ADB rules out coal, sets conditions for gas projects in draft energy policy

Burning fossil fuels is the single largest source of emissions heating up the planet and driving wilder weather.
Burning fossil fuels is the single largest source of emissions heating up the planet and driving wilder weather.PHOTO: ST FILE

SINGAPORE - The Asian Development Bank (ADB) has said it will formally rule out financing for new coal projects and will also ban financing for coal, oil and gas exploration and extraction as pressure grows on the institution to end all support for fossil fuels on climate concerns.

The pledges are contained in a draft energy policy released on Friday (May 7), following the bank's annual meetings in Manila last week. It is the first time the policy has been updated since 2009.

"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," the draft said.

But the bank will continue to consider financing gas projects such as pipelines and power plants. That places ADB at odds with a call last week by United Nations secretary-general Antonio Guterres, who urged international lending agencies to stop financing major fossil fuel projects.

"We can no longer afford big fossil fuel infrastructure anywhere," Mr Guterres said on May 6. "Such investments simply deepen our predicament. They are not even cost-effective."

Burning fossil fuels is the single largest source of emissions heating up the planet and driving wilder weather.

ADB came under criticism last week from Oil Change International and Fossil Free ADB, an international coalition of non-government groups and movements, for channelling US$4.7 billion (S$6.25 billion) to gas projects since the adoption of the 2015 Paris Climate Agreement.

The policy draft said the bank will still consider support for gas projects, such as transmission and distribution pipelines, LNG terminals, gas-fired power plant and gas for heating and cooking, when five conditions are met.

These include improving energy access, comparing projects with the cost of renewable alternatives, showing a plan for long-term carbon neutrality that also avoids locking into long-term carbon infrastructure, and lowering the emissions of local electricity grids. ADB said it will develop more detailed guidelines on future gas investments.

Green groups, while welcoming the pledges on new coal and fossil fuel mining and extraction, said the bank should speed up its investment focus on renewable energy.

"By leaving the door open for gas, the ADB is ignoring 96 per cent of their fossil fuel finance and painting it as climate leadership. As a public bank dedicated to achieving a 'prosperous, inclusive, resilient, and sustainable Asia and the Pacific', the ADB must rule out gas and focus on helping countries leapfrog to clean energy," said Ms Susanne Wong, senior campaigner of Oil Change International.

ADB said the majority of its energy financing during 2015-2020 went to renewable energy sources and grid infrastructure. Less than a fifth went to gas. The bank's aim is to wean Asia off fossil fuels, and in the draft said it had not funded any coal power project since 2013, even though the existing policy allowed it.

Globally, gas remains a major concern. The UN and many green groups say soaring gas consumption - especially liquefied natural gas (LNG) - is driving global warming. This is because the gas, while less polluting than coal and releasing less carbon dioxide (CO2) when burned, is highly polluting when the whole extraction and production life cycle is taken into account.

LNG, for instance, needs lots of energy to chill the gas for transport. Methane, the main component of natural gas, is also a far more potent greenhouse gas than CO2 and millions of tonnes leak from pipelines and production wells every year.

ADB, in the draft, also notes the risks from fossil fuels.


The Asian Development Bank also noted that many countries in Asia are highly exposed and vulnerable to natural hazards and impacts of climate change. PHOTO: BLOOMBERG

"Coal and other fossil fuels have played a large part in ensuring access to energy for the region's economic development, but they have not solved the energy access challenge, and their use harms the environment and accelerates climate change."

The bank also noted that many countries in Asia are highly exposed and vulnerable to natural hazards and impacts of climate change, such as the growing frequency and intensity of extreme weather events, droughts and sea level rise.

Yet, in the draft, it also said that it is likely Asia will continue to include gas in strategies to transition away from coal and fuel oil - despite growing CO2 emissions from gas use.

Mr Yongping Zhai, chief of ADB's Energy Sector Group, told The Straits Times on Monday the policy draft was meant to serve as the basis for further talks with ADB shareholders and the public this month and the next.

He said: "As ADB continues to consult with a wide range of stakeholders on the new policy, this draft is still subject to change so as to enable ADB to provide effective support to its developing member countries in meeting the SDGs (UN Sustainable Development Goals) and climate goals."

The final version was expected to be submitted to the ADB's board of directors for consideration by October this year, he said.