More than 60 Asian CSOs call on ADB to clarify details of its coal retirement mechanism

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The Asian Development Bank (ADB) must delay soliciting financial support for its coal buy-out scheme in Southeast Asia at COP26 until it has addressed a number of practical concerns about this proposal, including the risk it could undermine an ambitious, swift, and just transition from coal in targeted areas, an alliance of non-governmental organizations from across Asia said on Monday.

On November 3, the ADB plans to launch its  Energy Transition Mechanism (ETM), a private-sector led initiative to retire existing coal power plants early, starting with a pilot phase in the Philippines, Indonesia, and Vietnam. In an open letter to ADB management and board members, major donor governments and supporters of the initiative including Prudential, SE4All, Rockefeller Foundation and Bezos Fund, more than 60 civil society organizations instead demanded ADB to forego the announcement.

The CSO signatories, almost all of which are from the Asia region, are insistent that injustices wrought on communities by coal power projects come to an end as soon as possible, but they point out that there are no assurances the ADB’s ETM will actually shorten rather than prolong the lifespan of coal facilities. It’s also unclear that it will hasten the transition to renewables and protect end-users from exposure to increased costs of power. Power plants in the target countries are not subject to market pressures and thus any buy-outs will have to contend with state support and opaque power purchase agreements.  Analysis from the Institute for Energy Economics and Financial Analysis suggests that, if designed poorly, such a scheme could actually create direct or indirect incentives for coal-fired power plant operators to prolong the operations.

Meanwhile, civil society and community stakeholders from these countries have yet to be informed of the details of the ETM in their own languages, to have opportunities to be consulted, seek clarity, and provide input. “We urge ADB not to gamble with our climate survival and the possibility of ending coal in a swift, just, and genuinely transformative manner with a premature buy-out scheme that remains shrouded in uncertainty,” the letter says.

The main concerns include:

  • A lack of clarity as to why the estimated timeline for winding down coal-fired power plants operating under the ETM may be up to 15 years, subjecting people to years more of unreliable, inefficient, and polluting coal-fired power, while cheaper renewable energy sources that could have come online would be left untapped;
  • No assurances that capacities lost to early retirement of coal plants will be replaced by renewable energy sources (as there are no explicit safeguards to avoid a corresponding expansion in infrastructure for fossil gas-fired power);
  • A lack of clarity in relation to how the ETM would avoid overpaying – or creating incentives for – operators of older plants to extend their planned lifespan in the expectation of receiving finance;
  • The involvement – or potential involvement – in the scheme of financiers and developers implicated in the build out of the coal fleet elsewhere in the region or even the same countries;
  • Whether electricity end-users will be forced to shoulder additional costs; and
  • The severe lack of opportunities provided to date for communities and civil society and people’s organizations to engage with the ADB’s processes of formulating the ETM.

Gerry Arances, executive director of Center for Energy, Ecology and Development (CEED) in the Philippines, said: “While it could be a step in the right direction to free developing nations from the clutches of coal, the ETM as it stands gives no assurance that it will actually shorten the life of coal-fired power plants. The ADB has not even provided adequate consultation with civil society over issues such as whether electricity users will bear the costs of bailing out coal plant operators.”

The ADB acknowledges some of the constraints on the ETM in its project-related documents but has yet to address the overarching questions underpinning their approach raised by civil society groups. Rushing to drum up support in time for COP26 risks making the mechanism as it stands a “fait accompli” in the eyes of the world climate community, argue the CSOs. They contend that given the ADB’s legacy of investing in coal and other fossil fuel reliant infrastructure, it is time for the Bank to ‘consign coal to history’ — but in a manner that is “transparent, genuinely transformative, aligned to climate imperatives” and prioritizes access to clean, affordable, and sustainable energy in the communities of the Bank’s borrowing member countries.

Tanya Lee Roberts-Davis, Energy Campaigns Strategist, NGO Forum on ADB stated:Given the legacy of the ADB’s past and ongoing support for coal projects, it is most certainly incumbent upon the Bank to shift priorities towards supporting a just and inclusive energy transition in coal-affected regions of borrowing member countries.

However, it is far from clear how the ADB’s planned coal buy-out schemes — which are geared towards private sector buy-in — will not put profit margins above the needs of communities already ravaged by the devastating impacts of such toxic power facilities. There is no indication whatsoever how their ETM model will avert sidelining the rights of communities in the targetted areas for redress of the harm and damage inflicted,  or avoid undermining collective aspirations for a truly transformative energy transition, grounded in land, water, gender, and socio-economic justice. This is most especially the case if the coal ‘retirement’ phase ends up being drawn out over several years, or if ‘alternative’ sources of power are to be derived from no less resource-intensive, extractivist models, such as fossil gas, waste to energy incinerators and large scale hydropower dams. Why hastily leap into this coal transition initiative that remains full of risky burdens to both people and the environment? There are so many other ways the ADB should be deploying its limited financing so that it can genuinely contribute towards supporting locally relevant, just energy transitions scaled to meet the needs of communities, fully accountable to — and in control — of the public.

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