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Statement on ADB's no-coal policy

After much anticipation, the Asian Development Bank (ADB) has released its Draft Energy Policy. The policy states that, “ADB will not finance any coal mining, oil and natural gas field exploration, drilling or extraction activities. ADB will not finance any new coal-fired capacity for power and heat generation or any facilities associated with new coal generation” (par. 86). The draft goes on to state that:

· ADB will not participate in investments to modernize, upgrade, or renovate coal facilities that will extend the life of existing coal-fired power and heating capacity unless it is to re-engineer such plants for use of cleaner fuels, such as natural gas or renewable energy sources.

· ADB will support Developing Member Countries (DMCs) in planning for early retirement of coal power plants and will support decommissioning of coal power plants and site redevelopment for new economic activity, including cleaning of hazardous materials, restoring soil and water, redevelopment of the buildings, and upgrading existing infrastructure.

· ADB will support new job creation in cooperation with the local communities and stakeholders.

When finally approved by its Board of Governors in October this year, it will replace ADB’s 2009 Energy Policy. It will mark a milestone in the prodigious work put in by the collective of organisations advocating for the Bank to change its policy. The change could have come sooner but it is certainly most welcome now.

ADB’s 2009 Energy Policy supported the development of coal facilities in the Asia Pacific region. In the Philippines, ADB financed the construction and operation of the 200MW coal-fired power plant in Naga City and the acquisition and rehabilitation of the 600MW Masincloc coal-fired thermal power plant. It was during the Masinloc financing that the ADB also pushed for the Electric Power Industry Restructuring Act (RA 9136), which paved the way for the privatisation of state-owned power plants. Masinloc would be the first thermal plant to be privatised.

ADB’s pivot away from coal is an institutional validation of the climate crisis. It also signals some credence for its internal mechanisms, particularly the avenue for independent evaluations. In 2020 the result of the Sector Wide Evaluation of ADB’s 2009-2019 program found that that “it is no longer adequately aligned with the global consensus on climate change, the ongoing international transformation of energy sectors, the recent changes in the energy sectors of DMCs, or with ADB’s new institutional priorities…with respect to financing coal-fired power plants, there is a disconnect between what the policy formally allows and what ADB finances in practice.”

For this pivot, however, to be fully effective and aligned with just solutions to address the climate emergency, ADB must make a turnaround. The draft policy recognizes that “energy supply must in turn be decoupled from its reliance on fossil fuels.” And yet it maintains a degree of support for fossil fuel-generation, notably for natural gas (par. 88). It articulates an aspiration to “transition to cleaner power systems by supporting accelerated deployment of renewable energy” (par. 79), but maintains its support for large hydro power plants (par. 80).

To make headway, the ADB must only support projects that ensure that the very process of generating clean energy would in and of itself be clean—that is, there be no trade-offs between renewable energy and the rights of people or the environment.

The ADB’s move away from coal must mean more than just a change in energy technology. Its usual push for large-scale and mega interventions needs further reconsideration.

In this epoch of climate crisis, an effective and meaningful pivot means supporting and ensuring not only energy security, but more so energy sovereignty: community-based projects that help ensure the right of people to choose renewable and sustainable energy sources while maintaining ecological balance.

The ADB is poised to make a difference and rectify the failures and inequities of the prevailing energy system. Bold steps must be undertaken to truly transform this system.*

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