IN February this year, the European Investment Bank sent shock waves to energy investors when it formally announced that EIB is withdrawing support for energy projects using fossil fuels: coal, oil and gas. This EIB stand is in line with the EU commitment to the Paris Agreement of 2015, that is, to prevent global temperature rising beyond the maximum 2.0 degrees Celsius above pre-industrial era.
If the EIB can make such a bold policy declaration, why can’t the Asian Development Bank (ADB), which has been projecting itself as champion of the renewables, do the same? If one has to do any research on the risks facing humanity under global warming, the ADB is a good place to go to. It has produced lengthy studies on the debilitating impact of climate change on Asia’s industry, agriculture, habitat, health and population. And yet, ADB’s funding for coal, oil and gas projects remains heavy across Asia.
So where is the disconnect?
One explanation is history. The ADB has been the primary partner of Asian governments in the construction of energy and other infrastructure projects in more than five decades. In the energy sector, most of the investments have gone to the construction of power plants using fossil fuels. Along with the World Bank, the ADB is also Asia’s leading financier in the construction of big dams, which a number of CSOs have been denouncing as anti-people and environmentally degrading because whole communities are uprooted and forests decimated.
Now in the construction of the power and infrastructure projects, the partners of the ADB are not only governments but also the private sector, which is usually assigned the task of designing, erecting and operating the power projects as well as in raising supplementary funds. This policy of working closely with the private sector, composed mostly of multinational corporations from the advanced economies and their corporate partners in the different Asian countries, is very much part of the neo-liberal development framework being pushed by the ADB and the International Monetary Fund (IMF) and World Bank. To grow a developing economy, neo-liberal economists want the borrowing country to open the doors to the free flow of goods and free flow of capital under the general programs of trade and investment liberalization and privatization.
The ADB and the IMF, through the International Finance Corporation (IFC), are the original promoters of privatization in power and infrastructure development in Asia. The ADB christened the privatization program in the 1970s as “co-financing.” Today, privatization, as the panacea for the economic problems facing Asia, has become the standard policy recommendation given by ADB, IMF and the World Bank to the borrowing Member Countries of Asia.
This explains then why the public or government-run power sector in some countries has been subjected to privatization on the advice and pressure of the ADB. This happened in the Philippines in 2000-2001, when the ADB assisted the Philippine government in providing the rationale, design and mechanisms for the wholesale privatization of the power sector, meaning the privatization of power generation, transmission and distribution, including the establishment of a so-called spot market for corporations engaged in the buying and selling of power. The justification advanced for the wholesale privatization of the Philippine power sector was seductively simple: cheaper electricity for the Filipino consumers. And yet today, two decades after, the Philippines has acquired the notorious title of having the most expensive electricity in Southeast Asia and one of the most expensive as well in the world.
So the dilemma for ADB is how can it persuade, if it so decides, its development partners in the power sector of Asia—investment financiers from Japan and other countries and corporate power builders and operators in the different Asian countries—to get out of coal and other fossil fuels and to go renewable instead? How to push these big investors to get out of coal or oil or gas when these investors are already raking in so much profits from their investments? As it is, the ADB partnership with its private power financiers and developers has spawned a chain of GHG-emitting power plants across Asia, with some just built in the last 10 years.
Is this the reason why per report of a CSO energy tracker for Asia, ADB refused to sign a statement in the 2020 “Finance in Common” Summit where the participating development banks made express commitments to phase out fossil fuel investments? Ironically, the energy tracker also reported that ADB has been investing actively on renewable projects. Is this part of the ADB’s two-sided policy on energy, one side renewable and another GHG emitting?
Similarly, the Asian Investment Infrastructure Bank, China’s financial arm for its grand Belt-and-Road Initiative (BRI), has been equivocating on AIIB’s commitment to green finance. In July last year, AIIB President Jin Liqun openly declared the vision of AIIB to become the “green bank” of Asia. And yet, an energy investment tracking done by the NGO Forum on ADB found that for every dollar (US$1) the AIIB has invested since 2016, the AIIB has invested more than twice on fossil fuels.
It is abundantly clear that both the ADB and AIIB cannot walk the talk on going green or going renewable. And yet, their public rhetoric indicates that the two banks are leaders of green finance and are fully committed to the goals of the Paris Agreement. To the NGO Forum on ADB, this is all part of the “green washing” exercise that the two banks have been making.
The doublespeak adopted by the ADB and AIIB has been copied by their partner governments in Asia. Openly, they all say “Yes” to the collective fight against global warming. And yet, majority have been reluctant and hesitant in submitting realistic, measurable and time-bound commitments to the Paris Agreement under their respective nationally determined contributions (NDCs).
Obviously, the ADB, AIIB, Asian governments and other financial institutions can only give their full commitment to humanity’s fight against global warming if—and only if—there is a determined pressure from the organized working people of Asia.
Dr. Rene E. Ofreneo is a Professor Emeritus of University of the Philippines.
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