Green group questions Asian Development Bank’s coal buy-out scheme

August 26, 2021

A Manila-based pro-environment think-tank expressed support for the plan of the Asian Development Bank to explore ways to retire coal facilities in the region.

The activist group, however, urged the Bank to clarify its plan that entails the setting up of a “carbon reduction facility” that would buy and operate existing coal-fired power plants.

“When ADB made an announcement in May that it will no longer fund coal and would instead seek to support the phaseout of existing coal power plants in the region, we welcomed it as recognition of the Bank’s obligation to atone for having fueled massive coal expansion in Asia in decades past,” said Gerry Arances, executive director of the Center for Energy, Ecology, and Development (CEED).

“Now, we hope to understand why it intends to do this with a buy-out scheme which, on first impression, is incompatible with its no-coal policy,” he added.

Arances said that with the scheme, “ADB is effectively going to finance and even take part in the operations and share in the profits of these projects for another 15 years.”

The multilateral development bank and other key financial institutions have earlier expressed their intention to pursue a scheme to buy out coal power plants and wind them down within 15 years.

The goal is supposedly to allow the countries to shift to renewable energy, with ADB now allotting up to US$1.7 million to conduct feasibility studies on the cost of early closures of coal plants.

In a letter addressed to ADB regional climate and energy executives, Arances inquired about the status of the Bank’s feasibility studies on coal phase-out.

He also sought clarification on the “operational changes” that will be implemented in power plants that are considered for the buy-out scheme.

“A 15-year winding down period means exposing the power sector to 15 more years of unreliable, inefficient, and pollutive [power plants],” read CEED’s letter to ADB.

The group also pointed out that under the scheme, companies behind the operating coal plants are meanwhile “[absolved from] internalizing the negative externalities and social costs brought about by the pollution that they create.”

CEED questioned ADB’s decision to work with finance institutions still channeling financial support to the coal industry.

“It seems counterintuitive that in its coal retirement initiative, ADB is partnering with the same financial institutions who are still funding new coal-fired power plants in the Philippines,” read the group’s letter.

Civil society and coal-affected communities will continue engaging the bank to ensure 1.5°C aligned energy development directions, be it in ADB’s coal phase-out plans or its ongoing energy policy update process, the group said.

“The immediate and just phase-out of coal and transition to clean and affordable energy from renewables in climate-vulnerable Philippines and the rest of Asia must be the ADB’s priority in all its energy related initiatives,” said Arances.

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