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A new energy strategy to drive the Asian shift to energy

The Asian Development Bank (ADB), through an extensive energy policy, ensuring the natural, social, economical, and sustainable climate is committed to helping its developing countries (DMCs) provide clean, green, efficient, sufficient, and affordable energy to ensure inclusive growth.

There are three foundations behind the new energy strategy, adopted in June 2009:

  • To promote sustainability of electricity and clean energy;
  • To maximize access for all to energy;
  • To promote reforms, capacity building, and governance of energy sectors.

From 2009 to 2019, it was crucial to funding the energy market for $42.5 billion in every DMC. This allowed them to develop much-needed fundamental energy infrastructure, allowing them to access affordable energy universally, improve energy protection, and deliver reliability. In 2009, investment in renewable and power efficiency schemes was also led by the strategy, encouraging the move to a clean green economy with low carbon emissions.

But considering the structural developments in the energy market, the continuing global evolution of energy, and increasing questions about climate change, ADB is now adapting its energy policies to a new format, which the Board of Directors expects to consider in the fourth quarter of 2021. Chief Yongping Zhai of the ADB Energy Sector Group discusses the reasoning and mechanism for the policy updates.

ADP updating its energy policy?

Since ADB approved its current strategy over a decade ago, several fundamental reforms have taken place. The Paris Agreement, which brought all nations together to fight against climate change with increased aid to the developed world, was implemented most notably at COP 21 in 2015.

This century’s overall spike at global temperatures just less than 2° Celsius over pre-industrial levels and attempts to reduce this increase by 1, 5° C is the core target of the Paris Agreement. The Paris Convention calls for all countries to make their best efforts and continuously enhance them by national contributions (NDCs).

In 2009-19, a complete assessment of the existing energy policy and its execution was completed by ADB’s Independent Evaluation Department. The assessment concluded that while 2009 energy policy was appropriate throughout the time, it no longer corresponds sufficiently with the global agreement on climate change, continuing global energy-sector transition, recent modifications to DMC energy policies or ADB operational goals under Strategy 2030, and ADB management decided that the policy should remain relevant.

The technological growth in the last decade, where the higher power costs of renewable energy have dropped substantially, has also progressed significantly. Photovoltaics costs decreased by 82% between 2010 and 2019, according to the International Renewable Energetics Agency, inshore winds of 40% and onshore winds of 29%. In certain countries, photovoltaics and wind become more efficient while new coal-fired power stations are more costly to install.

Emerging technology like energy efficiency, smart grids, hydrogen, carbon capture and storage, and the Internet are being developed to promote the inclusion of clean energy in the infrastructure and energy networks. The market side of energy efficiency equipment for end-use products has also improved remarkably.

All of this suggests we must evaluate the energy policies currently in force by taking into account these trends and formulate new strategic guidelines for addressing the needs of Asian and Pacific developing countries.

How does the current energy agenda work into the long-term plan of ADB?

In response to changes in the needs of the region, ADB has implemented a new long-term approach. The Strategy 2030 aims to ensure that Asia and the Pacific are stable, equitable, resilient, and sustainable. Innovative, renewable, and cross-sectoral initiatives will endorse seven organizational targets. ADB will promote the use of new technology to “develop better” the country.

The Strategy identified seven priorities: tackling poverty remaining and reducing inequalities. Speed up gender equality progress; tackle climate change, build climate and disaster resilience, and enhance environmental sustainability; make the city more livable; foment rural development and food security; strengthen governance and institutional capacity, and foster the region are the main purposeful targets to achieve.

What will be the new policy’s stance on fossil fuels and coal in particular?

Coal has historically played a key role in providing affordable energy to develop its economies in many Asian countries. Almost 60% of Asian electricity was provided by coal in 2018. The average age of Coal-fired power plants in Asia is around 12 years and is sometimes more than 30 years. Soon, a sustainable power blend would be required for a growing proportion of renewable energy.

What is the status of ADB concerning gas?

Natural gas emissions are significantly smaller than coal gas emissions. Gas will help balance green energy intermittently and improve access to clean cooking and heating.

ADB funded natural gas programs to make renewable cooking and heating electricity accessible and to replace coal power with more reliable combined-cycle gas-fired technology with less pollution.

The long-term lock-in consequences and the chance of generating stretched reserves must be avoided by the gas projects. To that end, ADB will ensure that gas developments comply with the NDCs in the country and the energy transformation strategy for the long term.

The ventures must therefore be aligned to the goals of achieving net carbon neutrality by the middle of the century. The technology for carbon capture, usage, and storage (CCUS) can also be used to cut gas energy projects’ emissions.

 How did ADB fund climate finance?

An aim under the 2030 ADB strategy is to address climate change, develop climate and catastrophe resilience and increase environmental sustainability. Between the years of 2019 and 2030, ADB has undertaken to provide $80 billion in total climate funding and ensure that at least 75% of its programs are numbered, by 2030.

In 2020 ADB recorded $5.3 billion in climate financing, notwithstanding the COVID-19 uncertainties. It is anticipated that $4.5 billion (86 percent) would mitigate and that it will make up $751 million (14 percent) in adaptation. ADB contributed $4.5 billion in its capital and mobilized $758 million from foreign resources, such as ADB donor fiduciary funds, MCF funding, including the Global Environment Foundation, and bilateral funding, amongst other things. ADB contributed $1.9 billion to carbon change in the oil industry and $80 million to climate adaptation in 2020.

What are ADB’s guiding principles as it updates the policy?

The new policy will be based on five guiding principles: securing energy for a prosperous and inclusive Asia and the Pacific; building a sustainable and resilient energy future; engaging with institutions and framing policy reforms; promoting regional cooperation to enhance energy security; and providing integrated solutions and cross-sectoral operations to maximize development impact. A series of stakeholder consultations are being held as part of the process. As of the end of April 2021, ADB had held 19 consultations with various stakeholder groups. These include ADB members, development partners, international organizations, energy policy and technology experts, civil society organizations, and the public. The objective is to understand the energy needs of our DMCs and assess policy options. Stakeholder engagement is also a key for reflecting the ongoing transformation of global energy systems.

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