The Asian Infrastructure Investment Bank last week launched the initial stage of public consultations for its first energy strategy — a crucial piece of policy that will play a significant role in the Beijing-based institution’s pursuit of becoming a “green bank”.
“The rationale of elaborating an energy strategy is to direct the activities of the bank into those business areas, which are of significant importance for its performance as a green bank promoting sustainable infrastructure,” an AIIB spokesperson told Devex.
Top management officials at the world’s newest multilateral development institution have stressed that their institution will promote sustainability. President Jin Liqun has repeatedly said that AIIB will be a “lean, clean and green” institution focusing simultaneously on growth, development and the environment.
This includes a focus on what kind of projects, particularly on energy, the bank should and will finance. “In the future, projects will be selected for bank financing based on the priorities developed in the energy strategy,” the spokesperson said.
Part of the strategy launch is the release of an issues note meant to aid the discussion and inform relevant stakeholders planning to submit recommendations to the bank. The ultimate goal, according to the document, is to contribute to “sustainable energy for Asia”.
The first tranche of public consultations is expected to close on Nov. 12. A second round of consultation is expected to happen in early 2017, with a view of finalizing the strategy by the first half of next year.
Energy policy is of paramount importance in the Asia-Pacific region. Rachel Kyte, head of the Sustainable Energy for All initiative, told Devex in a previous interview that there is a need to focus on efficiency and sustainability in the region as energy demand is expected to double by 2030. This is something that AIIB is hoping to address as a new multilateral institution for the region.
“Our role will be to help our member countries in the implementation of the principles of Energy for All,” the spokesperson said. “This means expanding energy access and energy security where it is needed and doing so in a way that is compatible with the Paris agreement.”
Salient points
The issues note includes guiding principles and implementation specifics for setting targets, operationalizing plans and aligning resources with countries’ needs and capacities.
Some of the guiding principles include: ensuring energy security and equality; realizing countries’ energy efficiency potential; reducing the carbon intensity of energy supply; limiting local and regional pollution; catalyzing private capital; and promoting regional cooperation.
The document revealed that AIIB’s project selection process will be technology neutral. Two implementation guidelines speak to sectoral and crosscutting issues related to potential investments.
Some of the sectoral issues include power transmission and distribution, energy efficiency investments, and renewable energy investments like wind, solar and hydropower to reduce fossil fuel consumption. There is also a focus on local and regional pollution investments, fossil fuel power generation investments (only temporary), as well as oil and natural gas processing, transportation and distribution.
Nuclear power generation, meanwhile, “will not be considered by AIIB at this stage” but could be revisited in the future, according to the issues note. “In order to engage in nuclear power, AIIB would have to develop the capacity to be involved in such complex and capital-intensive projects.”
The crosscutting issues, on the other hand, largely focus on the cost of renewable energy investments, development of strong and diversified energy portfolio, incentives for interconnectivity of infrastructure, and AIIB’s own lack of capacity to engage in knowledge-based and policy dialogue activities, to name a few.
Consultation, new role
Public consultations have not always gone smoothly for AIIB. Civil society representatives were critical of the Beijing-based bank’s conduct of the public consultations of its safeguards framework last year.
These groups raised concerns about a short consultation window, lack of local language translation of the documents for member countries, and a lack of face to face interactions. But officials from AIIB has been quick to clarify the criticisms, saying it’s all about managing expectations, given the bank’s “startup” status.
“AIIB is keen on the substantive input from a wide range of stakeholders,” the AIIB spokesperson shared. “We are conducting consultations with full openness and transparency and in a way that is compatible with the limited capacity of a still very young institution with few staff.”
Although it is a newcomer in the multilateral development field, the AIIB still sees a significant role for itself.
“As a comparatively new bank, we do see our role in putting a special emphasis on the financing of green energy and infrastructure, on promoting cross-country connectivity, and on mobilizing private capital for infrastructure investments,” the spokesperson concluded.
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About the author
Lean Alfred Santos@DevexLeanAS
Lean Alfred Santos is a Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. Prior to joining Devex, he covered Philippine and international business and economic news, sports and politics. Lean is based in Manila.