Asian Development Bank (ADB), the Government of Indonesia and the Philippines have announced the launch of a new partnership at COP26 to create an Energy Transition Mechanism (ETM). The ETM Southeast Asia Partnership is the first such collaboration in the Asia Pacific region and it intends to speed up Southeast Asia’s transition to sustainable energy.

Under the terms of the agreement, ADB will collaborate with government stakeholders to pilot ETM by conducting a feasibility study focusing on the best business model for each pilot country. The agency will also ADB will assist national governments in developing enabling legislation and business conditions to help the programme achieve its governance, carbon reduction, and just transition goals. ETM will raise the financial resources needed to facilitate the retirement of five to seven coal plants in Indonesia and the Philippines during the two-to-three-year pilot phase, while enabling investment in alternative clean energy solutions in the countries.

The full scale ETM programme in Indonesia, the Philippines, and eventually Vietnam will target the retirement of 50 per cent of existing the coal fleet, with a production capacity of 30 GW, over the next 10 to 15 years. This is expected to result in a reduction of 200 million tons of carbon dioxide (CO2) emissions annually.

A pre-feasibility study for the programme has been completed with a comprehensive feasibility study currently underway to establish ETM’s financial structure, select eligible coal plants for inclusion in the pilot programme, and develop transition actions. The Ministry of Finance of Japan has committed a grant of USD25 million towards the ETM. Government officials from Denmark, the United Kingdom, and the United States, as well as key global financial institutions and philanthropies, have backed the partnership as well.