The energy landscape has across the world changed radically over the last decade. The Sustainable Development Goals, the Paris Agreement on climate change, and Strategy 2030 of the Asian Development Bank (ADB) have set ambitious targets for providing energy access to all. However, the growth in the energy sector has not been uniform across and within countries, and the expansion of energy systems came at the cost of harmful climatic consequences. While developing countries in Asia and the Pacific have made significant advances in economic development and energy modernisation, there is still room to do more on these agendas.
Energy demand is projected to almost double in the Asia and Pacific region by 2030. ADB’s 2009 Energy Policy helped its developing member countries provide reliable, adequate and affordable energy. To align its energy operations with Strategy 2030, ADB reviewed its 2009 policy, recognising the changing contexts and increasing needs of ADB’s developing members while mindful of the impacts of increasing energy use on the climate and environment. Recently, in October 2021, ADB approved a new Energy Policy that aims to support universal access to reliable and affordable energy services while promoting the low-carbon transition in Asia and the Pacific. Southeast Asia Infrastructure takes a look at the new policy…
Energy sector issues and need for intervention
Progress on energy access has been rapid across Asia and the Pacific, reaching an overall electrification rate of 96 per cent in 2019, recording an increase of 16 per cent since 2010. However, the electrification rates of individual developing member countries vary widely. Currently, about 940 million people in the region experience frequent interruptions, and about 150 million people still have no access to electricity. In addition to energy access, continuing economic growth and urbanisation will require the development of affordable and reliable energy systems.
Coal and other fossil fuels have played a large part in providing access to energy in Asia and the Pacific. But their use harms the environment and accelerates climate change. In 2019, about 50 per cent of global CO2 emissions from fossil fuel combustion was from Asia and the Pacific. While developing member countries did not contribute the majority of historic emissions that have led to the current climate crisis, their emissions are now significant. Consequently, the energy sector of Asia and the Pacific is a critical area for a direct and effective response to climate change. Furthermore, accommodating greater flexibility and new technologies will require governance, market, and regulatory reforms in many developing member countries.
The transition to cleaner energy is now accelerating. Distributed systems are reaching remote places. The region is experiencing increased deployment of renewable generation technologies such as solar photovoltaic systems and wind farms. At the same time, the traditional divide between the utility-led supply side and the consumer-led demand side has begun to blur, and national energy policies and regulatory environments are becoming more complex. Overall, these advances have enabled the provision of reliable and affordable energy for all while still meeting global climate targets.
In addition, as Asia and Pacific recover from Covid-19, improving the resilience and security of the energy sector has been become a priority. While Covid-19 has reduced the cost of imported fossil fuels because of lower demand, any future crisis could limit the countries’ access to fossil fuels or drive up fossil fuel prices. Therefore, a reduction in the use of imported fuel is important.
Details of the 2021 Energy Policy
In view of the transition to an increasingly multifaceted energy sector, ADB has formulated a new forward-looking energy policy. The objectives of the proposed policy are to help developing member countries accelerate the development of sustainable and resilient energy systems that provide reliable and affordable access for all and support the low-carbon transition in Asia and the Pacific. The policy seeks to ensure that developing member countries can adopt modern clean energy technologies, innovative financial instruments, and new business models. The proposed policy tries to prioritise ADB’s limited resources to tackle the most demanding energy challenges.
To achieve the policy objectives, ADB’s energy sector operations will be based on the following policy principles:
Securing energy for a prosperous and inclusive Asia and the Pacific: ADB will support efforts to bring affordable, reliable, sustainable, and modern energy to all, so as to eradicate extreme poverty and reduce social inequalities. ADB will be supporting electrification programmes; promoting cleaner cooking, heating and cooling; improving energy efficiency across supply and consumption chains; and promoting social inclusion, gender equality and partnerships.
Building a sustainable and resilient energy future: ADB will help its developing member countries increase energy efficiency, deploy more renewable and low-carbon energy, and integrate climate and disaster resilience into energy sector operations. The policy formalises 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 recognises developing member countries’ request for access to affordable, new technologies.
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 developing member countries to update and strengthen their Nationally Determined Contributions and long-term strategies for decarbonisation under the Paris Agreement.
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.
Integrated cross-sector operations to maximise development impact: ADB will continue to combine finance, knowledge, partnerships and its country-focused approach to deliver integrated solutions with comprehensive development impacts.
Consistent with ADB’s Strategy 2030, the policy adopts a common but differentiated approach in line with each developing member country’s level of economic development, resource endowment, respective capabilities, and nationally determined low-carbon transition pathway.
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 prioritises ADB’s resources to leverage commercial financing where possible to tackle the most difficult energy challenges. ADB has raised its ambition to deliver $100 billion in cumulative climate financing from its own resources between 2019 and 2030. This will support climate adaptation and mitigation in all sectors including energy. With the new policy, ADB is providing a clear path for its contribution to an environmentally sustainable energy future.