Op-ed: Asian Development Bank should close its doors to all dirty energy

The announcement by Asia’s leading development bank to exit from financing fossil fuels made global headlines. While it would be a major step for a just energy transition if fully implemented, the bank’s new energy policy continues to leave room with a number of loopholes for potential investment especially in fossil gas.

Climate groups and communities advocating against coal projects in the Asia-Pacific region have welcomed the Asian Development Bank’s (ADB) recent draft energy policy that aims to stop financing coal power and mining, and extraction activities for oil and natural gas. This decision puts ADB on the right track to be an active participant in the decarbonization and just energy transition efforts in the Asia-Pacific. However, if not monitored closely, ADB could also be jeopardizing its own efforts by creating loopholes in its new policy that might still allow financing for fossil gas and other dirty energy facilities.

With the recent changes, ADB aims to align its energy policy with its internal long-term Strategy 2030, the Sustainable Development Agenda, and the Climate Paris Agreement. The bank commits to scrapping coal financing and to support efforts to help communities and stakeholders that will be affected by the coal phase-out. It also commits to assisting member countries’ climate actions by investing more on renewable energy, energy efficiency, and the transition towards sustainable energy systems.


Host communities of past coal projects continue to suffer

Admittedly, the new policy is a welcome improvement from the bank’s previous 2009 energy policy that perpetuated support for coal. ADB financed controversial coal projects in the past decade such as the Tata Mundra Coal Plant in India and the Jamshoro Coal Project in Pakistan. ADB also funded some of the dirtiest coal-fired power plants in the Philippines – in Masinloc, Zambales; Pagbilao, Quezon; and Naga, Cebu. Though ADB’s last coal financing was in 2013, host communities continue to suffer from the pollution and toxic fugitive ash constantly released by these facilities. That is why the new policy, even though it is welcome, comes too late for communities who are already suffering. ADB should not lose sight of the past and must continue to clean up the impacts of its coal legacy, as it moves forward to a sustainable energy direction, including just transition plans for communities affected by coal.


Leaving loopholes for future financing of fossil gas

This leads to why ADB should not allow any loopholes in its new policy that may open the doors in the future for continuous financing of dirty energy. ADB identified fossil gas as a transition fuel and will continue to be open to financing gas transmission projects, distribution pipelines, gas-fired power plants, LNG terminals and other related systems.

ADB acknowledges in its draft report that replacing coal with fossil gas does not eliminate greenhouse gas emissions and other fugitive emissions associated with gas production and transmission. By not setting any clear timeline, ADB is open-endedly allowing fossil gas financing. ADB should not heavily invest on fossil gas since it will push its members to continuously rely on imported gas. Instead, the bank should help the region to develop further its indigenous energy resources, e.g. solar, wind, biomass, geothermal and others.

The bank also expressed that it will continue to invest on waste-to-energy incinerator plants for municipal waste. However, incinerators emit more carbon dioxide per megawatt-hour than coal-fired or oil-fired power plants. This is especially dangerous for Asia, where many countries produce waste with high moisture content that will not burn efficiently. To be able to operate effectively, incinerators in most Asian countries must be fed constantly with huge volumes of plastic waste, a petroleum-based product. Cities will also be locked in long term garbage incinerator contracts, which will seriously undermine efforts towards waste minimization and reduction.

Garbage incineration undermines circular economy and national waste diversion targets. The European Union already removed renewable energy subsidies for incineration activities. The US Environmental Protection Agency does not categorize energy recovery as waste minimization activity. ADB should therefore invest in city-level organics management and programmes that will boost materials recovery and recycling efforts.


No room for contradictions

According to the recommendations in a recent report of the International Energy Agency (IEA), all funding for new oil, gas and coal supply must be stopped to reach net zero emission by 2050. Given this report, it is imperative for ADB to not lose sight of its climate ambition by firmly discontinuing the indefinite financing of fossil gas and activities that incentivizes the production of petroleum-based products and waste.

As one of the biggest financing institutions in Asia, the ADB holds great influence in the policy and economic programme of its members. Decarbonizing its carbon-intensive energy portfolio signals a clear message to other financing institutions and investors that the era of coal is nearing its end. However, ADB must stop contradicting itself. If it wants to follow through fully with helping the region achieve net-zero by mid-century, it must immediately shut its doors to all fossil energy. The expected release of the final energy policy by October this year would be the perfect opportunity to do so.


Riedo Panaligan is the President of the public think tank group Center for Renewable Energy and Sustainable Technology (CREST) and a board member of the Climate Action Network-Southeast Asia (CANSEA). He is a local partner of FES Philippines and supports cities and communities achieve their sustainable energy programmes.

The views expressed in this article are not necessarily those of FES.

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