A new financing tool that allows Asian governments to force coal plants into early retirement is set to launch its first project in Indonesia “soon” following months of negotiations, the Asia Development Bank’s (ADB) climate envoy said on Friday.
The ADB’s “energy transition mechanism” (ETM) makes use of private and public capital to refinance investments in coal-fired power, allowing power purchase agreements to be shortened and plants to be shut as much as a decade earlier than planned.
ADB’s senior climate advisor Warren Evans said negotiations on the Cirebon One project in Indonesia were now on schedule, and talks were also underway to launch similar projects in the Philippines and Vietnam.
“This is the first that has ever been done, so there are a lot of challenges and uncertainties to be resolved, but the negotiations are proceeding and we expect this to go forward soon,” he told Reuters.
“If we are successful across the countries we are having discussions with right now – if we are successful in reducing the lives of 50% of coal-fired power plants – this will be the largest decarbonisation initiative the world has seen.”
The mobilisation of climate finance to help developing countries adapt to climate change will be a major theme at Cop28 climate talks in Dubai this year.
Developed nations have not yet fulfilled a pledge to make $100 billion in annual funding available by 2020, but even when they do, it would not be enough, Evans said.
ADB recently launched its Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP), a donor-backed guarantee facility allowing it to free up billions of dollars of capital for loans to climate projects in the region.
IF-CAP, launched in May, was criticised by charity group Oxfam, which said it would pile more debt on Asia’s most vulnerable communities.
Evans said he agreed that more concessional and grant finance would also be required to help poor communities adapt, but “action needs to be taken now”.
“If somebody comes up with a different model, where there is funding available, we’ll be all for it,” he said.