New ADB energy policy to support energy access and low-carbon transition

The Asian Development Bank (ADB) has approved a new energy policy to support universal access to reliable and affordable energy services, while promoting the low-carbon transition in Asia and the Pacific.

"Energy is central to inclusive socioeconomic development, but the expansion of energy systems has come at the cost of harmful impacts on our climate and environment," said ADB President Masatsugu Asakawa. "ADB's new energy policy will support our developing member countries (DMCs) in the critical and urgent task of expanding access to reliable, affordable, and clean energy."

"This new policy locks in our strong commitment that ADB will not fund new coal power production," he said. "Together with our elevated ambition to deliver $100 billion in climate financing to our DMCs in 2019–2030, it provides a clear path for ADB's contribution to an environmentally sustainable energy future," says the Asian Development Bank.

Progress on access to energy has been rapid across developing Asia and the Pacific. But roughly 350 million people in the region do not have an adequate supply and about 150 million people still have no access to electricity.

Continuing economic growth and urbanization will require developing affordable and reliable energy systems with substantial additional electricity-generating capacity. To respond, International Energy Agency scenarios suggest the region's installed electricity-generating capacity could increase by about 7% per annum, from 3,386 gigawatts in 2019 to 6,113 gigawatts by 2030. Investments in renewable energy generation in the region could reach $1.3 trillion per annum by 2030, doubling the amount from the previous decade.

ADB's 2021 Energy Policy will guide ADB support to the region as it responds to these changes both in terms of energy access and security, and climate change and environmental sustainability. The policy is based on five principles:

1. Securing Energy for a Prosperous and Inclusive Asia and the Pacific. ADB will help its DMCs secure energy for development by supporting electrification programs; promoting cleaner cooking, heating, and cooling; improving energy efficiency across supply and consumption chains; and promoting social inclusion, gender equality, and partnerships.

2. Building a Sustainable and Resilient Energy Future. ADB will help its DMCs increase energy efficiency, deploy more renewable and low-carbon energy, and integrate climate and disaster resilience into energy sector operations. The policy formalizes ADB's current practice of not financing new coal-fired power and heating plants. ADB will support a planned phase-out of coal in the region, and will commit to a just transition that promotes sustainable, inclusive, and resilient livelihoods for all in affected communities. The policy also recognizes DMCs' request for access to affordable, new technologies.

3. Supporting Institutions, Private Sector Participation, and Good Governance. ADB will support the institutional development, financial sustainability, and good governance of energy sector institutions and companies, as well as private sector participation. ADB will also help create the policy frameworks needed to manage the energy transition, including helping its DMCs to update and strengthen their nationally determined contributions and long-term strategies for decarbonization under the Paris Agreement.

4. Promoting Regional Cooperation and Integration. ADB will promote regional energy cooperation and the integration of energy systems to strengthen energy security and increase cross-border access to cleaner energy sources.

5. Integrated Cross-Sector Operations to Maximize Development Impact. ADB will continue to combine finance, knowledge, partnerships, and its country-focused approach to deliver integrated solutions with comprehensive and magnified development impacts.

Consistent with ADB's Strategy 2030, the policy adopts a common but differentiated approach in line with each DMC's level of economic development, resource endowment, respective capabilities, and nationally determined low-carbon transition pathway. ADB will prioritize essential energy access in the poorest and most vulnerable countries through greater use of low-carbon and renewable energy sources and rehabilitate infrastructure to enhance energy security and climate resilience.

ADB has made a significant contribution to the region's energy sector with total financing of over $42 billion from 2009 to 2020 but the region's energy financing needs far exceed the resources of any single actor. The new policy prioritizes ADB's resources to leverage commercial financing where possible to tackle the most difficult energy challenges.

ADB is committed to aligning all its operations with the goals of the Paris Agreement and this month raised its ambition to deliver $100 billion in cumulative climate financing from its own resources from 2019–2030. This will support climate adaptation and mitigation in all sectors including energy. At least 75% of ADB's operations by number of projects will feature climate adaptation and mitigation initiatives by 2030.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.