Philippine Civil Society Position On The Energy Legacy And Energy Policy Update Of The Asian Development Bank

We, the undersigned civil society and faith-based organizations, advocates, and communities in the Philippines, issue this statement as a challenge to the Asian Development Bank (ADB) to adopt ambitious policies that hold itself accountable for its dirty energy legacy. ADB must commit to the promotion of clean, just, and fossil-free power for all, and drive its member countries like the Philippines towards a sustainably powered future aligned to the 1.5°C ambition of the Paris Agreement.

We expect ADB to finally publish the draft of its newest energy policy soon, timed around its Annual Meeting of the Board of Governors on May 3-5. This comes after a long process of evaluation and deliberation which we from civic movements in the Philippines actively engaged in. The update will determine whether ADB will leave the door open for financing for coal and other fossil fuel projects, or finally turn its back from such. With this, we challenge ADB to set the standard for climate action before it is too late, and rectify the enormous faults in its past financing decisions that put the collective future of Filipinos and the environment in peril.

We call attention to the fact that ADB has not truly walked its “clean energy” talk. Its professed ambition to become the climate leader among development finance institutions is contradicted by its own carbon-intensive energy portfolio. Under its 2009 Energy Policy, ADB had been financing high-carbon development projects and strategies. A review of its lending portfolio in the last ten years revealed that the energy sector is its top recipient of committed resources, with approximately USD 68,114 million, and third in terms of number of funded projects. While only 19 percent of its list of energy generation projects are fossil fuels, these actually comprise 50% of the total installed capacity that the Bank helped fund.

Thus, without a strict criteria for clean energy and a firm exclusion for financing of coal projects, the Bank’s decade-old policy has enabled ADB to make dirty commitments, providing a crutch for the next generation of advanced coal plants and undermining the Paris 1.5°C goals. ADB’s clean energy agenda, then, is no more than a grave oxymoron.

In the Philippines, ADB played a major role in turning the energy sector into an arena played by the proponents of dirty energy sources. Through its financial services, the Bank helped give rise to some of the oldest and dirtiest coal-fired power plants in the country that have since negatively affected the health of residents in host and nearby communities, as well as their livelihoods that depend on the well-being of the environment, such as fishing and agriculture. These include coal facilities in Pagbilao in Quezon, Masinloc in Zambales, and Naga in Cebu. In fact, an analysis of coal ash samples from the 200 MW coal plant in Naga, which was funded by ADB and began operating in 2011, found amounts of arsenic, cadmium and mercury that exceed limits deemed allowable by global standards, thereby explaining the health concerns experienced by communities in the area. By funding these coal projects, ADB is also responsible for coal-dependent Philippines’ status as having among the highest costs of electricity in the world – being number one in the Southeast Asian region and top 2 in Asia.

Beyond its financing accountability, ADB also set the stage for the privatized, largely anti-consumer, and highly carbon-intensive power sector we have today. In the early 2000s, ADB supported the Philippines’ restructuring and privatization of the energy sector under the Electric Power Industry Reform Act (EPIRA) through a bank-approved loan to finance the Electricity Market and Transmission Development Project. 20 years since its implementation, EPIRA has not been able to secure least-cost electricity for consumers, nor promote healthy competition in the power sector that it promised would lead to efficient electricity supply and services. Like ADB’s 2009 Energy Policy, EPIRA is in dire need of serious review and eventual overhaul.

ADB’s Energy Policy is severely outdated in the context of the global energy transformation and the climate emergency, the deadliest manifestations of which are already being experienced in our country. Year by year, the Philippines makes it to global headlines for the thousands of lives and billions of assets lost to extreme weather events and other impacts. It is in solidarity with climate-vulnerable nations like ours that we urge the Bank to decarbonize now in order to become the financial leader that the energy transition in developing Asia needs today.

We thus urge ADB to update its energy policy with the view of championing the end of coal in the Philippines and advancement of clean, affordable, and climate-resilient renewable energy systems globally. This demand we detail in the following:

ADB must implement a strict alignment with the 1.5°C Paris goal. This is drastically different from merely setting a clean or climate agenda, which neither displaces funding for fossil fuels nor helps us phase-out coal, the dirtiest fossil fuel. For many of ADB’s climate-vulnerable members like the Philippines, a 0.5°C difference can spell the difference between millions of people falling into poverty and suffering from climate impacts. To keep any remaining hope of limiting global temperature rise to the 1.5°C limit, the Bank has to ensure that it will only support projects compliant to the P1 Scenario of the Intergovernmental Panel on Climate Change Special Report, not adhering to false solutions and keeping in mind the common but differentiated and historical responsibilities of each country in which it provides financial services. In line with this, country partnership strategies (CPS) should also be updated, and projects should be screened in accordance with updated CPS and national decarbonization pathways.
ADB must engage in the decarbonization of the energy supply by ending fossil fuel finance, beginning with fully moving away from coal in the Philippines and the rest of the world. The Bank must declare a full commitment to stop new investments and to divest from all fossil fuel power generation projects, related infrastructures, and projects. ADB must also stop supporting projects that are in pre-construction or construction phase by withdrawing their commitment to disburse pending financial resources.
ADB’s decarbonization must include an end to financing fossil gas projects, which account for the biggest share in all of the generation projects of ADB in the past decade. At 40%, fossil gas projects account for a much larger share of ADB’s finance portfolio than even coal, which is at 10%. This is an alarming number, and highlights the importance of ending fossil gas financing in the new energy policy. It is because of the lending for fossil gas of institutions like ADB that governments like the Philippines’ are emboldened to shape their energy policies skewed in favor of this dirty energy source. Today, our country has an energy plan that aims to add 18 GW of fossil gas by 2040 under a Clean Energy Scenario, even without a clear fossil gas phase out plan and energy transition plan. Worse, our Department of Energy has a dream of making the country the SEA LNG hub while most of the proposed LNG terminals so far are surrounding the Verde Island Passage in Batangas, which is the center of marine shore fish biodiversity in the world. This said, ADB must also cease providing any and all indirect support to fossil gas expansion, including financing for research and development of policy infrastructures on fossil gas.
Part and parcel of decarbonizing the energy supply is prioritizing just transition. In the middle of a pandemic where billions of workers globally are already affected, and facing a high risk of falling into poverty, ADB should provide technical assistance to its members to help them strengthen institutional capacities to formulate just transition policies and strategies. It should create its own energy transition package, similar to the European Investment Bank, which will prioritize funding for reconversion of abandoned coal sites, retraining for displaced workers, and other initiatives that will give rise to new employment opportunities.
ADB must promote community microgrids by empowering communities to purchase and manage their own distributed renewable energy system, which makes these systems more affordable. By doing so, this could maximize energy access and be increasingly cost-competitive and bankable.
ADB must support innovations and enable infrastructures by funding innovative renewable energy technologies. It must prioritize upgrading existing grids into smart grids with increased capacity, in order to maximize the integration of more variable renewable energy. This will help the Philippines’ massive Renewable Energy potential to be finally integrated into the grid. The Bank should also support other energy infrastructures such as alternative renewable energy technologies for district heating and cooling networks.
ADB must cease its support to the advancement of other destructive energy systems, including waste-to-energy. We urge the Bank to halt its provision of technical assistance in Asia due to its proven health, social, environmental, and climate risks. Lest it does so, ADB diverts resources that could instead be allocated to efforts that would truly aid in addressing the worsening ecological and climate challenges of our time, such as the promotion of a circular economy and other mitigation and adaptation measures.
In advancing renewable energy systems, the Bank must be guided by stringent environmental policies. Special attention to this is required in large-scale hydropower and geothermal projects, proponents of which, globally, have already built for themselves a history of subjecting communities to environmental, social, health, and economic threats. The development of clean and affordable energy need not be synonymous to the advance of ecological injustice, and ADB in its investment decisions is in a position to keep it from being so. ADB must exercise extraordinary diligence in determining whether environmental impact assessment processes have been religiously complied with, especially in identifying harms, alternatives and social acceptability.

Unless all these demands are met and vividly reflected in the ADB’s policies, member countries and their communities will continue to suffer from climate impacts, remain poor, and find it difficult to recover from the onslaught of the Covid-19 pandemic – thus, defeating the very purpose for the Bank’s existence as a development financing institution. For it to create a meaningful impact in the bid to secure clean and affordable energy for all, ADB must also stop fostering the corporate capture of essential services and instead ensure that the welfare of people is always prioritized over profit, in and beyond the energy sector.

ADB is about to make a critical decision that will define its role in global energy transformation and addressing the climate emergency. We urge it to choose to finally end financing for coal and other dirty energy projects, and set the standard among all other development banks in climate and sustainable finance leadership.

SIGNED,