The Asian Development Bank (ADB) on Friday, May 7, 2021 issued its draft energy policy, following the conclusion of its 54th Annual Meeting and clarion calls from the United Nations to end financing for all fossil fuels including gas.
The draft energy policy states that the ADB “will not finance any new coal-fired capacity for power and heat generation or any facilities associated with new coal generation.”
While the draft rules out finance for gas extraction, it says the ADB will continue to consider finance for gas transmission and distribution pipelines, LNG terminals, storage facilities, gas-fired power plants, gas for heating and cooking when five conditions are met. These include improving energy access, comparing projects with the cost of renewable alternatives, and showing a plan for long-term carbon neutrality. However, the conditions are only broadly defined and the draft policy says details will be issued in a separate staff guidance rather than being open for public consultation.
The multilateral development bank, which focuses on eradicating poverty in Asia, provided no timeline for its commitment.
It also laid out conditions under which fossil fuel projects would continue to receive funding, such as where no other cost-effective technology was available.
Yongping Zhai, head of the ADB’s energy sector, said the draft would be deliberated by its board of directors in October.
On Thursday, UN Secretary General Antonio Guterres called on international financial institutions like the ADB to stop funding fossil fuel projects, saying “We can no longer afford big fossil fuel infrastructure anywhere.” His comments followed the release of a new UN report which clearly states that gas cannot be considered a bridge fuel and called for urgent steps to cut methane emissions to reach the Paris goal of keeping global temperature increase below 1.5 degrees Celsius.
Lidy Nacpil, coordinator of the Asian Peoples’ Movement on Debt and Development (APMDD), said: “The ADB must stop funding gas and oil projects. Support for the expansion of all types of fossil fuels must end. There must be a swift and early phase-out of existing fossil fuels projects with an accelerated and just transition to clean, renewable and democratic energy systems. Further, we will also call on the ADB to cancel debts especially those incurred from harmful projects such as fossil fuels.”
Rayyan Hassan, executive director of NGO Forum on ADB, said: “The new draft Energy Policy announcing an end to coal finance is much-delayed justice for all the affected communities across Asia impacted by ADB coal projects. We urge the ADB to move towards a full transition to renewable energy finance through solar and wind as soon as possible.”
Gerry Arances from the Centre for Energy, Ecology, and Development (CEED), Philippines, said: “With its draft policy, ADB is setting a high climate leadership standard for other international banks in their stance on coal–but only if its pledge to abandon coal is translated into a clear roadmap for phasing out existing fleets. We urge the bank to pour into renewable energy systems that will power the sustainable development Asia needs today. Microgrids, in particular, with their capacity to address electrification woes in our nations, to empower communities to manage and enjoy the full benefits of their own energy systems, and even to generate much needed green jobs, must be prioritised.
“The COVID-19 pandemic revealed weaknesses of current carbon-intensive systems of unreliability and costliness, among others – all of which community-based renewables can help address. ADB is already actively pursuing efforts to drive the post-COVID recovery of its developing member countries, and would be hitting two birds with one stone if it integrates the advancement of climate-responsible and resilient microgrids in them.
“To this end, we caution that continuing to support gas, as it declared it would, will only be a detour in the road to a thriving renewable energy sector in Asia. We urge ADB to thoroughly consider its fossil gas policy in terms of a full alignment to the 1.5°C Paris goal. A concrete phaseout plan for gas should also be already in the works.”
Vidya Dinker of Indian Social Action Forum and Growthwatch, India, said: “ADB at 54 is finally catching up, and we welcome that. It is a battle hard fought by communities long-suffering pollution and destruction by their projects and policies in India and across Asia, and today they can finally look forward to reparations. We reaffirm our struggles and commitment to hold ADB accountable.”
Hasan Mehedi from CLEAN (Coastal Livelihood and Environmental Action Network), Bangladesh, said: “The ADB has to urgently phase out fossil gas to achieve the Paris Goal of staying below 1.5 degrees Celsius.”
Susanne Wong, senior campaigner of Oil Change International, said: “By leaving the door open for gas, the ADB is ignoring 96% of their fossil fuel finance and painting it as climate leadership. As a public bank dedicated to achieving a ‘prosperous, inclusive, resilient, and sustainable Asia and the Pacific,’ the ADB must rule out gas and focus on helping countries leapfrog to clean energy.”
Petra Kjell, Campaigns Manager at Recourse, said: “ADB’s coal exit is a first step towards realising a fossil free ADB. Public development banks such as ADB must now put people and planet at the heart of their operations, ruling out remaining harmful energy choices like gas.”
Chuck Baclagon, 350.org Asia Finance Campaigner, stated: “We welcome this step because it brings to fruition the years of painstaking resistance from communities and organisations against energy projects that come at the expense of health, ecosystems, and the climate.
“The exclusion of coal in the new investment policy further affirms that coal is not only bad for the environment and our climate, but also a bad investment because of the growing risk of coal infrastructure becoming stranded assets. Investors have already caught on to the fact that coal can no longer be the least-cost option for baseload demand, even before factors such as public health impacts and environmental damage are priced in.
“We are concerned, however, that the new policy still states that the Bank may still finance natural gas projects (including gas transmission and distribution pipelines, LNG terminals, storage facilities, gas-fired power plants, natural gas for heating and cooking) under certain conditions.
“It is imperative that support for all types of fossil fuels, not just coal, must end. To align with what ADB calls the global consensus on climate change, there must be a swift and early phase-out of existing fossil fuels projects with an accelerated and just transition to a clean, renewable and community-centred energy system.”
Jasper Inventor, Greenpeace Southeast Asia programme director, said: “ADB’s new policy to stop coal financing is a long-delayed and incremental move. Communities throughout Asia have struggled for decades to demand ADB to stop financing dirty energy. But while their new energy policy puts the brakes on coal financing, it still opens doors for fossil gas development.
“Greenpeace is calling on ADB to phase out investment and support for all fossil fuels, including fossil gas. The bank must not provide a loophole and opportunities for businesses to impede the transition to renewable energy by replacing coal with fossil gas.”
Set up in the early 1960s and headquartered in Manila, the ADB has channelled $42.5 billion into the energy sector across the region between 2009 and 2019, it said on its website.