Faced with mounting scrutiny over a ‘coal-to-clean’ project in Indonesia that it is refinancing, the Asian Development Bank has said that affected people and communities with concerns should first seek out a grievance redress mechanism that the plant operator has in place, instead of turning straight to its accountability mechanism as a last resort.
In an email response to Eco-Business to address recent criticism of gaps in its refinancing of the Cirebon 1 coal plant decommissioning project, the Manila-based development bank pointed to how Cirebon Electric Power, which operates the Cirebon 1 plant, already has in place a mechanism that affected people can turn to. It emphasised that the Energy Transition Mechanism (ETM) pilot that it is running will “build on that to receive and facilitate resolutions” of the concerns of any affected person.
The ADB was responding to a specific question posed by Fair Finance Asia (FFA), a regional network of over 90 allied civil society groups engaged in sustainable finance advocacy, and NGO Forum on ADB (the Forum), in a jointly published report that highlighted concerns about ADB’s ETM deal. The Forum is a regional network of over 250 allied civil society organisations that advocates on projects and policies related to international financial institutions.
The report had asked if communities living between the Cipaluh and Kanci rivers, where the Cirebon 1 plant is located, and who have faced impacts on their livelihoods and health, would be able to file grievances under the longstanding ADB Accountability Mechanism, created to address concerns if an ADB project caused harm to or adversely affected people and the environment.
In its replies, the ADB distances itself from allegations of local stakeholders of gross negligence, environmental disruption and human rights violations that have arisen since the Cirebon 1 plant was constructed in 2008. It states that the compliance reviews under its Accountability Mechanism “cover only ADB-assisted projects”, and that “eligibility will be limited to the project area of influence and will exclude impacts that might have occurred without the project or independently of the project”.
On the Cirebon 1 plant, it said: “People will be encouraged to first address their problems with the project-level GRM, which will be a prompt way for their concerns to be resolved.”
Operated by PT Cirebon Electric Power, the Cirebon 1 coal power project is a 204-hectare facility that sits along Mundu Bay and overlooks the Java Sea in the port city of Cirebon, some 220 kilometres from Jakarta. Earlier this month, Eco-Business had reported on the gaps of ADB’s new landmark ETM deal, specifically, its “coal-to-clean” agreement in Indonesia, which involves terminating the operations of Cirebon 1 by 2037 at the latest, by expending US$250-US$300 million in loans to finance the facility.
In the report, FFA and the Forum had flagged uncertainties on whether the new policies will produce meaningful change for communities already impacted by widespread negative consequences wrought by the coal plant, such as air pollution from fly ash and heavy metals contaminating bodies of water, given how they might be “flawed by design”.
In its replies, ADB did not state if any form of reparations or accountability has been offered to affected people at the project level. Communities who have had concerns about the devastating impacts of the Cirebon 1 project had previously sought remedies through class action and protests, given the limited channels available.
ADB also did not directly answer questions on whether it is taking steps to address the concern that not enough assurance is given and that the ETM does not benefit fossil fuel companies and their investors.
It said, however, that ETM is a mechanism that uses low-cost capital from various sources to incentivise the early retirement or repurposing of coal-fired power plants, and to accelerate investment in clean energy, grid and storage. “Specific to accelerating the retirement of coal-fired power plants, each ETM transaction will be structured in a way that reflects market conditions and is agreeable to all parties.”
It emphasised that it has taken steps to engage with civil societies, communities, and non-governmental organisations for consultations and the assessment of its policies, and that it has held more than 10 consultations with “various groups” over the past two years. It did not mention if this included engagement with anyone from the Cirebon 1 communities.
“This engagement will continue to be a key priority as ADB works to support countries reaching their energy transition goals in ways that benefit people, communities, and global carbon reduction goals,” it said.
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If this first ETM transaction is proven to be successful, it could provide a guide for how to accelerate the retirement of other fossil-based power plants, to the benefit of climate and communities.
Asian Development Bank
In addressing doubts over how the potential decommissioning of the Indonesia Cirebon 1 plant is followed by plans for a new Cirebon 2 coal plant to be built, ADB sought to clarify that the Cirebon 2 project is a separate one from Cirebon 1, “with a separate ownership structure”, even as it is aware of the looming rollout of the new power plant.
“The focus of the Cirebon-1 transaction is to demonstrate an approach to accelerating the retirement of coal-fired power plants in a just and affordable manner. If this first ETM transaction is proven to be successful, it could provide a guide for how to accelerate the retirement of other fossil-based power plants, to the benefit of climate and communities,” it said. “If ETM does not engage and support early retirement, the existing plants will continue to operate on a business-as-usual basis.”
A check by Eco-Business shows that the Cirebon 2 plant is owned by Cirebon Electric Power, the same parent company as Cirebon 1. However, it is developed by PT Cirebon Energi Prasarana (CEPR), a special-purpose company created under a joint venture between the Tokyo Electric Power Company (TEPCO) and Chubu Electric Power Company, along with four consortium companies owned by Cirebon Electric Power.
Civil society stakeholders such as FFA and the Forum have previously pointed out that the need to navigate the economic interests of powerful corporations in Indonesia is what complicates its coal phase-out plan. They also highlighted issues they had with ADB’s ETM mechanism as it does not explicitly assure that its environmental and social safeguards standards will be put in place for the Cirebon 1 communities.
