THE ASIAN

DEVELOPMENT
BANK’S ENERGY
TRANSITION
MECHANISM
Emerging Social,
Environmental and 
Rights-Based Considerations

DECEMBER 2022
ABOUT THIS WORKING PAPER
This joint working paper by Fair Finance Asia (FFA) and NGO Forum on ADB was made possible with the support
of the Embassy of Sweden in Bangkok, Thailand. The content of this publication is the sole responsibility of FFA and
NGO Forum on ADB and can in no way be taken to reflect the views of the Swedish Ministry for Foreign Affairs.

This joint working paper is intended to generate data-driven evidence, contribute to public debate and invite
feedback on sustainable finance policy issues.

For more information on this working paper, please write to info@[Link] and secretariat@[Link].

ABOUT FAIR FINANCE ASIA In addition, Fair Finance Asia and NGO Forum on
Fair Finance Asia (FFA) is a regional network of Asian ADB would like to thank all contributors to this
civil society organizations that are committed to ensuring working paper, including:
that the business decisions and funding strategies of • Members of FFA national coalitions for their
financial institutions in the region respect the social and valuable inputs: Fair Finance Cambodia, Fair
environmental well-being of the communities in which Finance India, ResponsiBank Indonesia, Fair
they operate. Civil society coalitions from eight countries Finance Guide Japan, Fair Finance Pakistan, Fair
within the region are participating in FFA: Cambodia, Finance Philippines, Fair Finance Thailand and
Japan, India, Indonesia, Pakistan, the Philippines, Thailand Fair Finance Vietnam
and Vietnam. • Sandy Pederson of Seed Edit Communications for
editing the working paper
ABOUT NGO FORUM ON ADB • Sunil Butola, Creative Design Consultant, for
NGO Forum on ADB (Forum) is a network of primarily designing the working paper.
Asian-based civil society organizations that monitor
the projects, programs and policies of the Asian NGO Forum on ADB also acknowledges and thanks
Development Bank (ADB) and the Asian Infrastructure Forum member organizations and allied groups
Investment Bank (AIIB). In particular, the Forum aims in the Philippines, Indonesia and Pakistan for
to amplify the calls and demands of civil society contributing critical perspectives and insights on the
organizations and movements in the Asia Pacific in their ETM which, taken together, made it possible to write
struggles against ADB- and AIIB-supported projects this working paper.
and policies that threaten people’s livelihoods, the
environment and their communities. DISCLAIMER
This working paper is provided for informational
AUTHORSHIP purposes and is not to be read as providing
This working paper was written and researched endorsements, representations or warranties of
primarily by Tanya Lee Roberts-Davis (Energy Policy any kind whatsoever. Fair Finance Asia and NGO
and Campaigns Strategist, NGO Forum on ADB). Forum on ADB observe the greatest possible care
in collecting information and drafting publications
Inputs were also provided by Rayyan Hassan (Executive but cannot guarantee that this working paper is
Director, NGO Forum on ADB), Bernadette Victorio complete. No one should act on such information
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Advocacy Advisor, FFA) and Dharrnesha Inbah Rajah thorough examination of the particular situation.
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thereof, Fair Finance Asia and NGO Forum on ADB
Correct citation of this document: FFA and NGO Forum do not owe a duty of care (whether in contract or in
on ADB (December 2022). The Asian Development tort or under statute or otherwise) to any person or
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Environmental and Rights-Based Considerations. shall not be liable to any party who uses or relies on
this working paper.
EDITORIAL REVIEW AND CONTRIBUTIONS
© Fair Finance Asia and NGO Forum on ADB, December 2022:
This working paper was finalized with strategic
guidance and editorial reviews by Bernadette Victorio
This publication is subject to copyright, but the text may be used
(Program Lead, FFA) and Rayyan Hassan (Executive free of charge for the purposes of advocacy, campaigning, education
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 CONTENTS

Abbreviations 3

Summary and highlights 4

About this working paper 6

Introduction 6

1. THE ROLE OF THE ASIAN DEVELOPMENT BANK (ADB) IN THE REGIONAL ENERGY LANDSCAPE 8
1.1 Energy policy changes and implications for ADB project financing 8

2. OVERVIEW OF THE ADB’S ENERGY TRANSITION MECHANISM (ETM) 10

3. PROPOSED IMPLEMENTATION PLANS FOR THE ETM 11

3.1 Proposed financing architecture 12

3.2 Proposed models for operationalizing the ETM 12

3.3 Prioritizing coal power projects 14

3.4 Indicative timelines 14

3.5 Unresolved questions about the ADB’s Safeguard Policy Statement and Accountability Mechanism 14

4. REGIONAL AND NATIONAL STRATEGIC ENVIRONMENTAL AND SOCIAL ASSESSMENT

PROCEDURES FOR THE ETM 15
5. QUESTIONS ABOUT ADB’S PLANS FOR A JUST TRANSITION 17

6. COUNTRY-LEVEL IMPLICATIONS 19

7. CONCLUSIONS: EMERGING RISKS AND CONCERNS ABOUT THE ETM 23

Notes 26

References 31

LIST OF FIGURES

Figure 1: Currect scope of the ETMPTF 11

Figure 2: P
 roposed expanded scope of the ETMPTF 11

Figure 3: T
 ransaction models to accelerate retirement/repurposing of CFPPs 12

Figure 4: E
 TM portfolio transaction structure 13

Figure 5: E
 TM synthetic transaction structure 13

Figure 6: S
 takeholder and value chain mapping 17

Figure 7: ClF-ACT Investment Plan (proposed) 20

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 ABBREVIATIONS

ADB Asian Development Bank

ADB DMCs ADB Developing Member Countries

B2CS Beyond 2°C Scenario

CEF Clean Energy Facility

CEP PT Cirebon Electric Power (international consortium made up of Marubeni, Indika Energy,
Korean Midland Power and Samtan Corporation)

CFPP Coal-Fired Power Plant

CIF-ACT Climate Investment Funds’ Accelerating Coal Transition Investment Program

CRF Carbon Reduction Facility

CSO Civil Society Organization

DFI Development Finance Institution

ETM Energy Transition Mechanism

GHG Greenhouse Gas

GW Gigawatt

HCPP High-Carbon Power plant

IEA International Energy Agency

IFI International Financial Institution

IP Investment Plan (drafted by government to receive financing via the ClF-ACT Investment
Program)

IPCC Intergovernmental Panel on Climate Change

IPP Independent Power Producer

JETP Just Energy Transition Partnership

MDB Multilateral Development Bank

MW Megawatt

NGO Non-Governmental Organization

PLN Perusahaan Listrik Negara (Indonesian state-owned electricity company)

PPA Power Purchase Agreement

PT SMI PT Sarana Multi Infrastruktur (Indonesian state-owned infrastructure company)

PV Photovoltaic System

SDGs Sustainable Development Goals

SESA Strategic Environmental and Social Assessment

UNESCAP United Nations Economic and Social Commission for Asia and the Pacific

UNFCCC COP United Nations Framework Convention on Climate Change Conference of the Parties

WBG World Bank Group

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 SUMMARY AND HIGHLIGHTS

For decades, social movements across Asia and the • Clearly align with climate science imperatives by
Pacific have been calling for the urgent, time-bound supporting a swift phase-out of coal industries
phase-out of coal and other fossil fuel industries. This across the region (by 2040 at the latest).
would involve retiring coal power projects, making a
transformative shift away from fossil fuel and other • Publicly commit to ensuring fossil fuel-
extractive energy sources and prioritizing energy, dependent infrastructure and associated facilities
resource, social, economic, environmental and climate will stay out of investment pipelines.
justice.1
• Provide credible ways to ensure coal power project
operators are not overpaid or commit to disclose
In contrast to the rights-based, justice-oriented
information about renegotiated power purchase
solutions proposed by grassroots advocacy groups
agreements (PPAs), not only for the purposes of
in the region, the Asian Development Bank (ADB)
greater public scrutiny and transparency, but also
is advancing plans to work with other financial
for affected workers and communities to access
institutions, governments, corporations and
key information about plans underway that will
philanthropies to implement the Energy Transition
have a direct impact on their futures.
Mechanism (ETM), a top-down financing scheme
intended to accelerate the process of retiring coal • Meaningfully acknowledge that social and
power from national energy grids and replacing it environmental damage would be exacerbated if
with other sources of power. it takes 10 to 15 years to retire coal power plants
(as proposed under the ETM to ensure market
The ETM is expected to be piloted initially in Indonesia returns for project operators).
and the Philippines and later elsewhere in Asia,
including Kazakhstan, Pakistan and Vietnam, but has • Clarify how shifting investments to piloting
yet to be trialed at a specific site. However, the ADB’s unproven and speculative carbon “removal”
plans for operationalizing this market-oriented model, schemes, carbon-intensive “repurposing”
and the initial closed-door negotiations underway technologies3 and other false energy and climate
for the first pilot of the ETM in Indonesia, have raised solutions4 will be avoided.
critical questions and concerns among civil society,
community and workers’ organizations across the • Unequivocally focus on existing options to
region and beyond.2 rapidly replace coal power capacity with non-
resource-intensive renewable energy.
Accordingly, this working paper highlights that, to date,
• Require implementing partners (coal power
the ADB and partner financiers supporting the ETM,
project operators, power and utility companies
including the World Bank Group (WBG), have yet to:
and other financiers) that continue to expand
• Publish a thorough policy analysis demonstrating the global coal fleet to provide time-bound
how, and during what stages, their accountability commitments – on a portfolio and project-by-
mechanisms, safeguards, access to information project basis – to hasten the phase-out of all coal
commitments and energy policy provisions power dependent facilities while suspending all
will be applied to the decommissioning of coal plans for new or expanded fossil fuel projects.
power projects through the ETM.
• Proactively consider the risk of reprisals and
• Provide unequivocal assurances of adherence retaliation to community members and civil
to rights-based frameworks, such as the UN society organizations (CSOs) working in
Guiding Principles on Human Rights and ILO and around coal power projects targeted for
Conventions (including ILO Convention 169 decommissioning and clarify the response
on Indigenous Peoples’ rights to land and mechanisms that would be in place.
territories), and of the applicability of social and
• Heed calls from national and local social
environmental safeguard frameworks, access to
movements in ETM pilot countries for a faster
information policies, as well as accountability
and transparent phase-out of coal industries in
mechanisms when/if grievances arise.

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 line with the Paris Agreement, for reparations • Provide compensatory reparations and
and restitution for coal-affected communities restitution to communities where operating coal
and for a just energy transition to include power projects received institutional financing.
broader and more systemic change.
• Support the clean-up and decommissioning
• Provide assurances that existing national debt costs of coal-related projects financed, in
burdens will not be exacerbated by ETM loan- consultation with governments, workers’
based modalities.5 associations, communities and allied civil society
groups.

In addition, this working paper suggests that the • Clarify the protocols that are in place to respond
ADB and ETM partner institutions, such as the WBG, if community members who raise concerns
should specifically take immediate steps to: about ongoing or past coal project investments
of the ADB or WBG, or about the ETM process,
• Halt any ongoing investments that support or face reprisals.
enable expansion of the coal industry (including
via financial intermediary on-lending). • Support governments to develop a coal phase-
out schedule by 2040, assigning specific
• Conduct a full independent evaluation of their closure dates for each coal power unit without
legacy and current coal project investments, overcompensating a dying, highly polluting
with an assessment of how these projects can and unsustainable industry or relying on false
be urgently retired (or suspended if still in the short-term solutions. This process should be
planning or construction stages) in line with the undertaken in full consultation with workers’
imperatives of climate science (no later than associations and civil society groups, and
2040). in conjunction with the development of
corresponding legislation.

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 INTRODUCTION

The Asia-Pacific region accounts for three-quarters is becoming increasingly important for community,
of the world’s current global coal-fired capacity,6 worker and environmental rights advocates to
and hosts an estimated 94% of the world’s be prepared to interrogate, analyze and raise
planned expansion of new coal power projects.7 critical perspectives about the policy and practical
Unless urgent action is taken to phase out the implications of these proposed “coal-to-clean”
current coal fleet and close off the pipeline of new schemes.
projects, countries across the region will be locked
into relying on unsustainable, carbon-intensive In Asia, national and regional civil society
energy sources with devastating health8 and organizations (CSOs) that monitor development
environmental impacts for decades to come. finance institutions (DFIs) are increasingly
scrutinizing the ADB’s plans for an Energy
Heeding the climate imperatives for an ambitious Transition Mechanism (ETM),13 which is an initiative
“Beyond 2°C Scenario” or B2CS (i.e. 1.5°C– to blend public- and private-sector investments
1.75°C), while putting peoples’ rights to a healthy with a stated aim“to retire coal power assets on an
environment at the center, would require all coal earlier schedule than if they remained with their
power plants in the region to close by 2040 at the current owners”14 that will be piloted in Indonesia,
latest.9 Implementing this shift across the region Pakistan, the Philippines and other countries in the
opens opportunities to envision, plan and collectively region.
create new energy systems that respect the rights
of communities, workers and Indigenous Peoples, This working paper aims to articulate the key
as well as planetary limits, and that respond to local overarching risks and concerns about the ETM
needs through democratic, publicly accountable and identified by CSOs and allies in the Asia-Pacific
decentralized structures. However, if the transition region that have engaged collectively with
from coal-based energy systems is conceived in the responsible ADB staff to date. Thorough
narrow terms – simply shifting to less carbon- discussions with a wider range of civil society
intensive sources of energy and adjusting the actors and sectors were not possible within the
workforce accordingly – the current systemic social, scope of this paper but, if undertaken in the future,
economic, environmental and resource inequities will could produce a more comprehensive, nuanced
remain in place. positioning on the issues at stake. It is hoped that
this working paper can serve as a key source of
For decades, social movements and community information for those monitoring how the ETM
groups across Asia and the Pacific have been is being operationalized, as well as those living
at the forefront of demanding an end to the around and working at coal project sites selected
development and expansion of coal power projects for ETM implementation.
and mining, in particular calling for multilateral
development banks, including the WBG and ADB,10 ABOUT THIS WORKING PAPER
to withdraw support for the sector. Despite dealing
with repression from authorities and threats to To delve into the ADB’s ETM scheme, assess the
their safety,11 human rights advocates continue key risks involved and offer recommendations
to push for these institutions to be accountable for alternative ways forward, this working paper
for the damages wrought by their current and draws on a wide variety of primary and secondary
past financing of coal projects, and for an end sources. Since the ETM has yet to be trialed, there
to financing new fossil fuel and other resource- are no concrete cases to cite. Instead, information
intensive energy infrastructure. from the ADB’s website, presentations from ADB
staff, written correspondence in response to
Given that the WBG and regional development inquiries from non-governmental organizations
banks such as the ADB are now engaging (NGOs) and civil society statements addressed to
with governments and the private sector to the ADB, have been used as primary references,
conceptualize models for transitioning away from supplemented with data and insights culled
coal-dependent power systems and economies,12 it from online news outlets, peer-reviewed journal

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articles, the International Energy Agency (IEA), the of ADB’s support for the coal industry and then
Intergovernmental Panel on Climate Change (IPCC), outlines relevant policy updates. The subsequent
UN agencies, as well as research and analysis sections provide an overview of the ETM, including
produced by independent think tanks. initial plans for implementation in Indonesia
and Pakistan. The concluding section provides
The working paper is organized into three broad reflections on key concerns related to the ETM
sections. The first section provides background on as articulated by CSOs that have come together
the ADB as a public multilateral development bank to engage with the ADB on these issues to date,
(MDB) that provides financing for infrastructure accompanied by an initial set of recommendations
projects and technical assistance to governments for the ADB and other financial institutions
and the private sector. It briefly recalls the legacy involved in the ETM.

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THE ROLE OF THE ASIAN DEVELOPMENT BANK
(ADB) IN THE REGIONAL ENERGY LANDSCAPE
1
The ADB is a MDB headquartered in Manila, the 1.1 E
 NERGY POLICY CHANGES AND
Philippines. It was established in 1966 and is comprised IMPLICATIONS FOR ADB PROJECT
of 68 member countries, 49 from the Asia-Pacific FINANCING
region and 19 from outside the region. Its stated aim
is to support the development of a “prosperous, In 1981, the ADB adopted its first Energy Policy
inclusive, resilient, and sustainable Asia and the Pacific,” to guide investments in the sector. This policy
in particular to “eradicate extreme poverty in the was updated in 1985, 2009 and, most recently,
region”.15 It provides loans, grants, equity investments, in 2021. The latest revision was undertaken over
guarantees and technical assistance to developing the course of 2020 and 2021, during which a
member countries (DMCs)16 based on priorities review was conducted by the ADB’s independent
outlined in periodically updated country partnership evaluation unit28 that recommended a provision be
strategies and regional cooperation strategies. incorporated into the new policy to explicitly end
investments in coal.29 Policy drafts were released
Focal areas of investment include health, finance, for public comment in May and August/September
transport, water, energy, education, agriculture, 202130 before the final version of the new policy was
natural resources and rural development sectors, adopted in October 2021.31
public sector management, as well as industry
and trade development. According to the ADB’s Between 2009 and 2021, the ADB continued to
most recent annual report, in 2021, the majority provide financing to build coal power projects in the
of investments flowed to countries in South Asia region and provided technical advice on the use of
(39%), Southeast Asia (24%), and Central and West coal power. According to the 2009 Energy Policy,
Asia (23%), with a smaller percentage disbursed to the ADB could support “coal-based power projects
the Pacific region (9%).17 While the bulk of financial if cleaner technologies are adopted and adequate
resources are directed to public sector entities,18 mitigation equipment and measures are incorporated
private sector investments are also deployed by into the project design”, “base-load power plants
the ADB,19 particularly in the areas of infrastructure [using subcritical boiler technology], if found to be
development, financial and capital markets, justified after due diligence” and interventions to
agribusiness and, increasingly, in the emerging field “retrofit existing power plants that need to improve
of ‘clean’ energy.20 efficiency”32. Policy provisions also enabled support
for coal mine development for “captive use by power
Decisions on the general direction of the ADB are plants”33, as well as for “(i) safety in coal mines, (ii)
made by a resident board of 12 Executive Directors environmentally and socially sound mining practices
(each of whom also has a designated alternate). The and efficient use of coal for power generation, (iii)
largest capital shares in the bank (and, accordingly, carbon capture and storage (or sequestration)
voting powers) are held by Japan and the United once technologically viable, (iv) coal bed methane
States, with China, India, Australia, Korea, Indonesia extraction and use, (v) coal gasification, (vi) coal
and Canada also holding large shares relative to scrubbers, (vii) waste coal utilization, and (viii)
other member countries. efficient coal transportation over land and sea”.34

For community-based advocates and CSOs that are These provisions led to a disbursement of nearly
affected by, monitoring and/or concerned about USD 900 million for the planning and construction
ADB-financed projects and operations, there are of the 1,000 megawatt (MW) Mong Duong 1
important institutional policies and frameworks21 Thermal Power Project in Vietnam between 2009
to be aware of, including policies related to access and 2017,35 USD 120 million for the development of
to information,22 the accountability mechanism,23 the 200 MW Visayas Baseload Power Project36 and
independent evaluation,24 safeguards (in the process associated facilities in the Philippines between 2009
of being updated),25 the energy sector (updated in and 2014, USD 100 million for the development and
2021)26 and the operational priorities for financing expansion of the coal mine methane gas supply
outlined in Strategy 2030.27 network in Shanxi, China between 2012 and 201937

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Emerging Social, Environmental and Rights-Based Considerations
and more than USD 690 million for the construction to discourage the use of high-emitting, inefficient
of the 600 MW coal-fired Jamshoro Power coal-fired power plants. It will also assist the
Generation Project from 2013 onward.38 Technical decommissioning of coal-fired power plants and site
assistance was also provided for Mongolia to redevelopment for new economic activity, including
expand coal liquefaction technology development the removal and secure management of hazardous
in the Ger District from 2014 to 2017 at a cost of materials, restoration of soil and water quality,
USD 350,000,39 and to support planning for waste redevelopment of buildings, and upgrades of existing
coal-powered facilities in Shanxi, China from 2012 infrastructure”.43
to 2015 at a cost of USD 500,000.40 Although
all projects are completed with the exception of The 2021 Energy Policy also stated:
the Jamshoro facility, the people and ecosystems
surrounding these sites continue to bear the burden “ADB will support DMCs [Developing Member
of this financing.41 For example, those living around Countries] in undertaking and implementing
the Visayas Baseload Coal Power project in Naga transparent and inclusive planning and policies
City, Cebu, have continued to call for the closure of for a just transition….Planning for a just transition
the project, demanding accountability for the harm will be critical in managing this process: the aim is
and damage to their health, as well as for the clean- to mitigate negative socioeconomic impacts and
up of the surrounding areas.42 increase opportunities associated with the transition;
support affected workers and communities; and
The ADB’s 2021 Energy Policy finally put into writing enhance access to sustainable, inclusive, and resilient
a commitment to end financing for new coal power livelihoods for all. ADB will work with DMCs to
projects or mining. The provision reads as follows: support such planning in a way that involves all
stakeholders and affected groups at all stages of the
“ADB will not support coal mining, processing, energy transition.”44
storage, and transportation, nor any new coal-
fired power generation…..ADB confirms its current Notably, however, the policy did not include
practice of not financing new coal-based capacity proactive language to restrict ongoing investments
for power and heat. ADB will promote the adoption in coal power projects,45 nor did it commit to
of cleaner fuel sources and will support emissions support a just transition and coal phase-out in
reductions that mitigate health and environmental communities where the ADB has financed coal in
impacts but will not participate in investments to the past.46 Although not explicitly identified as such,
modernize, upgrade, or renovate coal facilities that the conceptualization and planning of an ETM in
will extend the life of existing coal-fired power the region can be considered a manifestation of the
and heating capacity. ADB will support the early policy to support early retirement of coal power
retirement of coal-based power plants and the projects alongside a just transition. The ETM is
enhancement of power generation dispatch regimes elaborated in more detail in the following section.

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OVERVIEW OF THE ADB’S ENERGY
TRANSITION MECHANISM (ETM)
2
In 2021, when the energy policy review process was outlined critical concerns and key questions about
underway, the ADB allocated technical assistance the ETM, including: (i) the risk that it may absolve
grant funding to conduct pre-feasibility47 and coal power project operators from internalizing
feasibility studies48 of implementing an Energy the negative externalities they have created; (ii) a
Transition Mechanism, or ETM, in the Southeast lack of clarity on how ADB safeguards would be
Asian region. The ETM, as proposed by the ADB, is applied while the targeted coal power projects are
a market-oriented scheme that aims to financially being closed; and (iii) the lack of opportunities
incentivize coal power project operators to for for communities, as well as civil society and
decommission or “repurpose”49 specific coal power peoples’ organizations to provide input on the
projects (“assets”) before their estimated operational design.53 These concerns were also highlighted in
end of life, thereby contributing to the effort to a press release54 circulated by CSOs during the
reduce the overall dependence of national grids on ADB’s official launch of the ETM at COP26.55 At
coal-sourced energy.50 the time, seed money for the ETM was committed
by the Japanese government, and indicative
An analysis by the United Nations Economic support for the pilot stages was provided through
and Social Commission for Asia and the Pacific a Memorandum of Understanding (MoU) with the
(UNESCAP) has affirmed that phasing out coal Rockefeller Foundation.
by 2040 is “the single most important step” that
needs to be taken by governments in every country Based on pre-feasibility and ongoing feasibility
of the region “to ensure consistency with the Paris studies by ADB consultants, it has become clear
Agreement and SDGs”.51 However, the ETM is not that following the initial piloting of the ETM in
modeled to enable a complete coal phase-out by Indonesia and the Philippines, versions of the scheme
2040, as governments in pilot countries are not are planned to be rolled out in Pakistan, later in
required to commit to meeting this benchmark. The Kazakhstan and potentially in Vietnam in the future.
ETM also does not require pilot coal power project Although the ADB suggests that the ETM may be
operators to adhere to internationally accepted piloted in more countries, it is unclear how it would
human rights standards, such as binding United be operationalized in different contexts.
Nations treaties or the UN Guiding Principles on
Business and Human Rights.52 In the short term, the ETM is being fast-tracked
in Indonesia through planning under the Climate
Rather, the ETM model is based on the idea that Investment Funds’ Accelerating Coal Transition (CIF-
providing concessional loans to current coal power ACT) program, with financing and support from the
project operators would provide earlier market WBG, ADB and donor country funds. International
returns. This would give them an incentive to adjust funds mobilized through the Just Energy Transition
to the terms of power purchase agreements (PPAs) Partnership (JETP) for Indonesia are also expected
and decommission coal power facilities before the to contribute to the operationalization of the ETM
end of their operational lifespan. Therefore, as coal at coal power project sites yet to be announced.56
power project operators seek to ensure profits According to the ADB, the ETM would be a
are earned before the site is closed, communities “key delivery mechanism to ensure successful
would continue to experience a toll on their health, implementation of JETP”.57
livelihoods and surrounding environment.
The first proposed financing by the ADB was
In response to initial plans for the ETM publicized announced in October 2022 for a loan of USD 600
by the ADB, more than 60 CSOs from across million to Indonesia’s state-owned electric power
the region and beyond issued an open letter distribution company, Perusahaan Listrik Negara
in the lead-up to the 2021 UN Climate Change (PLN).58 In the Philippines, it is expected that the
Conference in Glasgow (COP26). Addressed to ETM will also be operationalized under the CIF-ACT
the ADB and prospective ETM sponsors, the letter program, but details are yet to be disclosed.

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PROPOSED IMPLEMENTATION PLANS FOR
THE ETM
3
This section outlines how the ADB is proposing to set coal power project operators in each country. The
up the ETM. However, the models and diagrams are following figures provide an overview of the components
notably generic as implementation is expected to be envisioned to be addressed through the ETM (Figure
different in Indonesia, Pakistan, the Philippines and 1) along with changes to the scope of the funding
other pilot countries based on negotiated outcomes mechanism announced in October 2022 (Figure 2),
with government authorities and selected independent including the ETM Partnership Trust Fund (ETMPTF).

FIGURE 1: Currect scope of the ETMPTF

Source: ADB (2022, October), “Major Change in Trust Fund: Energy Transition Mechanism Partnership Trust Fund under the Clean Energy
Financing Partnership Facility”. Accessed online.
*All figures are copied from ADB materials. Any grammatical errors are attributable to the original source.

FIGURE 2: Proposed expanded scope of the ETMPTF

Source: ADB (2022, October), “Major Change in Trust Fund: Energy Transition Mechanism Partnership Trust Fund under the Clean Energy
Financing Partnership Facility”. Accessed online.
Note: a These stand-alone projects may be without any financing by ADB or with cofinancing by third-party financiers.
*All figures are copied from ADB materials. Any grammatical errors are attributable to the original source.

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Emerging Social, Environmental and Rights-Based Considerations
3.1 PROPOSED FINANCING ETMPTF’s scope, use of funds, and implementation
ARCHITECTURE arrangements” (Figures 1 and 2). Adjustments
include the clarification that grant and non-grant
The ADB intends to establish an ETM Partnership Trust resources (i.e. loans at concessional or market-
Fund (ETMPTF)59 with blended financing from donor priced rates) may be used to “provide debt, equity,
governments and philanthropies. It would channel guarantees, and other risk transfer products”, that
financing through the ETMPTF to: stand-alone projects may be financed via the fund
without the ADB’s involvement and that the fund
• Provide technical assistance to partner governments will “accommodate financing partners who may wish
or utilities operationalizing the ETM. For example, to opt out of specified countries and decline the
to conduct technical, financial and grid analyses, application of their contribution to such countries”.61
provide policy and regulatory advice, support the
development of carbon credit schemes and help 3.2 P
 ROPOSED MODELS FOR
design reskilling and livelihood development plans for OPERATIONALIZING THE ETM62
retrenched workers.
The ADB is proposing to focus primarily on two
• Provide direct ADB transactions, potentially in options for coal retirement that are suitable in
cooperation with other IFIs, to support the initiation different contexts – the “portfolio model” and the
of coal retirement and the development of clean “synthetic model” – although in some circumstances
energy projects. the “acquisition model” may be explored (Figure 3).
• Partner with IFIs and philanthropies to dispense
Under the portfolio model, the ETM CRF would
grants and concessional financing to utility
provide a corporate loan to a utility company on
companies and coal-fired power plant (CFPP)
the condition that it commits to retire coal power
operators via a Carbon Reduction Facility (CRF)
projects (evaluated based on the number
and a Clean Energy Facility (CEF). As per Figure 2,
of gigawatts [GW]/projects/percentage of coal
in the future, grants and concessional financing may
fleet retired) within an agreed timeframe and shift
be provided directly to utility companies and coal
sourcing to non-coal-dependent energy facilities.
power project operators, bypassing the CRF and
Financing from the ETM would be intended to enable
CEF.60
the utility to retire or repurpose coal power projects
over time and invest in grid upgrades and renewable
In October 2022, the ADB Board of Directors
energy facilities.
approved changes to the ETMPTF to “expand the

FIGURE 3: Transaction models to accelerate retirement/repurposing of CFPPs

Source: ADB ADB (2022, July 27), “The Energy Transition Mechanism Program for Southeast Asia Update”.
1
Acquisition model to be used only in exceptional scenarios.
*All figures are copied from ADB materials. Any grammatical errors are attributable to the original source.

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Emerging Social, Environmental and Rights-Based Considerations
 FIGURE 4: ETM portfolio transaction structure

Source: ADB (2022, July 27), “The Energy Transition Mechanism Program for Southeast Asia Update”.
*All figures are copied from ADB materials. Any grammatical errors are attributable to the original source.

In contrast, the synthetic model is considered suitable as a percentage earned from continuing operations
by the ADB for coal power projects operated by over an estimated 10 to 15 years. In the interim, the
independent power producers (IPPs) (a private financing from the CRF would help the operator
ownership structure). The ETM CRF would provide repay any outstanding loans and provide project
a loan to the IPPs that contractually negotiate early proponents with a special dividend to compensate for
retirement with the national utility company by economic losses incurred by the decision to shorten
adjusting the PPA. The coal power project operator the operational lifespan. The coal project operator
would retain full ownership and responsibility for the would also be encouraged to invest profits in shares
project, committing to repay the debt to the CRF of renewable/clean energy projects.

FIGURE 5: ETM synthetic transaction structure

Source: ADB (2022, July 27), “The Energy Transition Mechanism Program for Southeast Asia Update”.
*All figures are copied from ADB materials. Any grammatical errors are attributable to the original source.

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Emerging Social, Environmental and Rights-Based Considerations
For IPP coal projects, especially when international Both Indonesia and the Philippines are in the process
companies are involved, the ADB may consider of finalizing investment plans for the CIF-ACT
a third option: the acquisition model. Under this Investment Program68. Through the planned CIF-
model, the ADB would acquire a majority share in ACT program in Indonesia, WBG and ADB funds
the project, taking control as the owner and operator are proposed to provide direct transactions to the
of the project to negotiate an early retirement date operator of an IPP coal power project to incentivize
with the utility company. At the termination date, the early retirement or to the PLN to support retirement
plant would be retired or repurposed. of the coal fleet, investment in clean energy options
and the development of renewable energy battery
In all cases, the ADB would seek commitments from production chains. WBG financing is also intended
the country government to transition away from to be used, in part, to support the closing and
coal power reliance and from the project investors repurposing of coal mines. In the Philippines, a
to not develop new coal assets. This commitment country IP for CIF-ACT has not been made public,
would not extend to projects already in the planning so it is currently unclear how the scheme will be
or development phases. For example, Indonesia’s proceeding.
extensive pipeline of planned projects (estimated
at more than 20 GW)63 would remain intact while 3.5 U
 NRESOLVED QUESTIONS
ongoing developments, such as ADB’s own financed ABOUT THE ADB’S SAFEGUARD
600 MW unit of the Jamshoro Coal Power Plant in POLICY STATEMENT AND
Pakistan, are not subject to suspension. ACCOUNTABILITY MECHANISM

3.3 PRIORITIZING COAL POWER In October 2022, the ADB clarified that coal
PROJECTS power project sites targeted for early retirement/
repurposing through the ETM “will be subject to
For coal power projects where the ETM scheme would [an] independent environmental and social audit
initially be trialed, ADB scoping studies64 suggest that to assess the level of compliance with applicable
a project should be prioritized based on: laws, standards, and procedures under which the
• Impact on grid stability (ideally low); facility” and project operating companies would
• Utilization (should be under 80%); be expected to “address any noncompliance in a
• Age range (should be 5 to 25 years); manner acceptable to the ADB and commensurate
• Potential for replacement by renewable energy with the project’s risks and impacts if (i) such
or repurposing; noncompliance is likely to have material adverse
• Potential for renegotiating the PPA; risks and impacts on people or the environment
• Greenhouse gas (GHG) emissions (estimated during the remaining operational life of the facility;
reduction if taken offline); and and (ii) the noncompliance can be addressed,
• Community health and just transition impacts. taking into account the costs and benefits of
the various alternatives”.69 Critically, the ADB
However, the ADB has been clear that the governments also suggested that although their “safeguard
of countries implementing the ETM would be in requirements will apply within each project’s area
charge of selecting projects to advance first, which of influence,” this “does not include impacts that
means the methodology used to select projects may might occur without the project or independently
be completely different. For example, in Indonesia, of the project, or legacy issues”.70
a shortlist of nine candidate projects for retirement
has been put forward by the government and PLN in In practice, the limitations outlined above raise
the CIF-ACT Investment Plan (IP), five of which have several questions about the extent to which workers
been operating for 25 to 37 years and are closer to and communities at the coal project sites selected
retirement65 than projects proposed by the ADB. for ETM piloting will be able to hold the ADB
accountable if safeguard standards are violated.71
3.4 INDICATIVE TIMELINES For instance, in the first application of the ETM
model in Indonesia at the Cirebon 1 coal fired
At the time of writing, the ADB was conducting a power project,72 the ADB suggested that it could
Southeast Asia regional feasibility study; a national be retired by 2037, ahead of an estimated technical
feasibility study for Indonesia was also underway, lifespan of 40 years. Will environmental and social
along with a pre-feasibility study in Pakistan. By the safeguard standards be applied in the interim years
end of 2022, their intention was to develop a “pipeline before the project is closed? Will the surrounding
of power plant retirement deals”66 and to have communities and affected workers be able to
secured sufficient funding commitments to begin file grievances under the ADB’s Accountability
piloting the initiative at coal project sites from late Mechanism? It remains to be seen.
2023 onward.67

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REGIONAL AND NATIONAL STRATEGIC
ENVIRONMENTAL AND SOCIAL ASSESSMENT
PROCEDURES FOR THE ETM
4
As part of the development of the ETM, the the regenerative social work that is undertaken
ADB has conducted a regional strategic primarily, but not exclusively, by women. In
environmental and social assessment (SESA) and contrast, the SESA framing equates a shift towards
is proceeding with national studies for Indonesia a non-coal-based economy with opportunities
and the Philippines to identify the “positive” for women to have more training and income-
and “negative” impacts of “key environmental generating opportunities in the renewable energy
and socio-economic issues likely to arise when sector.75 Notably, the studies do not consider the
implementing the ETM”,73 as well as stakeholders social and environmental risks leading up to the
that should be involved or consulted, including retiring or repurposing of coal power projects (up
government ministries, the private sector, public to 10 to 15 years of ETM implementation). Nor do
services and civil society. Social and environmental the studies evaluate reparations and restitution for
considerations are evaluated in terms of meeting communities for the past harms of coal operations.
the Sustainable Development Goals (SDGs) Instead, the assessments consider the risks and
rather than accepted rights-based international opportunities at the time of project closure and
frameworks, such as binding UN human rights the development of new centralized, medium or
treaties and the UN Guiding Principles on Business large-scale renewable energy systems.
and Human Rights.74
At the time of writing, the national scoping report
Specifically, the ADB is considering the SESA for Indonesia was underway. A draft is expected
framework to evaluate risks, opportunities and to be released in mid-2023 and open for public
impacts associated with: (i) retiring and repurposing comment before a final report is published later
CFPPs and associated coal mines, and (ii) developing in 2023.76 According to a presentation by ADB
non-fossil fuel-based energy options, including staff and consultants at a SESA scoping workshop
hydropower, wind, solar, bioenergy, geothermal and for the ETM in Indonesia in October 2022, it is
tidal power projects. expected that while two CFPPs will be retired
and one coal mine repurposed or closed before
Environmental issues highlighted by the ADB for 2030, the development of replacement renewable
the SESA include impacts on air quality, water energy projects and planning for grid expansion
and land use, GHG emissions, solid waste created/ and interconnections would get underway. It is also
to be cleaned up, as well as worker health and expected that the development of battery industry
safety. In terms of social issues, the main areas value chains would be explored. Meanwhile, mid-
of concern identified by ADB consultants are term considerations (up until 2060) would include
economic impacts (local, national and, more scaling up the retirement of coal-fired power
broadly, regional), employment and livelihood plants and coal mines, repurposing some of the
adjustments, food security, public services, human sites and building replacement renewable energy
rights, migration, community cohesion and gender projects.77
and vulnerability.
Once the national SESA report in Indonesia is
The regional SESA considers impacts finalized, environmental and social audits of the
through a generic lens of social, political and CFPPs selected to be retired under the ETM would
economic dynamics. For example, there is no be conducted (mid-2023 onward), and capacity
contextualization of the shrinking civic space in building/technical assistance support would be
all countries where the scheme is being piloted, provided to the PLN to develop and implement
which poses serious challenges to the proposed a safeguard action plan. Part of the process of
community and local CSO engagement processes. the SESA report is convening a national multi-
Furthermore, the SESA fails to identify unpaid stakeholder steering committee to provide input.78
caregiving as work, lacking consideration for It remains to be seen whether, or how, this process

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Emerging Social, Environmental and Rights-Based Considerations
will provide an open space for critical voices from local languages, and discussions with CSOs would
civil society and community groups to be heard need to be held in communities around the coal
and taken into account. However, it is already project sites being considered for early closure/
concerning that the terms and conditions for the repurposing. These discussions would need to
early retirement (or repurposing) of the first coal be held in places perceived as safe spaces to
power project to receive support via the ETM in speak out without fear of retaliation, as well as
Indonesia are being discussed behind closed doors in urban centers. Discussions would also need to
without the involvement of community groups be held with independent workers’ associations
and workers, who have not been fully informed or at local, provincial/state and national levels. Their
given the opportunity to provide their perspectives priorities and perspectives should not only inform
and insights or to intervene in the process in any negotiations for the retirement of coal projects,
meaningful way (see Section 6: Country-level but also the design and planning of new renewable
Implications). energy projects, so as to ensure community consent
for developing facilities defined as ‘clean’ energy
If the ETM process was fully consultative, options.
information would need to be disseminated in

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Emerging Social, Environmental and Rights-Based Considerations
QUESTIONS ABOUT ADB’S PLANS FOR A
JUST TRANSITION
5
The ADB has suggested that developing just Accordingly, the ADB has identified key
transition plans are an integral component of the stakeholders in just transition planning, including
ETM. As they explain on their website: informal and formal workers, as well as supplier,
equipment and maintenance services in the coal
“Transitioning from coal to cleaner energy will have supply chain, including coal mining, transport and
many benefits but it may also introduce negative power projects.81
socioeconomic impacts to regions and countries….
Integrating just transition as part of ETM ensures that At the power plant level, the ADB suggests
the negative socioeconomic impacts are minimized identifying:
through implementation of different policies and • Actions to be taken to mitigate the “material
programs.”79 impacts” of early retirement;
• Legal requirements to support affected workers;
During an online engagement with CSOs, ADB staff • Entities that will be responsible for the support
specifically suggested that their support for a just systems that need to be put in place;
transition is being undertaken “in the service of net • Where funding can come from; and
zero” to help drive growth and sustainable development • Appropriate monitoring and evaluation (M&E)
“so that countries capitalize on opportunities and methodologies.
address the challenges for transition.”80

FIGURE 6: Stakeholder and value chain mapping

Scope of sectors included in considerations for a just transition under the ETM, according to the ADB.
Source: ADB (2022, August 18), “Just Transition in the Energy Transition Mechanism”, PowerPoint presentation.
*All figures are copied from ADB materials. Any grammatical errors are attributable to the original source.

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Emerging Social, Environmental and Rights-Based Considerations
Beyond the project level, the ADB will also aim just energy transitions. For example, many CSOs have
to provide technical assistance to support the been adamant that false solutions to the energy and
identification of financial resources to contribute climate crisis (ranging from the installation of waste-
to national transition plans, including “economic to-energy projects, large hydropower dams, carbon
diversification to greener sectors”, “crowding in capture and utilization infrastructure and biomass,
private sector investment”, “strengthening social hydrogen or ammonia co-firing technologies, to
protection opportunities”, developing “reskilling carbon and biodiversity offset schemes), have no
and upskilling” programs for workers, supporting place in a just transition, and that there must be a
“women’s access to green jobs and non-traditional break with extractive, resource-intensive economies in
sectors”, and facilitating “social dialogue and favor of sustainable, care-based systems that prioritize
stakeholder engagement”.82 community-led solutions for democratizing energy
and resources.83 Such comprehensive considerations
Across the Asia-Pacific region and beyond, there are of transformative, multi-faceted just(ice) transitions
ongoing civil society discussions on conceptualizing stand in stark contrast to the use of the just transition
inclusive, sustainable, rights-based and transformative terminology advanced by the ADB.

Key components of just energy transitions: A perspective from Fair Finance Asia and
Oxfam International

In addition, in December 2022, the Oxfam

While the scope and defining components of
International Secretariat launched a report,
a just energy transition in Asia continue to be
“Towards a Just Energy Transition: Implications
debated among CSOs and their networks, some,
for Communities in Lower- and Middle-Income
such as Fair Finance Asia (FFA), are taking steps
Countries”, which identifies four justice
to identify key aspects that are relevant in the
principles and associated rights that must be
context of the ETM. For example, in the 2021 FFA
considered for a transition to be “just”. These
study, “A Future Without Coal: Banking on Asia’s
include:
Just Energy Transition”, a just energy transition is
• Recognition-based justice – which requires
defined as abiding by nine principles:
that the rights, concerns of, and injustices
1. No financing for new coal projects for
experienced by, affected marginalized
electricity generation and phasing out existing
economic and social groups are recognized
coal-based power generation;
and addressed.
2. Development of a time-bound transition
• Procedural justice – which requires that
away from other fossil fuels for electricity
affected people have a meaningful say in
generation;
the design and implementation of transition
3. Active investment in renewable energy
policies and projects, including the right to
generation;
Free and Prior Informed Consent, to freedom
4. Long-term planning and strategies to mitigate
of association, to organize and to protest,
the adverse environmental and social impacts
among others.
of renewables;
• Distributional justice – which requires
5. Respect for land rights and Free, Prior
a fair distribution of the responsibilities,
and Informed Consent (FPIC), and clear
costs and benefits of climate/energy
policies for community participation, gender
action across different economic and social
sensitivity and consultation with CSOs in large
groups and protects the right to life, right
energy projects;
to land, decent work, a healthy and clean
6. Protection of the rights of workers and
environment and health and safety, among
mainstreaming of Human Rights Due
others.
Diligence (HRDD) during the energy
• Remedial justice – which requires that
transition;
people and communities negatively
7. Safeguarding the health, livelihoods, culture
affected by the energy transition are fairly
and heritage of communities impacted by the
compensated. These issues are critical
continued use of fossil fuels;
to workers, communities and all people
8. Active and meaningful engagement and
that are affected by the climate crisis and
participation of women in the energy
energy transition, but are often neglected or
transition; and
ignored.85
9. Investments in access to electricity for all.84

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Emerging Social, Environmental and Rights-Based Considerations
COUNTRY-LEVEL IMPLICATIONS

6
The ETM is still in the planning stages, but it of commercial co-financing, stakeholder
is most advanced in Indonesia where the first engagement processes and the development
pilot project targeted for retiring/repurposing of a “just transition framework”; (ii) provide a
coal power has already been announced. In “standby facility for renewable energy projects”
the Philippines, there is no publicly available to scale-up investments in renewable energy
information on the progress of discussions through bonds; and (iii) direct commercial loans
between the ADB, government authorities and for the development of renewable energy and
industry players. Initial discussions about the storage infrastructure projects.
ETM have begun with authorities in Vietnam, but
no details have been disclosed on the status of • A private sector loan of USD 250 million to
plans for feasibility studies. In Pakistan, initial support the early retirement of an identified IPP
information about the pre-feasibility studies coal project.91
getting underway has been disclosed by the ADB.86
• A public sector loan of USD 140 million to support
The following section outlines salient points of the
research and development, including the launch
ETM roll out in Indonesia and the status of the ETM
of Centers of Excellence in Energy Transition to
in Pakistan.
conduct research on energy storage technologies
and photovoltaic (PV) cell development, as well
INDONESIA as to support skills programs for retrenched
workers from coal power projects.92
In early October 2022, the ADB published basic
project data87 and an Initial Poverty and Social • A private sector loan of USD 150 million
Assessment88 for its first proposed ETM loan of to support the development of a national
USD 600 million to Indonesia’s national power battery industry value chain (mining, refining,
company, PLN. It is intended to fulfill the first part of processing, manufacturing, application and
Component 1 of the Indonesian government’s Country recycling) for energy storage and electric
Investment Plan89 for the CIF-ACT program. Combined mobility. This includes, but is not limited to,
with an expected USD 50 million from the CIF and investments in battery manufacturing plants,
USD 300 million from the German Development Bank nickel smelters, as well as public utility electric
(KfW), the focus of financing will be to (i) increase vehicles and charging infrastructure.93
electricity supply from renewable energy sources
(site and power source unknown); (ii) pilot the To operationalize the ETM plans in Indonesia via
retirement of +/-1 GW of “old and inefficient coal- the CIF-ACT program, the WBG is expected to
fired power plants”; (iii) replace diesel power plants contribute substantial resources in the form of public
(sites unknown); and (iv) strengthen PLN institutional and private sector loans, including:
capacity to “manage a just energy transition”.
However, at the time of writing, this loan has yet to be • A loan of USD 400 million to retire and
formally approved by the ADB’s Board of Directors. repurpose94 two or three PLN-operated coal
power units along with planning for the labour
Additional financing from the ADB is expected to force to transition to alternative worksites.
follow, as outlined in the CIF-ACT Investment Plan,
including:90 • A loan of USD 415 million to close and repurpose
a coal mine in either Sumatra or East Kalimantan
• A financial intermediary loan of USD 150 with corresponding just transition measures.
million to PLN, which in turn will re-loan the
funds to the state-owned entity tasked with • Private sector financing of USD 140 million
implementing the ETM at the national level, for a “dispatchable renewables program” for
PT Sarana Multi Infrastruktur (PT SMI). Three investments in land-based, rooftop and floating
separate facilities are envisioned to be on- solar PV developments, as well as other energy
lended to PT SMI to (i) support the accelerated projects that may include waste-to-energy
retirement of its CFPPs via the mobilization plants.95

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Emerging Social, Environmental and Rights-Based Considerations
 FIGURE 7: ClF-ACT Investment Plan (proposed)

Source: Excerpt from the CIF-ACT Indonesia Country Investment Plan (2022, October). Accessed online.
*All figures are copied from ADB materials. Any grammatical errors are attributable to the original source.

Although ETM financing will not be used to develop Mechanism,” the 660 MW Cirebon 1 coal power
fossil gas-related infrastructure, the CIF-ACT project in West Java, operated by a subsidiary of
Indonesia Country Investment Plan confirms that the Jakarta-based Cirebon Power, Cirebon Electric
ADB is expected to provide technical advice on fossil Power (CEP).99 According to the press release
gas facilities in the future, and that ADB’s private announcing the agreement, “it is anticipated that
sector operations will continue to support such ADB would provide an early retirement facility in
project developments in the country.96 the form of senior debt, on the condition that the
tenor of the power purchase agreement between
Notably, under the CIF-ACT Investment Plan, CEP and PLN [Indonesia’s state owned power
accelerating the retirement of coal power plants company] will be shortened.”100 The ADB also
– even with the support of the ADB and WBG – suggested that “the transaction will determine
would leave ultra-supercritical coal power plants97 when the plant will be retired, and this will be
operational until 2056. In contrast, according to the negotiated,” while asserting that if “this power
Carbon Tracker Initiative, a least-cost coal phase- plant were to permanently terminate operations in
out pathway in Indonesia that is consistent with the 2037, for example, that would reduce its operating
aims of the Paris Agreement and does not rely on life [estimated at 40 years] by at least 15 years”.101
carbon capture schemes would require phasing out According to the ADB website, it is expected that
50% of the country’s coal capacity by 2031 and the the required funds will amount to approximately
remainder by 2040, at the latest.98 USD 250–300 million, as per the amount allocated
in the CIF-ACT Investment Plan enumerated
The ADB made only one announcement about above.102
the ETM in Indonesia at the G20 Summit in Bali in
November 2022, suggesting they would “jointly As the project operator of Cirebon 1, CEP is made
explore the early retirement of the first coal-fired up of an international consortium of four separate
power plant owned by an independent power corporate entities, Japan’s Marubeni Corporation,
producer (IPP) under ADB’s Energy Transition South Korea’s Korean Midland Power Company and

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Emerging Social, Environmental and Rights-Based Considerations
Samtan Company, along with the Indonesian power would exacerbate the livelihood and health impacts
company PT Indika Energy, with financing from on people living in the area, wreak further havoc
several international sources, including Japan’s Bank on surrounding ecologies and result in continued
of International Cooperation (JBIC), Sumitomo Mitsui heavy GHG emissions.108 Critical questions remain on
Banking Corporation, Mizuho Financial Group and how or whether the ADB will intervene to apply its
MUFG Bank, as well as the Export-Import Bank of safeguards under these circumstances, and whether
Korea and ING Group.103 local communities and workers will be able to file
grievances through the channels available under the
Since the plant began operating in 2012, ADB’s Accountability Mechanism.
communities have been raising concerns about
the devastating impacts on their health and PAKISTAN
livelihoods, including a major rise in severe chronic
respiratory illnesses,104 the loss of coastal fisheries Notably, the ADB continues to support the
and contamination of surrounding land and development of Pakistan’s coal fleet through
coastal areas.105 At the time of writing, a 1,000 MW ongoing financing of the 600 MW coal-powered
expansion of the Cirebon power plant, Cirebon 2 unit at the Jamshoro Power Project in Sindh
(which is being developed by PT Cirebon Energi Province. Although an ETM pre-feasibility study is
Prasarana, a subsidiary of the same parent company moving forward with financing from the ADB, little
as Cirebon 1), is set to begin commercial operations. information is currently available on the ADB website
Therefore, while the terms of the ETM are being about the process of the ETM roll out in Pakistan.
negotiated for the Cirebon 1 site, Cirebon 2 will The ADB has, however, released materials suggesting
begin generating power and exacerbate the social that focus of the ETM is expected to be on early
and environmental harms in the area. In response to retirement of CFPPs and/or high-carbon power
the expansion of the Cirebon coal power complex, plants (HCPPs),109 as well as options for scaling up
residents in the surrounding area have consistently renewable energy sources.110 In terms of specific
called on financiers and project proponents to projects that would be retired or repurposed under
suspend its development specifically because of the the ETM in Pakistan, according to the ADB, “relevant
impacts on their livelihoods, health and surrounding governing authorities will eventually determine which
land and coastal areas.106 assets would be prioritized for early retirement,
subject to available funding and ensuring energy
As the ETM-related negotiations for the Cirebon 1 security through the timely installation of renewable
Project site proceed between the ADB, CEP, PLN replacement capacity”.111
and the Indonesian Investment Authority, it remains
unclear whether the coal power unit will, in fact, be As the Institute for Energy and Financial Analysis
‘repurposed’ to enable business as usual. Notably, (IEEFA) has suggested, aiming to retire coal-based
simultaneous to the ADB’s announcement in power assets would come with many complications
November 2022 that Cirebon 1 would be the first site in Pakistan, especially given that the average
to pilot the ETM, Tokyo-based Marubeni Corporation, operational age of coal projects is about four years
as the largest shareholder of CEP, published the (i.e. the facilities are relatively young and generally
following statement: seen as profitable assets by equity investors, for
example). In addition, new coal projects are expected
“If the four companies [i.e. Marubeni, Korean Midland to be built to replace several oil and diesel projects
Power, Samtan and Indika Energy] can agree on that are planned to be retired soon. Since there is
terms and conditions such as the financing terms and little transparency about PPAs between IPP project
conditions and measures to mitigate the potential operators and public power generation companies, if
impact due to the early retirement of the plant (such the terms are renegotiated for early plant retirement
as the arrangement of an alternative power source), (whether coal, diesel or oil), IEEFA research indicates
the Cirebon 1 Coal-Fired Power Plant is expected to there is a significant risk that the burden of price
be the pilot project to aim for the early retirement of increases would fall on the general population. Also,
the coal-fired power plant by applying this ETM.”107 as the IEEFA asserted: “Care must be taken to ensure
that ADB’s role is additional, and the government
As revealed in an analysis published by Fair Finance doesn’t consider this a bail-out package for these
Guide Japan, such public statements indicate that already retiring assets.”112
the CEP project consortium may be exploring
options to extend the life of Cirebon 1 by relying on In a written response to questions from the
co-firing technologies (i.e. with biomass, ammonia Pakistan-based Alliance for Climate Justice and
or hydrogen as alternative power sources), which Clean Energy about how the ADB will ensure ETM

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Emerging Social, Environmental and Rights-Based Considerations
operationalization will be transparent and include fossil fuel use and storage in the country, it is
meaningful engagement with CSOs, the ADB’s simultaneously being used to finance the feasibility
Central and West Asia Regional Director for the study of the ETM in Pakistan. Specifically, the ETM
Energy Sector stated that the “details for CSO/NGO pre-feasibility study117 is expected to:
engagement will be discussed and agreed among
relevant stakeholders during the TA’s inception • Explore options for the possible phasing out
stage”.113 Meanwhile, in response to concerns that of Pakistan’s coal, diesel and furnace oil power
retired coal power projects may be replaced by projects and replacement with renewable energy
fossil gas, the ADB has suggested that although ETM sources;
financing would not be used directly to support such
facilities: “ADB may still consider supporting mid- • Develop screening criteria to select potential
and downstream gas projects in ADB developing pilot projects for retirement/repurposing;
member countries (DMCs), including Pakistan”.114
• Consider ways to incentivize project investors
and owners to “replace returns from their
Notably, the technical assistance grant allocated
existing CFPP and/or HCPP assets with returns
to support plans for the ETM in Pakistan to date,
on capital reinvested in cleaner renewable
“Preparing Sustainable Energy Projects” (Project
energy assets”;118
53058-001; TA 9756-PAK),115 has different
components. This includes a study posted online • Review the expected impacts on workers,
in July 2022, “Update Techno Economic Feasibility communities and regions in Pakistan, as well as
Study”, which provides recommendations for storing options for a just transition in affected areas; and
and expanding the use of fossil gas and for ramping
up the development of associated infrastructure. • Develop an overarching timeline for
The study also considers liquefied natural gas operationalizing the ETM.
(LNG) options for the purpose of energy security.116
As a result, while ADB’s technical assistance grant The completion of this first planning step would be
on “Preparing Sustainable Energy Systems” (TA expected to lead to a full feasibility study, but no
9756-PAK) is providing financing for studies that information on this has yet been publicly disclosed
recommend options to expand infrastructure for on the ADB’s website.

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Emerging Social, Environmental and Rights-Based Considerations
CONCLUSIONS: EMERGING RISKS AND
CONCERNS ABOUT THE ETM
7
There are a number of social, economic, transmission and distribution infrastructure
environmental and climate risks related to the across the region, including where the ETM will
practical application of the ETM. Most of these be piloted (Indonesia, Pakistan, the Philippines
issues have the potential to exacerbate socio- and Vietnam). If not accompanied by strict
economic, resource, energy and climate injustices, commitments to end the expansion of other
and are embedded in, not peripheral to, the ETM fossil fuel-related projects, shifting away
model. As a result, local, national and regional CSOs from coal power could become an excuse to
are increasingly concerned that the ETM is flawed promote the expansion of gas infrastructure
by design and will be harmful for communities, in the name of energy security in times of
ecosystems, national economies and the climate. transition.

Critically, civil society, community and workers’ have • Provide credible methodologies to ensure coal
noted rights groups are that the ADB’s plans for ETM power project operators are not overpaid, and
operationalization have yet to unequivocally: meaningfully acknowledge that social and
environmental damage would be exacerbated if
• Provide assurances of adherence to rights-based it takes 10 to 15 years to decommission CFPPs
frameworks, such as the UN Guiding Principles on (as proposed under the ETM model to ensure
Business and Human Rights and ILO Conventions market returns for project operators).
(including ILO Convention 169 on Indigenous
Peoples’ rights to land and territories), as well § T
 he ETM model does not rely on any payment
as the applicability of their own social and caps to coal power project operators to
environmental safeguards (at the coal project site accelerate retirement, nor does it require the
and surrounding affected communities), access to terms of retirement to be disclosed (i.e. there
information policies and accountability mechanism is no transparency in renegotiated PPAs).
when/if grievances arise. For example, the ADB will be negotiating
with coal operators through non-disclosure
§ T
 o date, the ADB has yet to provide a agreements on the terms of early retirement
thorough policy analysis demonstrating how and is also proposing to provide loans
its Accountability Mechanism, safeguards, to utility companies to incentivize early
access to information commitments and retirement of coal projects, with references
energy policy provisions will be applied to to the book value120 of these projects. Given
the decommissioning of coal power projects the absence of transparent and disclosed
through the ETM. processes, there is no possibility for workers’
unions, community groups or broader civil
• Clearly align with climate science imperatives society to review agreements. Compensation
by supporting countries to achieve a swift phase- to coal project operators could therefore
out of coal (by 2040 at the latest) in line with the be paid at a highly inflated rate and based
recommendations of the IPCC to keep planetary entirely on voluntary agreements with the
heating as close to 1.5°C as possible.119 asset owners. Importantly, the long-term PPAs
granted to coal project operators mean that
• Ensure fossil fuel-dependent infrastructure and
the book values of USD million/MW do not
associated facilities stay out of the investment
align with project market values, effectively
pipeline.
granting operators greater negotiating
§ A
 lthough ETM-related financing is not expected power.121
to flow directly into supporting any fossil gas
§ T
 he initial proposal for the ETM model
projects as replacement power for coal power
estimated compensation at USD 1 million–1.8
plants targeted for decommissioning, the
million/MW for coal power project owners
ADB has provided technical assistance and
to retire early.122 Similarly, recent analysis
direct financing for LNG power projects and

THE ASIAN DEVELOPMENT BANK’S ENERGY TRANSITION MECHANISM

23
Emerging Social, Environmental and Rights-Based Considerations
 by Transition Zero recommended that to close to 10 GW of coal projects are in the
accelerate retirement, Indonesia’s coal power planning, permitting and construction
projects should be compensated at a rate of stages as of July 2022128). Although the ADB
USD 1.2 million/MW.123 In contrast, Germany’s will seek commitments from pilot countries
coal auction caps on thermal plant retirement to avoid additional new projects from being
are set at approximately USD 151,000/MW, added to the pipeline, no measures are
declining to USD 86,000 by 2026. Even at this being taken to withdraw projects already in
much lower rate, Ember analysts have warned the pre-permitting, permitting and planned
that Germany must “reassess its strategy to stages or to suspend the development
avoid wasting millions of euros funding loss- of coal power units under construction.
making plants and delaying their closure.”124 By continuing to build out coal fleets, the
actors involved are effectively defying
• Focus on existing options to rapidly and reliably climate science imperatives and positioning
replace coal power capacity with non-resource- themselves to undermine the few remaining
intensive renewable energy sources, as there is opportunities to avoid catastrophic
no reason to delay the transition. temperature rise.

§ A
 ccording to Carbon Tracker Initiative, in • Avoid shifting investments into piloting
2022, 7% of Indonesia’s coal capacity is more unproven and speculative carbon “removal”
expensive to operate than new wind or solar schemes, carbon-intensive “repurposing”
power, but this will rise to 100% by 2027. This technologies along with other false energy and
means that “under current regulations 7% of climate solutions.129
coal capacity in Indonesia could be shut down
and replaced with new renewables at a saving § T
 he lack of clarity on the definition of
today” and 100% within five years.125 This clean energy options and parameters for
contrasts with the Indonesian government’s repurposing projects risks incentivizing the
CIF-ACT Investment Plan to power down coal development of false solutions, including
by 2056. Meanwhile, in Pakistan and Vietnam, waste-to-energy incinerators, facilities to burn
Carbon Tracker estimates it already costs woody biomass,130 projects that replace coal
more to keep current coal operations running with ammonia/hydrogen, pumped hydropower,
than to develop new solar or wind projects.126 carbon capture and storage infrastructure
In the Philippines, while it is cheaper to or battery plants and nickel smelting. These
develop new renewable energy facilities than projects would, in turn, exacerbate the
new coal projects, Carbon Tracker modeling unsustainable use of local water and land
suggests that within eight to nine years, it will resources and lead to violations of local
be more expensive to keep the country’s coal residents’ access to land, water and livelihoods.
fleet running than to develop new wind or However, if these projects are financed
solar projects.127 through blended mechanisms or financial
intermediary modalities, it is not clear how or
• Require the implementing partners of ETM whether compliance with the ADB’s safeguard
projects (coal project operators, utility standards will be strictly applied. Nor is it clear
companies and other financiers) that remain how affected communities will know whether
involved in expanding the global coal fleet ADB financing is involved so they can raise
to provide time-bound commitments – on a grievances when/if they arise through the
portfolio and project-by-project basis – to hasten ADB’s independent Accountability Mechanism.
the retirement of these facilities and suspend all
plans for new and expanded projects. • Proactively consider the risks of reprisals and
retaliation to community members and CSOs
§ While the ETM will partner with working in and around coal power projects
governments, power and utility companies targeted for retirement.
and other financiers to retire operational
projects, this may be overshadowed by §  he ADB has yet to clarify how it would
T
the sheer number of projects still in the respond to cases of reprisals and retaliation
permitting, planning and construction for community members who raise
stages (e.g. in Indonesia, 7.26 GW of coal questions or concerns about coal power
power projects are still in the planning projects operating under accelerated
and permitting stages and 18.7 GW in the retirement timelines.
construction stages, while in Pakistan,

THE ASIAN DEVELOPMENT BANK’S ENERGY TRANSITION MECHANISM

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Emerging Social, Environmental and Rights-Based Considerations
• Heed calls by national and local social • Support the clean-up and decommissioning
movements in ETM pilot countries for faster costs of the fossil fuel projects they have
and transparent phase-out of coal power sector, financed, in consultation with governments,
for reparations and restitution for coal-affected workers’ associations, communities and allied
communities and for the just transition to include CSOs.
broader, more systemic changes.
• Undertake a full independent evaluation of their
• Avoid increasing national debt burdens by legacy and current coal project investments,
prioritizing grants instead of loans. Otherwise, with an assessment of how these projects can
loans to national utility companies to retire projects be urgently retired (or suspended if still in the
and build/invest in clean energy infrastructure may planning or construction stages) in line with the
create additional financial burdens,131 compounding imperatives of climate science (no later than
high levels of foreign debt.132 2040). Clarify the protocols in place to respond
if community members who raise concerns
Where the ADB and WBG have specifically been about current or past ADB/WBG coal project
involved in bolstering the coal sector, such as in investments, or the ETM process, face reprisals.
Indonesia, Pakistan, the Philippines and Vietnam, but
also more broadly across the region, they should: • Support governments to develop a coal phase-
out schedule by 2040, assigning specific
• Halt any ongoing investments that support or closure dates for each coal power unit without
enable expansion of the coal industry (including overcompensating a dying and highly polluting
via financial intermediary on-lending). industry or relying on false short-term solutions.
This process should be undertaken in full
• Provide compensatory reparations and consultation with workers’ associations and civil
restitution to communities where coal power society, and in conjunction with the development
projects received institutional support. of corresponding legislation.

THE ASIAN DEVELOPMENT BANK’S ENERGY TRANSITION MECHANISM

25
Emerging Social, Environmental and Rights-Based Considerations
 NOTES

1 For a range of advocacy efforts across the region related to 9 See, for example: Carbon Tracker (2021, June), Do Not Revive
coal, see, for example: EnvJustice (2022, November), EJ Atlas Coal: Planned Asia coal plants a threat to Paris. Accessed
Coal Map. Accessed online. online.

2 See, for example: NGO Forum on ADB (2021, November 2), 10 See, for example: ADB Go Fossil Free website (updated
“More than 60 Asian CSOs call on ADB to clarify details of its 2021, June/July). Accessed online. Also see: Urgewald (2021,
coal retirement mechanism proposal”. Accessed online. Also August), “The World Bank Drives Billions into Fossil Fuel
see: WALHI and Friends of the Earth Japan (2022, November Investments”. Accessed online.
14), “Climate, Environment and Social Conditions Require
a Further Earlier Closure of Cirebon Coal Plant Unit 1 and a 11 See, for example: “Threats and Murders of Environmental
Halt to the Commencement of Operation in Cirebon Unit 2”. Activists Fighting Coal In The Philippines” (Section 5) in
Accessed online. Philippine Movement for Climate Justice, Re: Complaint
concerning IFC investments in and financing to RCBC (2017).
3 Repurposing in this context typically refers to options Accessed online.
for retrofitting coal projects to be co-fired with biomass,
ammonia or hydrogen. See, for example, the recent statement 12 See, for example: World Bank (2022), Just Transition for All:
published on FoE Japan (2022, November 1), “Indonesian The World Bank Group’s Support to Countries Transitioning
CSOs Submit a Petition to the Japanese Government: ‘No Away from Coal. Accessed online.
more prolonging the lifespan of fossil fuel and destroying
the environment and livelihoods in Indonesia in the name 13 See, for example: NGO Forum on ADB (2021, November),
of a ‘Just Energy Transition’”. Accessed online. Also see the “Towards a swift and just end to coal: A statement of civil
feature in Mongabay News: Giseburt, A. (2022, August 29), society and communities in Asia-Pacific urging the Asian De-
“Biomass cofiring loopholes put coal on open-ended life velopment Bank not to gamble with our climate plight with a
support in Asia”, online: Accessed online. premature coal buy-out scheme”. Accessed online.

4 See, for example: NGO Forum on ADB (2022, June 17), 14 See: ADB Energy Transition Mechanism website (2022, No-
“Beyond ACEF 2022: Challenging the ADB to Stop Financing vember).
False Climate and Energy Solutions”, online: [Link]
[Link]/post/beyond-acef-2022-challenging-the-adb- 15 ADB (2018), Strategy 2030: Achieving a Prosperous,
to-stop-financing-false-climate-and-energy-solutions. (17 Inclusive, Resilient, and Sustainable Asia and the Pacific.
June 2022) Accessed online. See also: Friends of the Earth Accessed online.
International (2022, October 27), “COP27 briefing: What’s
at stake regarding false solutions?”. Accessed online. Also, 16 ADB (2022), “Where We Work”. Accessed online.
Asia Pacific Forum on Women, Law and Development (2022,
November), “What are False Solutions?”. Accessed online. 17 ADB (April 2022), ADB Annual Report 2021. Accessed online.

5 See, for example: Roy, C. (2022, November), “Climate 18 See: ADB (2022), “Public Sector (Sovereign) Financing”.
finance in Asia: Assessing the state of climate finance in Accessed online.
one of the world’s most climate vulnerable regions”, Oxfam
International. Accessed online.
19 See: ADB (2022), “Private Sector (Non-Sovereign)
Financing”. Accessed online. Note that some private sector
6 IEA (November 2022), Coal in Net Zero Transitions: Strat- financing is via financial intermediary facilities and, therefore,
egies for rapid, secure and people-centred change, World not traceable as direct iniiivestments in the development of
Energy Outlook 2022 Special Report on Coal Transition. specific projects (See: “What are the areas currently covered
Accessed online. by ADB’s private sector?”).

7 UNESCAP (2021, February), Coal Phase Out and Energy

20 See, for example: ADB (2021, November 5), “Private Sector’s
Transition Pathways for Asia and the Pacific. Accessed online.
Role in Combating Climate Change in Asia and the Pacific”.
Accessed online. Note that this field is not simply confined
8 The grim reality of the impacts of coal on communities is to renewable energy developments, such as wind and solar
well documented. For instance, one peer-reviewed study projects. It may also include renewable energy battery
estimated that coal pollution from currently operating power developments, the piloting of facilities powered by blue/
plants in Southeast Asia results in approximately 20,000 green/turquoise hydrogen, or investments in carbon capture
excess premature deaths every year, which are expected and storage technologies, among others.
to rise by 2030 to 70,000 per year (assuming planned and
under-construction coal power plants in the region become
21 See: ADB (2022, November), Operations Manual. Accessed
operational). The emissions of sulfur oxides, nitrogen oxides
online.
and other noxious particulate matter are also leading causes
of lung cancers, ischemic heart diseases, chronic obstructive
22 See: ADB Access to Information website (2022). Accessed
pulmonary disease, as well as other chronic cardiovascular
online.
and respiratory diseases in the region. See: Koplitz, S. et al.
(2017, January), “Burden of Disease from Rising Coal-Fired
Power Plant Emissions in Southeast Asia”, Environ. Sci. 23 See: ADB Accountability Mechanism website (2022).
Technol., 51, 3, pp. 1467–1476. Accessed online. Accessed online.

THE ASIAN DEVELOPMENT BANK’S ENERGY TRANSITION MECHANISM

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Emerging Social, Environmental and Rights-Based Considerations
24 See: ADB Independent Evaluation Department website 44 Ibid. para 82.
(2022). Accessed online.
45 At the time of writing, for example, the ADB still has an
25 See: ADB (2009, June), “Safeguard Policy Statement”. active direct investment in the coal power sector in Pakistan,
Accessed online. through its support for a 600 MW unit at the Jamshoro Coal
Power Project, including site development, operational and
26 See: ADB (2021, September), Energy Policy: Supporting Low- maintenance support and on-the-job training for workers.
Carbon Transition in Asia and the Pacific. Accessed online. Notably, at this site, contracts for construction were signed
only in 2018 and, as such, the ADB has set the indicative date
for closing its investment in the project in 2027. See: ADB
27 See: ADB (2018, July). Strategy 2030: Achieving a
(2022, July), “Project 47094-001 | Pakistan: Jamshoro Power
Prosperous, Inclusive, Resilient, and Sustainable Asia and
Generation Project”. Accessed online.
the Pacific. Accessed online. Relevant areas highlighted
for future financing include a focus on support for climate
change adaptation and mitigation measures, environmental 46 For a critical review of the ADB’s 2021 Energy Policy, see:
sustainability and increased support to the private sector. NGO Forum on ADB (2021, October), “Letter to ADB Board of
Directors regarding upcoming vote on the ADB’s 2021 Energy
Policy”. Accessed online. Also see: Fair Finance Asia (2021,
28 See: ADB Independent Evaluation Department (2020,
September 1), “Fair Finance Asia’s Response And Feedback On
August), “Sector-wide Evaluation: ADB Energy Policy and
ADB’s Draft Energy Policy”. Accessed online.
Program, 2009–2019”. Accessed online.

47 See: ADB (2021, February), “Project 55024-001: “Opportunities to

29 See: ADB (2020, August 31), “Independent Evaluation
Accelerate Coal to Clean Power Transition in Selected Southeast
Recommends ADB Formally Withdraw from Financing New
Asian Developing Member Countries”. Accessed online.
Coal-Fired Energy Projects”. Accessed online.

48 See: ADB (2021, July), “Project 55124-001: “Regional:

30 A critical review of ADB’s draft energy policy was submitted
Accelerating the Clean Energy Transition in Southeast Asia”.
to the ADB by the NGO Forum on ADB along with more than
Accessed online.
70 CSOs from across the Asia region and beyond. See: NGO
Forum on ADB(31 August 2021), “Critique of the ADB’s 2021
Energy Policy Working Paper”. Accessed online. 49 In this context, the exact meaning of “repurposing” is vague. It
may entail retrofitting the project to be fired by woody biomass
or blue hydrogen (sourced from fossil gas) or using the same
31 See: ADB Energy Policy Review website (2021, October).
land as a site for solar panels/wind turbines.
Accessed online.

50 For a comprehensive overview of different coal transition models

32 ADB (2009, June), Energy Policy 2009 (para 33). Accessed
emerging in different country and regional contexts, see, for
online.
example: Calhoun, K., et al. (2021, November), “Landscape of
existing financial mechanisms for the coal transition” in Financing
33 Ibid. para 39.
the Coal Transition: Pragmatic Solutions to Accelerate an
Equitable, Clean Energy Future. RMI. Accessed online.
34 Ibid. para 40.
51 See, for example: UNESCAP (2021, February), Coal Phase
35 ADB (2017, December), “Project 39595-033 | Viet Nam: Mong Out and Energy Transition Pathways for Asia and the Pacific.
Duong 1 Thermal Power Project - Tranche 2”. Accessed online. Accessed online. Also reiterated in a statement by UN Secretary-
General António Guterres in the lead up to the 26th UN Climate
36 ADB (2017, November), “Project 43906-014 | Philippines: Conference of the Parties (COP) in 2021, posted online.
Visayas Base-Load Power Project”. Accessed online.
52 See: UN OHCHR (2011), Guiding Principles on Business and
37 ADB (2019, October), “Project 44013-013 | China, People’s Human Rights. Accessed online.
Republic of: Shanxi Energy Efficiency and Environment
Improvement Project”. Accessed online. 53 See: NGO Forum on ADB (2021, November 1), “Towards a
swift and just end to coal: A statement of civil society and
38 ADB (2022, July), “Project 47094-001 | Pakistan: Jamshoro communities in Asia-Pacific urging the Asian Development
Power Generation Project”. Accessed online. Bank not to gamble with our climate plight with a premature
coal buy-out scheme”. Accessed online.
39 ADB (2017, May), “Project 48029-001| Mongolia: Coal to
Cleaner Fuel Conversion for Heating in Ger District and 54 NGO Forum on ADB (2021, November 2), “More than 60
Power Generation”. Accessed online. Asian CSOs call on ADB to clarify details of its coal retirement
mechanism proposal”. Accessed online.
40 ADB (2015, February), “Project 42074-012 | China, People’s
Republic of: Recycling Waste Coal for Power Generation”. 55 ADB (2021, November 3), “ADB, Indonesia, the Philippines
Accessed online. Launch Partnership to Set Up Energy Transition Mechanism”.
Accessed online.
41 See, for example: NGO Forum on ADB (2017, July), “A
Visual Testimony of Asian Development Bank’s 50 Years 56 In this regard, a publication released in December 2022
of Destruction” (especially pp. 93–98). Accessed online; by Fair Finance Asia in collaboration with the Stockholm
Indus Consortium (2022, October), “ADB Funded Jamshoro Environment Institute, Financing the Just Energy Transition
Coal & Gas Power Plant Deteriorates Socio-Environmental in Asia: Actions by Key Actors to Address, affirms that in the
Conditions of Surroundings”. Video. (Accessed online. process of transitioning from reliance on coal power projects,
comprehensive long-term planning and policy measures
42 See, for example: Licas News (2020, September 18), “ADB are needed at the national level to “mitigate the adverse
accountability on Philippine coal woes sought”. Accessed environmental and social impacts of [expansion of the]
online. renewables” sector, ensure Indigenous Peoples’ rights to give or
withhold consent for the use of lands, territories and resources
are respected, protect the rights of workers and communities
43 See: ADB (September 2021), Energy Policy: Supporting Low-
affected by the transition and make space for the “active
Carbon Transition in Asia and the Pacific. (para 75) Accessed
online.
and meaningful engagement and participation of women”.
Accessed online.

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27
Emerging Social, Environmental and Rights-Based Considerations
57 See: ADB (2022, November 14), “Q&A: ADB, Indonesia 75 ADB (2022, July), “Accelerating the Clean Energy Transition
Partners Sign MOU to Explore First Coal Utility Retirement in Southeast Asia: Regional Scoping Report for Strategic
under ETM”. Accessed online. Environmental and Social Assessment Applied to the Energy
Transition Mechanism in Southeast Asia” Environmental
58 See: ADB (2022, October), “Project 56140-001| Indonesia: and Social Assessment Applied to the Energy Transition
Accelerating Indonesia’s Clean Energy Transition Program – Mechanism in Southeast Asia, pp. 19, 22, 26, 33, 36, 39, 42,
Phase 1”. Accessed online. 44, 47, 52, 54, 61 and 67. Accessed online.

59 For more details, see: ADB (2022, October), “Energy 76 ADB (2022, October 4), “Energy Transition Mechanism (ETM)
Transition Mechanism Partnership Trust Fund: What is the In Indonesia: Strategic Environmental and Social Assessment
fund?”. Accessed online. Scoping Workshop”. PowerPoint presentation.

60 ADB (October 2021), “Regional: Opportunities to Accelerate 77 See: ADB and World Bank Group (2022, October 3),
Coal to Clean Power Transition in Selected Southeast “ADB/WBG Climate Investment Funds Accelerating Coal
Asian Developing Member Countries: Technical Assistance Transition Investment Plan: 1st Public Consultation on the IP”.
Consultant’s Report| Project 55024-001”. Accessed online. PowerPoint presentation.

61 ADB (2022, October), “Major Change in Trust Fund: Energy 78 ADB (2022, July 27), “The Energy Transition Mechanism
Transition Mechanism Partnership Trust Fund under the Clean Program for Southeast Asia Update”. PowerPoint
Energy Financing Partnership Facility”. Accessed online. presentation.

62 Ibid. 79 See: ADB (2022, July), “Why ADB’s Energy Transition

Mechanism is Prioritizing Safeguards and a Just Transition”.
Accessed online.
63 Carbon Tracker Initiative (2022, August), “Country Profiles –
Power and Utilities: Indonesia”. Accessed online.
80 Ibid.
64 See: ADB (2021, October), “Project 55024-001| Opportunities
to Accelerate Coal to Clean Power Transition in Selected 81 ADB (2022, August 18), “Just Transition in the Energy
Southeast Asian Developing Member Countries”, Technical Transition Mechanism”. PowerPoint presentation.
Assistance Consultant’s Report. Accessed online.
82 Ibid.
65 Technical lifespan of a coal project is assumed to be 40 to 50
years. 83 See, for example, the open statement issued by more than
35 organizations across the region during the ADB’s flagship
66 ADB (2022, July 27), “The Energy Transition Mechanism Annual Asia Clean Energy Forum, “Beyond ACEF 2022:
Program for Southeast Asia Update”, PowerPoint Challenging the ADB to Stop Financing False Climate and
presentation. Energy Solutions” (2022, June 17). Accessed online.

67 ADB (2022, June 17), “Energy Transition Mechanism (ETM): 84 Fair Finance Asia (2021, November), “A Future Without Coal:
Paving the Way toward Coal Phase Out in Indonesia”, ACEF Banking on Asia’s Just Energy Transition”. Accessed online.
2022 PowerPoint presentation. Accessed online.
85 Oxfam International (2022, December), “Towards a Just
68 See: Climate Investment Funds (2022, October), Energy Transition: Implications for communities in lower- and
“Accelerating Coal Transition: From Coal to Clean”. Accessed middle-income countries”. Accessed online.
online.
86 ADB (2022, July), “Preparing Sustainable Energy Projects –
69 ADB (2022, October), “Major Change in Trust Fund: Energy Opportunities to Accelerate the Transition from Coal-Fired
Transition Mechanism Partnership Trust Fund under the Clean and/or High Carbon Power Generation to Clean Power
Energy Financing Partnership Facility”. Accessed online. Generation in Pakistan – Senior Expert on Energy Policy and
Markets| Project 53058-001” (Tender). Accessed online.
70 Ibid.
87 ADB (2022, October), “Project 56140-001 | Indonesia:
Accelerating Indonesia’s Clean Energy Transition Program –
71 For instance, ADB’s safeguards include the polluter pays prin-
Phase 1”. Accessed online.
ciple, the precautionary principle, pollution prevention/minimi-
zation of polluting emissions and discharges, as well as health
and safety provisions for communities and workers. See: ADB 88 ADB (2022, October), “Project 56140-001 | Indonesia:
Safeguard Policy Statement (June 2009). Accessed online. Accelerating Indonesia’s Clean Energy Transition Program
– Phase 1”, Initial Poverty and Social Assessment. Accessed
online.
72 ADB (14 November 2022), “ADB and Indonesia Partners Sign
Landmark MOU on Early Retirement Plan for First Coal Power
Plant Under Energy Transition Mechanism”. Press release. 89 See: CIF-Accelerating Coal Transition (ACT) (2022, October),
Accessed online. “Indonesia Country Investment Plan”. Accessed online.

73 ADB (2022, July), “Accelerating the Clean Energy Transition 90 Ibid.

in Southeast Asia: Regional Scoping Report for Strategic
Environmental and Social Assessment Applied to the Energy 91 Although specific financial commitments have yet to be
Transition Mechanism in Southeast Asia“. Accessed online. published on the ADB website, the first IPP project to be
piloted for retirement under the ETM was identified as the
74 See: UN OHCHR (2011), “UN Guiding Principles on Business Cirebon 1 coal-fired power plant during the G20 Summit in
and Human Rights”. Accessed online. Bali. See: ADB (2022, November 14), “ADB and Indonesia
Partners Sign Landmark MOU on Early Retirement Plan for
First Coal Power Plant Under Energy Transition Mechanism”.
Accessed online.

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Emerging Social, Environmental and Rights-Based Considerations
92 ADB and World Bank Group (2022, October 3), “ADB/WBG 108 Fair Finance Guide Japan (2022, December), “Briefing paper:
Climate Investment Funds Accelerating Coal Transition Issues related to the decision on the First Use of the Energy
Investment Plan: 1st Public Consultation on the Investment Transition Mechanism (ETM) – Will the Cirebon 1 Coal-Fired
Plan”. PowerPoint presentation. Power Plant in Indonesia be shut down at an appropriate
early stage?” Accessed online.
93 See: CIF-Accelerating Coal Transition (ACT) (2022, October),
“Indonesia Country Investment Plan”, p. 33. Accessed online. 109 The ADB defines “HCPPs” narrowly as power projects that
run on diesel and refined furnace oil.
94 While power plant repurposing is proposed by the World
Bank to include options for the development of biomass/ 110 ADB (2022, August 18), “ETM Introduction: Islamic Republic
waste-to-energy, solar PV sites, pumped hydropower and of Pakistan”. PowerPoint presentation.
battery storage, the closure of coal mines may include
the installation of a solar PV site, “community and worker 111 ADB (2022, September 23), “Response to Pakistan Alliance
education programs on energy transition”, and converting for Climate Justice and Clean Energy”.
lands into “destinations for tourism, education and other
commercial activity” (See: CIF-ACT Investment Plan, p. 33).
112 Isaad, H. (2021, December 20), “IEEFA: A word of caution
for Pakistan’s inclusion in the ADB Energy Transition
95 See: Government of Indonesia (2022, October), CIF-ACT Mechanism”. IEFFA. Accessed online.
Investment Plan, p. 78.
113 ADB (2022, September 23), “Response to Pakistan Alliance
96 Ibid., p. 74.
for Climate Justice and Clean Energy”.

97 The term “ultra-super critical” refers to the heating

114 Ibid.
technology used at the site for the boiler, which increases
the percentage of electricity generated from coal firing.
For example, subcritical plants can turn 30–35% of the 115 ADB (2022, October), “Project 53058-001 | Pakistan:
energy generated into electricity, whereas ultra-supercritical Preparing Sustainable Energy Projects”. Accessed online.
plants turn 45% of energy from coal into electricity. The
emissions from burning coal, even under more “efficient” 116 ADB (2022, July), “Project 53058-001 | Pakistan: Preparing
conditions, make it scientifically incompatible with scenarios Sustainable Energy Projects: Update Techno Economic
recommended by the IEA and IPCC to limit global heating to Feasibility Study Consultant’s Report”. Accessed online.
as close to 1.5C as possible, in line with the Paris Agreement.
117 ADB Consultant Management System (2022, July 9),
98 Carbon Tracker Initiative (2022, August), “Country Profiles – “TA-9756 PAK: Preparing Sustainable Energy Projects –
Power and Utilities: Indonesia”. Accessed online. Opportunities to Accelerate the Transition from Coal-Fired
and/or High Carbon Power Generation to Clean Power
99 ADB (2022, November 14), “ADB and Indonesia Partners Sign Generation in Pakistan – Senior Expert on Energy Policy and
Landmark MOU on Early Retirement Plan for First Coal Power Markets (53058-001)” (Tender). Accessed online.
Plant Under Energy Transition Mechanism”. Press release.
Accessed online. 118 Ibid.

100 Ibid. 119 Intergovernmental Panel on Climate Change (IPCC) (2018),

Special Report: Global Warming of 1.5°C. Accessed online.
101 ADB (2022, November 14), “Q&A: ADB, Indonesia Partners
Sign MOU to Explore First Coal Utility Retirement under 120 Note: “Book value” in this context refers to the cost of an
ETM”. Accessed online. asset minus accumulated depreciation. However, these values
are determined by utility/power companies without requiring
102 Ibid. public transparency.

103 Global Energy Monitor (2021, August 21), “Cirebon Power 121 Universal Owner Initiatives (2022, April), “Refinancing
Station”. Accessed online. Coal: Do Private Decommissioning Funds Have Misaligned
Incentives?”, p 16.
104 Ibid.
122 See: Kanak, D. (2020, August), For Health and Climate:
Retiring Coal-Fired Electricity and Promoting Sustainable
105 See, for example: Hicks, R. (2001, April 21), “Dutch bank ING
Energy Transition in Developing Countries. Program on
draws complaint for financing controversial Indonesian coal
International Financial Systems. Accessed online. See also:
plants”, Eco-Business. Accessed online.
Kanak, D. (2021, January), The Davos Agenda: How to
accelerate the energy transition in developing economies.
106 See for example: Friends of the Earth Japan and WALHI Accessed online.
(2022, November 28), “Cirebon Coal Plant Unit 2,
Indonesia: Residents Submit Opinion – ‘JBIC Must Suspend
123 Transition Zero (2022, October 13), Financing Indonesia’s
Loan and Re-examine Examiner’s Findings”. Accessed
Coal Phase-out: Coal Asset Transition Tool. Accessed online.
online. In an appended “Opinion on the Report of the JBIC
Examiners regarding the Cirebon Coal-fired Power Plant
Project – Unit 2 in West Java, Indonesia,” residents affected 124 Ember (2020, December), “German State Awards €317 Million
by the Cirebon 2 coal-fired power plant provide detailed To Loss-Making Coal Plants”. Accessed online.
reasons why the development of the project should be
halted. 125 Carbon Tracker Initiative (2022, August), “Country Profiles –
Power and Utilities: Indonesia”. Accessed online.
107 Marubeni Corporation (2022, November 14), “Efforts towards
Reducing Greenhouse Gas Emissions in a Coal-Fired Power 126 Carbon Tracker Initiative (2020, March), “How to waste
Plant in Indonesia: Joint Study on Potential Reductions in the over half a trillion dollars: The economic implications of
Plant’s Operational Term through the Utilization of an Energy deflationary renewable energy for coal power investments”.
Transition Mechanism”. News Release. Accessed online. Accessed online.

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29
Emerging Social, Environmental and Rights-Based Considerations
127 Ibid. 130 See, for example, the consequences of a similar coal
retirement scheme in Chile: Programa Chile Sustentable
128 See, for example: Global Energy Monitor (2022, July), “Coal (2022, October), “Decarbonization in Chile: From Coal to
Plant Tracker Summary Tables: Coal Plants by Country Biomass – A False Solution”. Accessed online.
(MW)”. Accessed online.
131 See, for example, concerns raised about the coal retirement
129 See, for example: NGO Forum on ADB (2022, June plans moving forward in South Africa: Climate Home News
17), “Beyond ACEF 2022: Challenging the ADB to Stop (2022, October 22), “Breakdown: Who is contributing what to
Financing False Climate and Energy Solutions”. Accessed South Africa’s clean energy shift?”. Accessed online.
online. For an overview of false climate and energy
solutions, see the popularized materials developed by the 132 The risks of climate financing leading to exacerbated debt
Asia Pacific Forum on Women, Law and Development (2022, burdens were reiterated in the recent Oxfam International
November), “What are False Solutions?” Accessed online. report by Roy, C. (2022, November), Climate finance in Asia:
For specific concerns about repurposing coal projects, see: Assessing the state of climate finance in one of the world’s
FoE Japan (2022, November 1), “Indonesian CSOs Submit a most climate vulnerable regions, for example, pp. 4–5.
Petition to the Japanese Government: ‘No more prolonging Accessed online.
the lifespan of fossil fuel and destroying the environment
and livelihoods in Indonesia in the name of a Just Energy
Transition’”. Accessed online.

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Emerging Social, Environmental and Rights-Based Considerations
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 SUPPORTED BY

THE ASIAN DEVELOPMENT BANK’S ENERGY TRANSITION MECHANISM

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Emerging Social, Environmental and Rights-Based Considerations