The Asian Development Bank (ADB) has said it will formally rule out financing for new coal projects and will also ban finance 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 last Friday 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 the bank at odds with a call by United Nations Secretary-General Antonio Guterres urging international lending agencies to stop financing major fossil fuel projects. “Such investments simply deepen our predicament. They are not even cost-effective,” Mr Guterres said last Thursday.
Burning of fossil fuels is the largest source of emissions heating up the planet and driving wilder weather.
The 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$6.2 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, liquefied natural gas terminals, gas-fired power plants 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.
The bank 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 its 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 senior campaigner Susanne Wong at Oil Change International.
The ADB said most of its energy financing during 2015-2020 went to renewable energy sources and grid infrastructure. Less than a fifth went to gas.
In the draft, the bank said it had not funded any coal power projects 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 is driving global warming.
This is because gas, while less polluting than coal and releasing less carbon dioxide when burned, is highly polluting when the whole extraction and production life cycle is taken into account.
Mr Yongping Zhai, chief of the bank’s energy sector group, told The Straits Times yesterday that the policy draft was meant to serve as the basis for further talks with ADB shareholders and the public.
He said: “As ADB continues to consult 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 is expected to be submitted to the ADB’s board of directors for consideration by October, he added.