Lender points to increased investment in face of environmentalists’ criticism
MULTI-LATERAL lender Asian Development Bank (ADB) is ‘scaling up’ its funding for clean energy in line with the goals of the COP21 climate accord, balancing growth in Asia with climate mitigation concerns, the head of the bank told a forum here, responding to charges from an environmental group that ADB is ‘rationalizing’ fossil fuel use.
During ADB’s Asia Clean Energy Forum (ACEF) in Manila, which ended Friday, ADB President Takehiko Nakao said that the bank is scaling up its operations in clean energy.
“Expanding the deployment of clean energy is key to achieving the twin goals of mitigation and development. We must promote an energy transition to decarbonization,” Nakao said.
Last year, the international community made two important commitments in support of clean energy. The COP21 Paris Agreement and the Sustainable Development Goals are both global accords on climate change and sustainable development.
In Asia, Nakao said the most important challenge is to pursue climate change mitigation measures while the region is growing.
The Asian economy as a whole is growing at a solid pace of 6 percent annually. It will expand from a third of world GDP today to about one half by 2050.
A regional alliance of environmental advocates, the Asian People’s Movement on Debt and Development (APMDD), scoffed at the ADB forum, calling it a “roadshow to rationalize continued fossil fuel usage for the energy needs of big business and industry.”
“As it is themed, ACEF is indeed a showcase of “clean energy,” which we know all too well as sanitizing fossil fuels in the face of rising global awareness on their critical role in the climate crisis,” the group said in a statement.
APMDD asserted that ACEF 2016 is yet another staging ground, post-COP21, for pursuing ADB’s sales pitch of selling “clean coal” as well as the range of other so-called “clean energy” technological solutions to the profound, historical and systemic issues at the root of climate change.
The group’s statement called on Asian governments to “recognize the inconvenient truth on the contribution of fossil fuel usage to global warming, expose the lie of ‘clean coal,’ and other false solutions to climate change.”
“The first challenge is how to develop consistent energy policy. Countries need clear policies on an appropriate energy supply mix reflecting their COP21 commitments as well as a thorough cost analysis of different energy sources including possible decreasing costs of clean energy over time. We need specific regulations to incentivize clean energy development,” Nakao said.
“We should reduce fossil fuel subsidies, which encourage the overuse of energy and distort the market by making fossil fuels cheaper. Asia accounts for half of global fossil fuel subsidies. Eliminating them will promote cleaner energy, protect local environments, and reduce the carbon footprint,” he said.
Countries need to invest more in advanced and cleaner technologies, the bank chief stressed.
“We should make further efforts to improve energy storage and smart grid technologies that integrate clean energy into power systems. To better use coal resources, we must develop carbon capture and storage technologies,” he added.
“Last September, we announced that we will double our annual climate financing to $6 billion by 2020. Of this, $4 billion will support mitigation and $2 billion will be for adaptation. Out of the $4 billion for mitigation, $3 billion annually will go to clean energy projects on renewable energy and energy efficiency, such as solar and wind, and transmission projects with smart grid technology. Another $1 billion will be used on sustainable transport and mitigation efforts in the urban and water sectors,” Nakao said.
According to APMDD, however, from 1994 to 2012, ADB financing for 21 coal-fired power plants reached $3.9 billion, making it the third-largest public international financier of such projects.
The group pointed that ADB earlier announced an intention to “selectively support coal-fired power plants if cleaner technologies are adopted and adequate mitigation measures are incorporated into project design.”
“Coal-fired power generation projects can make an important contribution to a country’s development if they are developed in a responsible and sustainable manner. ADB will selectively support coal-based power projects provided cleaner technologies are adopted and adequate mitigation equipment and measures are incorporated into project design,” ADB explained.
In 2013, it committed to increasing support for “energy efficiency projects,” in order to help developing Asian and Pacific countries take advantage of the “low-hanging fruit” of energy efficiency interventions in the form of “smart technology.” By then, it had reached its target of raising at least $2 billion in annual “clean energy” investments.
These “smart technologies” include schemes such as carbon capture and storage, enhanced oil recovery, enhanced coal-bed methane recovery, supercritical to advanced ultra-supercritical thermal coal technology, among others.
But APMDD said ADB’s intervention for “clean energy” only refers to financing projects that are more technologically efficient, enable diversification of a member-country’s energy mix, and lessen dependence on heavy fuel oil, even though these efforts remain fossil-fuel based.
APMDD cited example of Jamshoro Power Generation project in Pakistan (still non-operational), for which ADB provided a $900 million loan in 2014 to install a 600MW supercritical coal-fired unit and provide 5 years of operation and maintenance support, among others.
Supercritical power plants operate at a higher efficiency in terms of temperatures and pressures than conventional coal-fired power plants.
Another project cited is the Mundra Ultra Mega Power Project (MUMPP), a 4,150MW coal-based power generation plant in Gujarat, India operating since March 2013.
Controlled by a subsidiary of India’s biggest private power utility, Tata Power Company Limited, MUMPP was made possible in large part through ADB’s direct loan of $450 million granted to the firm in 2008.
By ADB’s standards, MUMPP is considered a clean energy intervention because it uses supercritical boilers, claimed to be the most energy-efficient coal-based power generation technologies, which reduce fuel consumption and greenhouse gas emissions.
In the Philippines, ADB extended loans of $120 million for the construction of Korea Electric Power Corporation’s 200MW coal-fired power plant in Cebu province, and $200 million for the rehabilitation of the Masinloc Power Partners Ltd.’s 600MW coal-fired thermal power plant in Zambales province.
“Eleven other coal plants in the Philippines that ADB helped fund have shown dangerous discharges of mercury, arsenic and lead, in addition to the dirty energy that they typically emit,” APMDD said.
The ADB also recently provided credit-enhancement for the issuance of the first climate bonds in Asia-Pacific: P10.7 billion or over $230 million in climate bonds by a subsidiary of Aboitiz Power, a major coal-producing firm in the Philippines, according to the group.
“The ACEF aims to ensure the needs of big business and industry for greater and cheaper energy, not the needs of grassroots people and communities who are supposedly in the frontlines of ADB’S poverty eradication mission,” APMDD said.
“There is no dedicated discussion space in this Forum on communities’ energy needs, access, and the implications on the enjoyment of their basic human rights of profit-seeking private sector-led energy initiatives,” the group said.
“Lastly, the ACEF glosses over ADB’s long and dirty history of funding conventional fossil fuel projects, several of which resulted in irreversible and continuing harm in the destruction of natural resources, the displacement of homes and livelihoods, and the exacerbation of climate change, among others. ADB’s much touted safeguards have proven inutile in effectively responding to the magnitude of the damage it has inflicted on communities and their environments,” the added.
Climate change priorities
The ADB chief said, however, that ADB would help its member countries develop bankable clean energy projects through trust funds backed by bilateral donors. Such trust funds provide grants for project preparation, capacity building, and viability gap financing.
“ADB is also partnering with multilateral sources, such as the Green Climate Fund and Climate Investment Funds. In our new partnership with the Asian Infrastructure Investment Bank, we will make combating climate change a priority,” Nakao said.