AIIB criticized for backing gas as transition fuel

Environmentalists hailed the Beijing-based Asian Infrastructure Investment Bank (AIIB) for shunning coal-related projects but lamented the China-led lender’s promotion of natural gas as a “transition fuel” along efforts to mitigate climate change.

The AIIB’s updated Energy Sector Strategy (ESS), which the bank’s board had approved on Nov. 22 and was unveiled on Dec. 12, came after a series of consultations. However, it was heavily criticized “for glaring shortcomings in transparency and conduciveness,” according to Quezon City-based Center for Energy, Ecology and Development (CEED).

In a statement, CEED said the resulting update had shown the AIIB’s failure to sufficiently take into account the energy development needs of its stakeholders in Asia.

“By promoting gas as a transition fuel, the ESS proves itself blind to realities faced by households and businesses across the region of increasingly unaffordable energy from gas, as exacerbated” by Russia’s invasion of Ukraine,” the think tank said.

The group cited the experience of Bangladesh where the gas industry was also backed by AIIB.
CEED said consumers in Bangladesh were now paying the price of having an electricity generation mix of 44.53 percent gas, with rising power rates as well as frequent and prolonged outages.

“In aggrandizing the role of gas in the global energy transition we need today, AIIB emboldens companies, governments, and entire regions ambitiously pursuing large new capacities for fossil gas, like Southeast Asia, to tie their populations to volatile power rates and energy insecurity,” CEED said.

Further, the group noted that AIIB’s updated ESS provided no commitment to help limit global temperature rise to no more than a threshold of 1.5 degrees Celsius above preindustrial levels.

‘Long overdue’

“We welcome the AIIB’s affirmation that it “will not finance thermal coal mining, coal-fired power and heating plants, or projects that are functionally related to coal” —a direction that is already long-overdue for all development banks,” CEED said.

CEED, along with allied groups abroad, have similarly called out the Japan-led, Philippines-based Asian Development Bank for supporting natural gas and not making enough commitment to a definite stop in supporting coal projects.

Instead, the ADB is pushing for ways to mobilize funds that would help in the early retirement of coal-fired power plants through the Energy Transition Mechanism (ETM). The Philippines, Indonesia and Vietnam are the pilot countries where the ETM is being promoted.

The Philippines is a member of both ADB and AIIB.

In September 2021, the AIIB lauded then Finance Secretary Carlos Dominguez III for his proposal for multilateral development banks to work together in incentivizing private capital flows to the climate projects of developing countries.

At the same time, the AIIB expressed commitment to vigorously support its members, including the Philippines, in achieving their respective low-carbon energy transition commitments. INQ