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ADB draft energy policy can leave door open for over US$3 billion worth of gas projects

The ADB's new draft energy policy still falls 'short' of what is needed for climate leadership, according to new analysis, and provides scant detail about its funding plans that could allow for US$3 billion of gas investment to continue.

When the Asian Development Bank (ADB) issued a revamped energy policy for consultation—the policy’s first overhaul since 2009—in May, it ruled out coal, oil and natural gas field exploration, drilling, and extraction activities.

However, the mutli-lateral lender had incorporated certain conditions that “left space for continued large-scale gas investments”, according to an analysis released on Friday by Fossil Free ADBa 24-member coalition comprised of civil society groups and peoples’ movements from Asia, the United States and Europe, campaigning for the ADB to stop financing fossil fuels.

The five conditions include: improve or add access to energy services; pass a least cost of energy test with a social cost of carbon applied (starting at US$36.60 per tonne of CO2); use best available technology; reduce the net grid-emission factor for power generation, for example, by replacing a higher-emissions fuel; and demonstrate alignment with a net-zero by 2050 plan.

“The energy policy has not given details on how these conditions will be applied, stating that a separate staff guidance note will be issued,” said Bronwen Tucker, analyst of US-based research advocacy group Oil Change International, and one of the authors of the study titled Fossil Free ADB Analysis of ADB Draft Energy Policy.

“This is a major transparency issue, without the full text of the guidance note on gas being included in the policy, these conditions are not meaningful,” she told Eco-Business.

Since the Paris Agreement in 2015, a legally binding treaty to tackle climate change, the ADB has allocated at least US$4.7 billion to fossil fuels, 96 per cent of which has gone to gas.

Since then, 78 per cent, amounting to US$3.66 billion, is earmarked for activities the bank said will still be considered for finance, including “gas transmission and distribution pipelines, liquified natural gas terminals, storage facilities, gas-fired power plants, natural gas for heating and cooking.”

The remaining 22 per cent of the finance for gas (US$1.52 billion) was channelled towards exploration and extraction, which is now excluded from future finance in the ADB’s new draft policy.

Tucker noted how the draft energy policy is not aligned with recent policy updates by the bank’s peers. Canada-based think-tank International Institute for Sustainable Development (IISD) shows the majority of gas consumption is associated with uses that already have cost-competitive, clean alternatives in most countries and circumstances.

The ADB draft’s overall framing on gas is a concern, said Tucker. While other financial institutions have said that gas will only be funded in clearly-defined rare exceptions, the multi-lateral lender refers to gas as a “transitional” fuel and provides few details, she said.

Development banks are not supposed to fund any new gas.

Bronwen Tucker, analyst, Oil Change International

Energy policies of other public international finance institutions have more stringent measures to limit finance to gas projects, compared to the ADB. Dutch entrepreneurial development bank FMO has put in place a stronger climate test that requires proof that the alternatives to gas are not viable rather than just more expensive, while the European Investment Bank has stricter emissions standards for all projects with less than 250 grammes of CO2 per kilowatt-hour. 

“As a public bank with a mission for sustainability and equality, the ADB should be using their energy finance to help countries leapfrog to renewable energy, create green jobs, and improve energy access. Development banks are not supposed to fund any new gas,” Tucker told Eco-Business.

No “meaningful consultation” with civil society organisations

As the ADB’s annual clean energy forum came to a close on Friday, green groups expressed disappointment about the lack of “meaningful consultation” with them on the bank’s energy policy.  

NGO Forum on ADB, an Asian-led network of over 250 civil society organisations, said it decided to disengage from the session designated within Asian Clean Energy Forum (ACEF) for civil society organisations (CSOs) to discuss the bank’s energy policy. 

Since the release of the draft energy policy a month ago, the ADB Sustainable Development and Climate Change Department (SDCC) has not made any information publicly accessible detailing the timeline for consultations or the process by which input will be duly taken into account before final revisions are made, it said in a statement.

There is not even a respectable semblance of inclusivity or transparency of process in the ACEF, despite it being the big event for them to both showcase and have meaningful consultations on their energy policy draft.

Vidya Dinker, president, Indian Social Action Forum (INSAF)

Rayyan Hassan, executive director of NGO Forum on ADB, added that they decided not to participate when they found out the consultation was going to be in a non-interactive technical platform and details about key procedural issues were left unclarified.

“Civil society groups and communities from across Central, South, and Southeast Asia do not consider the review process a transparent, inclusive, and meaningful opportunity for a consultation,” Hassan said.

Vidya Dinker from the Indian Social Action Forum (INSAF) said: “There is not even a respectable semblance of inclusivity or transparency of process in the ACEF, despite it being the big event for them to both showcase and have meaningful consultations on their energy policy draft. We do not see any reason to participate in such a charade.

Zhai Yongping, ADB’s chief of its energy sector group, maintained that the bank has held “several consultations on the draft energy policy, including with CSOs” and pointed to its feedback form in the bank’s website for further reactions to the policy.

“Consultations with our stakeholders are ongoing and more sessions are planned with CSOs. We appreciate their inputs and continued dialogue, and we welcome feedback which can be submitted through the Energy Policy Review website,” Zhai told Eco-Business.

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