The Asian Development Bank (ADB), under its draft energy policy, has announced that it will discontinue financing any new coal-fired capacity for power and heat generation or any facilities associated with new coal generation.

ADB will not finance any coal mining, oil, and natural gas field exploration, drilling, or extraction activities, it said.

The ADB also indicated in the draft energy policy that it would support developing member countries (DMCs) to mitigate the health and environmental impact of existing coal-fired power plants and district heating systems by financing emission control technologies.

A review of the policy will be conducted in 2025 to gauge the progress in energy technologies to support DMCs and enhance their commitments towards carbon neutrality.

As part of the policy framework, ADB will continue to use a wide range of financial instruments to provide the most targeted and effective support for its DMCs. It will continue financing energy infrastructure and other interventions through financial assistance, primarily project loans, and associated technical assistance.

The policy measures range from technology-neutral policies, such as carbon trading and tax through enhancing the use of carbon pricing instruments in the region, to highly specific regulation aimed at individual technologies, such as building codes for energy efficiency or feed-in tariff for the accelerated deployment of on-shore wind power.

ADB believes that policy-based lending can play an important role in supporting the energy sector reforms, commercialization, and enactment of new energy policies necessitated by more stringent climate commitments. The bank has financed several projects to that end.

Last year, ADB approved a $231 million loan to develop the Lower Kopili Hydroelectric Power facility in Assam, India. The bank earlier signed an agreement to invest $15 million in Avaada Energy Private Limited to help expand the company’s solar generation capacity in India. ADB also invested $20 million in the first climate bond issuance of AC Energy, a wholly-owned subsidiary of Ayala Corporation in the Philippines.

In a recent financing program, the bank funded Bangladesh’s 35 MW Spectra Solar Park with $15 million.

ADB has also vowed to improve efficiency in supporting development programs that involve small and widely dispersed subprojects common in rural electrification, clean cooking, island energy supply, and demand-side energy efficiency programs.

In addition to technical assistance, ADB supports DMCs in cross-border and subregional electricity interconnection infrastructure development. To help DMC’s meet their climate goals, ADB will prioritize projects that pursue the large-scale deployment of renewable energy resources and the integration of variable renewable electricity at scale to wide-area grids created electricity interconnection. ADB will refrain from supporting dedicated cross-border transmission lines linked to coal-fired power plants.

Communities affected by coal-burning and civil society organizations worldwide that have been urging the ADB to stop funding coal projects have welcomed the decision.

Appreciating ADB for acknowledging the alleged suffering of many communities in the Philippines and across Asia due to the coal-fired power plants, Gerry Arances from the Center for Energy, Ecology, and Development, Philippines, stated, “We are happy that ADB finally decided to abandon coal once and for all in this draft policy.”

Hasan Mehedi from Coastal Livelihood and Environmental Action Network, Bangladesh, said, “This is sweet victory after a long fight. We also remind ourselves that we have miles to go! ADB still has to urgently phase out fossil gas, waste-to-energy, and large hydro projects to achieve the Paris Goal of staying below 1.5 degrees.”

“ADB at 54 is finally catching up, and we welcome that. It is a battle hard fought by communities long-suffering pollution and destruction by their projects and policies in India and across Asia, and today they can finally look forward to reparations. We reaffirm our struggles and commitment to hold ADB accountable,” added Vidya Dinker of Indian Social Action Forum and Growthwatch, India.

However, bank watchers see this policy as a reason to raise new risks for the gas industry. Rayyan Hassan, executive director of NGO Forum on ADB, explained, “The new policy announcing an end to coal finance is much-delayed justice for all the affected communities across Asia impacted by ADB Coal (Phulbari coal mine Bangladesh, Tata Mundra coal project India, Visayas Baseload and Masinloc coal project the Philippines, Jamshoro coal project Pakistan).”

Last year, the International Finance Corporation (IFC), the financial arm of the World Bank Group, advised its clients in the financial sector to increase their climate-related lending, reducing their exposure to coal to zero or close to zero by 2030. IFC already excludes coal-related investments from its loans.

In March last year, U.S.-based JP Morgan Chase announced that it had committed $50 billion (~₹3.59 trillion) towards green initiatives as part of a larger $200 billion (~₹14.37 trillion) commitment towards the United Nations Sustainable Development Goals.

Last month, IFC had proposed a $50 million loan facility to Italy-based Enel Green Power to fund its solar project in Rajasthan’s Bikaner.

An increasing number of financial institutions and insurance companies are moving away from financing fossil fuels.

Deutsche Bank is likely to end its global business activities in coal mining by 2025 as a move to facilitate the transformation to a sustainable economy. The European Investment Bank had pledged in 2019 that it would end financing fossil fuel-based projects by the end of 2021. Japan-based Sumitomo Mitsui Financial Group Inc had also decided not to provide support to new coal-fired power projects from May 1, 2020.