Most of the international financial institutions have realized just how bad the coal is for long-term business, Executive Director at NGO Forum on ADB, Rayyan Hassan told Trend.
On May 7, 2021, Asian Development Bank (ADB) through its draft energy policy announced that it will not finance any coal mining, oil, and natural gas field exploration, drilling, or extraction activities, and it will no longer finance any new coal-fired capacity for power and heat generation or any facilities associated with new coal generation.
Hassan noted that the NGO Forum on ADB encourages the ADB’s decision not to finance any coal mining, oil, and natural gas field exploration.
“Honestly, in my opinion, I wish it was five years earlier, I think it is five years too late. ADB notoriously, since its 1964 history till 2012 was one of the largest financers of coal in the world. It was building coal power plants in South Asia, in Southeast Asia, in the Philippines, it was building coal everywhere, coal was a big part of ADB's investment portfolio,” Hassan said.
Hassan noted that by 2013 there was a very controversial ADB-financed project - Tata Mundra Coal Plant in India.
“This was coal project financed in cooperation with IFC. And this particular project led to the displacement of over 1,000 fisherfolk in India. There was extreme pollution of the river next to where the coal plant was, where the fishing population died. In addition to the marine impact the power plant was also contributing to severe coal ash and air pollution, it was really a terribly destructive project,” he said.
Later, he noted, the local fishermen with the help of civil society organizations filed a lawsuit against the IFC in US courts, and the WB Group was questioned over this coal power plant. The lawsuit brought to light whether International Financial Institutions such as IFC should remain immune from national law, especially when irreparable harm has been done.
“ADB itself faced a formal complaint in its Accountability Mechanism filed by the fishermen demanding compensation for the loss of livelihood and environmental damage. It was all over the media, it was a terrible, terrible project,” he noted.
So, Hassan said, the ADB was getting a lot of bad press because of the Tata coal project, and the Visayas Baseload Coal project in the Philippines was also being blamed for similar harms to local people. Eventually, the ADB started to realize that coal was leading to controversy.
“Even though it was their own policy, the last coal project they financed was Jamshoro plant in Pakistan in 2014. So from 2014 till 2021, for the last seven years ADB has not financed a coal power plant,” he said.
“There is still coal power plants, but you will notice that there is a lot of financing coming in from China, there is Japanese coal-fired power plants, Korean power plants, but multilateral development banks, I think because of the international recognition of renewables being more and more competitive the financiers have started to realize that coal is much more expensive problem than it was before. So at this point, the ADB like most IFIs has realized just how bad the coal is for long-term business as the future is in renewable energy. Coal is dying and the ADB wants out of it,” he said.
Commenting on the question of what else can development banks do in order to protect the environment, Hassan emphasized that currently, the biggest environmental problems are dioxide pollution and greenhouse gas emissions. Secondly, big infrastructure projects by development banks such as ADB and AIIB have had intense adverse impacts on ecosystems and the livelihoods of local communities.
Aside from the weak implementation of environmental and social safeguards the ADB is also guilty of exacerbating climate change through increased GHG emissions. “So on one side you have methane which is a big pollutant, and on the other, you have carbon dioxide which also is a big pollutant. All of them come from burning fossil fuels and ADB not only does coal plants but also does gas power plants and pipelines which lead to further emissions. ADB also does incinerator projects, which means they can even take the plastic waste and burn it to produce electricity, which you can imagine will release vert harmful chemicals into the atmosphere,” he said.
Thus, Hassan expressed the opinion that if ADB, being a 50 years old development bank in Asia, wanted to protect the environment, the first thing it needs to do is - it needs to have an emission performance standard and secondly very strong environmental and social policy standards and regulations.
“With emission performance standards the bank will not finance projects that are going to produce harmful emissions gases over a particular limit. So what is that limit going to be? - I think that is the golden question,” Hassan said.
He recalled the European Development Bank’s (EIB) recent adoption of its new energy policy as an example.
“Last year the EIB adopted a new energy policy where they put an emissions performance standard at 250 grams of carbon dioxide per kWh of electricity produced. And if you do that, then you practically eliminate most gas and coal financing. I am not saying that ADB should do 250. Personally, I would want ADB to do 200 gm/KWh or even less, but the general idea is you want to get ADB to drastically eliminate greenhouse emissions from its projects so our planet stays cool and we do not offshoot the Paris 1.5 degree agreement,” Hassan concluded.
The finalized version of the ADB Draft Energy Policy is expected to be submitted to ADB’s Board of Directors for consideration by October 2021.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.
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