China-led AIIB plans to limit investment in coal power

In a bid to live up to its environmentally friendly values, the Asian Infrastructure Investment Bank (AIIB) is planning to adopt strict limits to investment in coal power.

Launched by China as a “lean, clean and green” lender to invest in infrastructure projects in Asia, the AIIB opened for business a year ago with 57 member countries and US$100 billion in capital.

Its draft energy strategy, released on Tuesday, puts emphasis on renewable energy and raising energy efficiency, likely disappointing coal producers and countries that were hoping the Beijing-based bank would adopt a looser policy towards coal power investment than the World Bank.

The proposed strategy, which will be approved after a final consultation round in the bank’s annual meeting in June, said the AIIB would focus on “supporting and accelerating its members’ respective transitions toward a low-carbon energy mix”.

“Carbon efficient oil and coal-fired power plants would be considered if they replace existing less efficient capacity or are essential to the reliability and integrity of the system, or if no viable or affordable alternative exists in specific cases, particularly in low income countries,” read the paper (pdf) which also ruled out investment in nuclear power projects.

Following pressure from environmental groups and countries including the United States and United Kingdom, multilateral development banks have in recent years moved to limit their funding of cheap but highly-polluting coal-fired power plants.
The Washington-based World Bank announced in 2013 that it will stop financing coal plants except in rare cases where no feasible alternatives are available while the Japanese-led Asian Development Bank now says it only supports coal projects that use high-efficiency and low-emissions technologies.

Joachim von Amsberg, AIIB vice-president of strategy and policy, told The Times in an interview on Monday that the bank was determined to be seen as a modern, environmentally-friendly lender.

“There’s a strong consensus that AIIB has to be a green bank and the portfolio has to show that it’s a green bank and if the portfolio is full of coal projects you won’t look like a green bank,” he said but added that there was “live discussion among member countries” about the issue.

Australia, a major coal producer and an AIIB founding member, has reportedly been lobbying for the bank to acknowledge the importance of the fossil fuel in its energy strategy. India and Indonesia have previously said they hope the AIIB will finance coal projects in their countries.

The AIIB’s energy strategy comes as China is increasingly taking the lead in the fight against global warming in the wake of Donald Trump’s election as the new US president. Trump has both called climate change a hoax invented by the Chinese and vowed to withdraw his country from the 2015 Paris climate change treaty.

Von Amsberg said in his interview with The Times that “we have to implement Paris [the climate change agreement] if we want to be relevant in the world. Yet there’s a tension with the tremendous need for expanding electricity supply in member countries.”

Estimating that Asia’s energy investment would amount to US$18 trillion by 2040, the AIIB’s draft strategy said countries in the region faced “daunting challenges” to meet their energy needs to sustain economic growth while moving towards a less carbon-intensive energy mix.

The Chinese-led development bank plans to invest US$2.5 billion this year, after lending US$1.73 billion last year to projects that included a gas-fired power plant in Myanmar, a power grid upgrade in Bangladesh, and a hydropower extension project in Pakistan.

The bank’s website currently lists several proposed projects related to energy, including two projects in India aimed at improving energy supply and efficiency, and a solar power plant project in Kazakhstan.

Souce: gbtimes

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