ADB's take on 'dirty energy'

MANILA — By its own definition, the Asian Development Bank no longer funds “dirty energy.” It does, however, still fund projects using fossil fuels and even “selective” coal projects, leading watchdogs to question whether there is a disconnect between its policies and commitments to help address climate change. 

In a recent opinion piece, Yongping Zhai, ADB’s energy director, wrote about how the bank is committed to helping countries in the Asia-Pacific region embrace renewable energy. In 2017, the bank approved over $2 billion for renewable energy and energy efficiency projects. The bank is also “stepping up support for off-grid solutions,” such as solar, he explained.

“Given the increasingly competitive cost of renewable energy technologies, the growing risk of stranded fossil fuel assets, and the rising shadow carbon price, coal-based power plants will no longer be a viable option to meet the electricity demand of developing countries,” Zhai wrote, adding: “We will ensure that, as we meet our own climate finance targets, ADB’s lending portfolio has no place for ‘dirty energy.’”

But the bank still funds fossil fuel projects. A report by E3G, a climate change think tank, released in May noted how ADB “performs worst” on fossil fuel finance among multilateral development banks. Some of its biggest investments on this include the $1 billion Shah Deniz Gas Field Expansion Project in Azerbaijan and the $400 million Tangguh Liquefied Natural Gas Expansion Project in Indonesia, both approved in December 2016.

In the same ADB opinion piece, the energy chief wrote that in countries with less-developed energy systems, the bank is supporting “interim” natural gas-based power plants. Natural gas is a form of fossil fuel, but produces 50 to 60 percent less carbon dioxide than coal power plants. Some see it as an effective climate change mitigation policy, which allows meeting energy demands in countries including the United States, and thus is an effective stopgap measure.

But environmentalists argue natural gas still produces emissions, particularly methane, one of the major greenhouse gases. Methane’s impact in the atmosphere is also 25 times greater than carbon dioxide over a 100-year period, according to the U.S. Environmental Protection Agency. 

Some of the gas-fired projects the bank is currently supporting include the Myingyan Natural Gas Power Project in Myanmar and a liquefied natural gas project in Batangas, the Philippines.

Renewed calls for the bank to end dirty energy investments came following the latest report by the Intergovernmental Panel on Climate Change that says the world only has about a little over a decade of effort to keep global temperature below 1.5 degrees Celsius. Making that happen will require aggressive actions to cut global carbon emissions, particularly from fossil fuels.

In an email to Devex, Zhai reiterated they have not funded “any coal power plants since 2013.” The last one, he said, was the Jamshoro supercritical coal-fired power plant in Pakistan. The status of that project is still active.

Pressed on what he meant by “dirty energy,” Zhai told Devex it is “energy which leads to the deterioration of the local environment (e.g. air quality indicators, SO2 [sulfur dioxide], NOx [nitrogen oxides], and particulate matter), and undermines a country’s commitments under the Paris Agreement on climate change.”

Under this definition, he reiterated “ADB does not fund any dirty energy.”

But he admits ADB’s current policy still allows for coal funding “on a very selective basis with stringent environmental, social, and clean technology standards.”

“Coal-power projects are untenable due to the declining cost of renewable energy and the rising carbon price. They are not a viable option for the more than 500 million people in Asia and the Pacific, most living in rural and remote areas, who still have no access to electricity,” he wrote.

The bank didn’t provide any further details when questioned on the specific guidelines they use in deciding whether to invest in coal projects.

A warming planet

Civil society actors have long criticized the bank for its continued lending for coal projects. During the 6th Asia Pacific Climate Change Adaptation Forum in mid-October hosted by ADB, the NGO Forum on ADB argued raising awareness about climate change is helpful, but the bank should follow this up by divesting entirely from coal and other fossil fuel investments.

The bank should also provide a “clear transition plan to sustainable and socially acceptable renewable energy projects,” said Rayyan Hassan, executive director of the NGO Forum on ADB, in an email statement.

Under its new corporate strategy to 2030, the bank committed to incorporate climate change mitigation and adaptation in 75 percent of its projects. It also pledged to increase its climate financing to $80 billion from 2019 to 2030. But alongside this, there is no specific mention of the bank ending its policy on coal, or other types of fossil fuels.

In a separate interview, ADB Director of Climate Change and Disaster Risk Management Division Preety Bhandari told Devex: “The way ADB is responding to investments in coal is of course in tandem with our energy policy, which clearly says that we will do coal only under certain circumstances where the country does not have any option and it is in the context of providing basic energy services. But we have also, in that context, said that if we do coal then we will make sure that it is [using] the best available technology.”

She added that “some internal discussions” are taking place on the bank’s energy policy, but deferred to Zhai, the energy chief, for answers.

How does Bhandari see the bank’s coal investments being in coherence with its climate work?

“There is a healthy discussion within the bank on all these imperatives that we have. And if you look at Strategy 2030, it is, you know, making reference to all the multilateral agreements, and how we will be responding to [these]. And I can assure you that we will be responsive and responsible ... moving forward,” she said.

ADB is currently in the process of developing its operational plans, following the release in August of its Strategy 2030.

“We are in the process of developing our operational plans and all these relevant discussions are taking place in terms of integrated approaches, in terms of differentiated approaches,” Bhandari said.

She also told Devex that the IPCC report underscores the need for serious action to reduce greenhouse gas emissions.

“It gave us that 12-year time period. That's something that has resonated with the audience, … that we have 12 years to get our act together. And it's not that it's not doable, but it needs a lot of political will. It needs human ingenuity, technological innovation at a scale that we haven't known. But I think, most importantly, it needs political will to take action at a multilateral level,” she said.