energy systems has come at the cost of harmful impacts on climate and the environment.

Based on its latest policy, ADB will help developing member countries (DMCs), including the Philippines, increase energy efficiency, deploy more renewable and low-carbon energy, and integrate climate and disaster resilience into energy sector operations.

The policy formalizes ADB’s current practice of not financing new coal-fired power and heating plants.

ADB said it would support a planned phase-out of coal in the region and commit to a just transition that promotes sustainable, inclusive, and resilient livelihoods for all in affected communities.

Asia-Pacific accounts for nearly 40 percent of the world economy, but it is also responsible for around 80 percent of the world’s coal consumption and up to 50 percent of carbon emissions.

The region is both a major contributor to global greenhouse gases and a casualty of climate change and weather-related calamities.

ADB said major changes in the energy sector should include avoidance of fossil fuels and switching to low-carbon fuels and the deployment of more renewable energy.

While progress on energy access has been rapid, some 350 million people in the region still do not have adequate supply and about 150 million people still have no access to electricity.

Asakawa said ADB’s new energy policy would support DMCs in the critical and urgent task of expanding access to reliable, affordable, and clean energy.

This would complement ADB’s recent move to ramp up its financing to DMCs and pour in $20 billion worth of additional funding resources to reach $100 billion by 2030.

“It provides a clear path for ADB’s contribution to an environmentally sustainable energy future,” Asakawa said.

ADB said the region’s growth and rapid urbanization would require developing affordable and reliable energy systems with substantial additional electricity-generating capacity.

As capacity is expected to increase by about seven percent per year, investments in renewable energy generation in the region could also double to $1.3 trillion per annum by 2030.

Based on ADB’s latest energy policy consisting of five principles, the bank will help countries secure energy for development by supporting electrification programs, promoting cleaner cooking, heating, and cooling, improving energy efficiency across supply and consumption chains, and promoting social inclusion, gender equality, and partnerships.

It will also support the institutional development, financial sustainability, and good governance of energy sector institutions and companies, as well as private sector participation.

Further, ADB said it would promote regional energy cooperation and integration of energy systems to strengthen energy security and increase cross-border access to cleaner energy sources.

Since 2009, ADB has extended over $42 billion in financing to Asia Pacific’s energy sector.

This article was originally published by PhilStar.