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Funding for new coal projects drying up fast in Southeast Asia as climate pressures mount - 

An exodus of financing for new coal projects in Southeast Asia is heaping pressure on new regional coal power projects and the companies and governments hoping to persist with burning fossil fuels for energy. 

The Asian Development Bank (ADB) delivered yet another blow to regional coal financing when it announced last Friday (May 7) that it would conditionally cease funding new coal-fired power stations as well as coal mining and oil and natural gas production and exploration.

It follows a raft of Southeast Asian banks and development banks and export credit agencies (ECAs) from China, Japan and South Korea pulling their support for dirty energy generation, as ambitious climate change targets filter through the sector.

“If these banks all stop financing, coal is dead because coal is not bankable without government subsidised finance,” he said.

ADB announced a major - but expected - shift in policy following mounting demands for it to cease supporting projects not aligned with tackling climate change. 

"Coal and other fossil fuels have played a large part in ensuring access to energy for the region's economic development, but they have not solved the energy access challenge, and their use harms the environment and accelerates climate change," the bank said in its new draft energy policy, while not ruling out supporting natural gas projects in the future, under certain conditions.

The development bank said that it has invested US$42.5 billion in the energy sector across the region between 2009 and 2019, but last invested in a new coal plant eight years ago in Pakistan. Last month, it pledged to target US$80 billion in climate financing by 2030.

It follows pledges from the Japanese and South Korean governments to end or tighten the financing of overseas fossil fuel plants, which includes projects in the ASEAN region, as both countries upped their climate change target commitments last month.

Globally, coal funding is on life support - funding for new projects dropped in 2019 to the lowest levels seen in a decade. Yet Southeast Asia remains a holdout on the trend, contributing to the growth of a commodity fast reaching its expiry date.
It means that some countries will continue to persist with coal as long as they can. And despite all the financial headwinds, Fitch Solutions analysis does not predict coal demand to peak until 2028, and new coal projects still account for more than an estimated 40 per cent of total power capacity in Asia’s power project pipeline.

“Coal will remain the dominant generation source in the regional power mix, despite its share falling slightly over the coming decade,” said Sabrin Chowdhury, a senior commodities analyst at Fitch Solutions.

“This is largely due to several governments across the region retaining an ongoing commitment to coal, as it remains the most practical means to stimulate affordable electricity generation growth at the pace and scale needed by many emerging markets in the region at present,” she said//CNA