Asian Development Bank Consortium is Buying Out Coal-Fired Power Plants to Shut Them Down

With over one-fifth of all greenhouse gas emissions produced by coal-fired electricity generation, with a high concentration of the worst offenders of those plants in Asia.

In response to this, some financial institutions have taken it on themselves to create a plan to combat this issue. The British insurer Prudential, along with other banking groups such as HSBC, Citi, and BlackRock Real Assets, is collaborating with the Asian Development Bank to buy out coal-fired power plants in Asia in order to shut them down in the next 15 years. 

The plan, known as the “energy transition mechanism” (ETM), is designed to limit the use of polluting fossil fuels. The 15-year timeframe will allow workers to find new jobs, as well as encourage other countries to use sustainable energy instead of coal-fired electricity. According to ADB's vice president for East Asia, Southeast Asia, and the Pacific, Ahmed M. Saeed, this plan will diminish the operational lifespan of the power plants, as the buyer would close down the plant in 15 years, instead of 50 years. This way, the carbon emission will be effectively cut by 35 years. 

Don Kanak, Prudential Insurance Growth Markets chairman, stated that the world couldn’t possibly meet the Paris climate targets unless we accelerate the retirement and replacement of existing coal-fired electricity. Buying the plants seems like a good idea, but the plan doesn’t answer essential questions like, how are they going to convince the owners to sell the plant, what are they doing with the plant after it closes, and what role would carbon credits play. 

Despite the lack of answers, the ADB hopes to release the plan on the COP26 climate conference, which is expected to be held in Scotland in November. Alok Sharma, president-designated of the COP26, said the consignment of coal would be his personal priority, due to the major role it plays in the climate crisis we’re facing. 

As expected, this buy-out-plants plan has raised some eyebrows among climate campaigners due to the recent plans of some institutions to finance new coal plants in Asia. For reference, HSBC participated earlier this year in a $400m (£290m) loan to Adaro Energy, an Indonesian company that produced 54M tonnes of coal in 2020.

Adam McGibbon, a campaigner at Market Forces, stated that the plan would only cause an impact if HSBC commits to quit financing the expansion of the fossil fuel industry and phases it out, following the Paris agreement to reach climate targets in the upcoming decades. Otherwise, HSBC should be rightfully accused of just trying to get money from both ends of the climate catastrophe.