The Philippines and Indonesia may be the first countries in Asia to remove coal from their energy mix.
This comes on the back of commitments from the Asian Development Bank (ADB) to back the energy transition mechanism (ETM) for the two countries. The ETM Southeast Asia Partnership is the first of its kind in Asia and the Pacific and aims to help accelerate Southeast Asia’s clean energy transition.
ADB President Masatsugu Asakawa, Indonesian Finance Minister Sri Mulyani Indrawati, and Philippine Finance Sec. Carlos Dominguez III made the announcement during the United Nations Climate Change Conference, or the 26th Conference of the Parties (COP26) in Glasgow, Scotland after receiving endorsements from senior cabinet-level officials from Denmark, the United Kingdom, and the United States, as well as leading global financial institutions and philanthropies.
Japan was the first to pledge financial support, dedicating $25 million for the ETM’s implementation in the two Southeast Asian nations.
“ETM can usher in a transformation in the battle against climate change in Asia and the Pacific. Indonesia and the Philippines have the potential to be pioneers in the process of removing coal from our region’s energy mix, making a substantial contribution to the reduction of global greenhouse gas emissions, and shifting their economies to a low-carbon growth path,” Asakawa said in a statement.
“A clean energy transition in the Philippines will create jobs, promote national growth, and lower global emissions. ETM has the potential to accelerate the retirement of coal plants by at least 10-15 years on average,” Dominguez said for his part.
Under the partnership, ADB will work with government stakeholders to pilot ETM by jointly conducting a thorough feasibility study focusing on the optimal business model for each pilot country; bringing together concessional resources from donor governments and philanthropies, in close coordination with global climate change-focused funds; and leveraging large amounts of commercial capital to trigger a decisive shift toward decarbonization.
Energy demand in Asia is set to double by 2030, and Southeast Asia is one of the regions continuing to build new coal-fired capacity. Coal comprises at least 41.6% of the country’s energy mix as of end-2020, based on data from the Department of Energy, which last year declared a moratorium on the building of new coal power plants.
ETM is a transformative, blended-finance approach that seeks to retire existing coal-fired power plants on an accelerated schedule and replace them with clean power capacity.
The mechanism will comprise two multibillion-dollar funds: one devoted to early retirement or repurposing of coal-fired power plants on an accelerated timeline, and the other focused on new clean energy investments in generation, storage, and grid upgrades. It is envisioned that multilateral banks, private institutional investors, philanthropic contributions, and long-term investors will provide capital for ETM.
ADB will support the national governments to establish enabling policies and business conditions to improve the program’s governance, carbon reduction, and just transition goals. During the pilot phase, which would run from two to three years, ETM will raise the financial resources required to accelerate the retirement of five to seven coal plants in Indonesia and the Philippines, while facilitating investment in alternative clean energy options within these countries.
Finance Asec. Paola Alvarez, who is also attending the COP26, earlier said that the ETM facility in the Philippines is at its pre-feasibility stage. Dominguez announced back in April that the government plans to buy old coal plants in Mindanao with the intention of retiring them once the Agus-Pulangi hydropower plants run at higher capacities. Implementing the plan would reportedly need some Php330 billion for it to happen.
Photo from ADB website.