“China needs to do something which can help it be recognised as a responsible member of the international economic community and maybe in the future be recognised as a responsible leader.”
This was the message of the Asia Infrastructure Investment Bank (AIIB), uttered by its President Jin Liqun this month, whilst flagging his ambition to rival other lenders such as the World Bank and the Asia Development Bank (ADB).
The Bank’s first major opportunity to demonstrate this ‘responsibility’ will come with the AIIBs new ‘Energy Sector Strategy’ due to be unveiled at Jeju in South Korea in mid-June.
The Strategy could not be released at a more pivotal moment, as many parts of Southeast Asia are on the threshold of major energy expansions, which to a large extent are reliant on multilateral lenders for finance.
With its economies experiencing massive growth, Southeast Asia’s power demands are presently growing as well. Indonesia alone is set to build up to 35GW of new energy infrastructure before 2025.
Power and development should not come at the expense of the health and well-being of people, nor does it need to.
Given the current consensus of the international community on the issue of climate change, as expressed in the Paris Agreement, there is no more room for new coal anywhere in the globe, especially if the aspirational goal of keeping the earth at a global average temperature of 1.5 degrees-Celsius is to be achieved.
There is little doubt it is much easier for an unambitious multilateral lender to fall back on the old way of doing things and finance coal-power plants, rather than developing new, cleaner alternatives.
Funding renewable energy in Southeast Asia requires more agility, but that is all the more reason for the AIIB to step up.
Given Mr. Jin’s emphasis on the ‘pioneering spirit’ of the AIIB, it is only logical that the Bank should embrace new and clean energy technology and not clinging on to dirty energy of the past, no matter how much coal miners such as Australia are desperate to continue selling their product, no matter the cost.
It would be irresponsible and contrary to the Bank’s expressed objectives to bow to the desire of the fossil fuel industry by financially propping up coal plants, which saddle these nations with decades of foul, deadly air and outdated technology, whilst threatening the stability of the global climate.
The AIIB need only look to countries such as India to see that renewable energy is not only environmentally responsible, but also economically the right choice for growing economies.
This month, costs for solar in India hit another record low of US$37/MWh, dropping an astounding 45% since January 2016 when India’s solar record low was set.
Solar power in India is now cheaper than imported coal and competitive with domestic coal plants, with costs declining fast as technology and efficiency improve. In fact, in the past two weeks alone, 7.6GW of proposed new coal plant proposals have been abandoned in India for the simple reason they can no longer compete on price.
In many ways, it is also fitting that the AIIB Energy Strategy launch should be in South Korea, as that country is emblematic of the rapidly transitioning world.
As recently as last year, coal exporters were looking to Seoul as one of the last hopes for the industry. But this has been extinguished by the election of President Moon this month, who ran on a platform of cutting air pollution by shutting down old coal plants and re-assessing whether new ones will be built.
Financing clean energy makes sense, as demonstrated by the fact that as early as 2015, investment globally in renewables was double that into fossil fuel generation capacity.
Of equal importance is the potential of renewable energy to finally make power accessible to 120 million people without electricity in Southeast Asia alone, something which coal-fired power plants have failed to do.
AIIB stands at an opportune moment where it can either be just one of the players in a game which disenfranchises millions from the promise of energy and development, or it can choose the more meaningful path of changing the rules of the game.
What is at stake is no less than the future, and it would be a waste if AIIB chooses to simply adopt the ways of the past. Coal is an industry of a bygone era and should simply be written off the agenda for any investor making a claim to be “responsible”, either from an environmental or economic perspective.
The world is switching to clean energy. Only by standing strong on its core value of being “Lean, Clean and Green” can the AIIB can be truly responsible in helping forge the sustainable path that Southeast Asia needs.
Gerry Arances is the Convenor of the Center for Energy, Ecology and Development (CEED)