‘ADB fund to bail out coal-fired power plants adds to debt load’


Civil society groups raised concerns with the establishment of a fund that may bail out private firms operating coal-fired power plants at the expense of public funds in three Southeast Asian countries.

The Asian Peoples’ Movement on Debt and Development (APMDD) opposed the creation of the “energy transition mechanism,” or ETM) that was established by the Asian Development Bank (ADB) in the Philippines, Indonesia and Vietnam.

APMDD Coordinator Lydinyda “Lidy” B. Nacpil said the risk of stranded assets in the coal industry has been growing and the move to build the ETM could be a way out for these firms.

“It would also most likely involve loans to Asian governments for the phase-out of coal projects, adding yet again to debt burdens. The nature of the scheme and its opaqueness makes it fertile ground for corruption and encourages the predatory behavior of private corporations to take advantage of the project to secure profits,” Nacpil said. “These are not acceptable.”

The ADB mechanism  proposes the closure of coal-fired power plants in Asia within 15 years by buying them out from current operators. It aims to close down 50 percent of coal-fired power plants in the three pilot countries.

“Coal plants should and can be closed much earlier than 15 years. The use of coal is the single biggest driver of climate change. It is time to end it to rein in emissions within this decade,” Philippine Movement for Climate Justice Coordinator Ian C. Rivera said.

Global investment in coal projects has declined by 75 percent in the last three years, according to reports.

However, this has been more than compensated by a 63-percent growth of the coal-fired power sector in Asia, where projects in the pipeline account for 80 percent of the world’s planned coal-fired power stations.

The use of coal in the Asia-Pacific region accounts for about three-quarters of worldwide coal consumption.

Rivera said the phase-out of coal should not involve using public funds to bail out private coal companies.

“Public funds should not be used to provide guarantees and bailouts to private corporations that insist on investing in coal energy despite warnings about the inevitability of stranded assets and of the harmful impacts of their projects,” Rivera said.

In a statement, the ADB said the ETM will employ a transformative, blended-finance approach to retire existing coal-fired power plants on an accelerated schedule and replace them with clean power capacity.

The mechanism will comprise two multibillion-dollar funds: one devoted to early retirement or repurposing of coal-fired power plants on an accelerated timeline and the other focused on new clean energy investments in generation, storage and grid upgrades. It is also envisioned that multilateral banks, private institutional investors, philanthropic contributions and long-term investors will provide capital for ETM.

The ADB said it will support the national governments to establish enabling policies and business conditions to improve the program’s governance, carbon reduction and just transition goals.

In the two to three year pilot phase, the ADB said the mechanism will raise the financial resources required to accelerate the retirement of five to seven coal plants in Indonesia and the Philippines, while facilitating investment in alternative clean energy options within these countries.

During the design of the ETM, the ADB and its partners will form an advisory group with nongovernment organizations and civil society groups to prioritize a just transition to clean energy. Technical assistance will be provided for reskilling and the livelihood development of affected workers and communities.

A full scale-up of the mechanism in Indonesia, the Philippines and possibly Viet Nam aims to retire 50 percent of the coal fleet, which is approximately 30 Gigawatts, over the next 10 years to 15 years.

This could cut 200 million tons of carbon dioxide emissions per year, the equivalent of taking 61 million cars off the road. As it grows, the ETM has the potential to become the largest carbon reduction program in the world.

A pre-feasibility study has been completed and a full feasibility study is underway to finalize the financial structure of the mechanism, identify candidate coal plants for inclusion in the pilot program and design just transition activities.

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