As world leaders resume their climate talks in Glasgow this week, many will hope to sound the death knell for coal as a global source of power. Indeed, a coalition of more than 40 countries including Poland, Chile and Vietnam, have pledged to phase out coal in the 2030s to the 2040s at the latest.
 
The Asian Development Bank last week announced its plans to launch a new $2.5bn to $3.5bn fund focused on buying up coal power plants in Southeast Asia with the aim of shutting them down early.
 
Piloted in Indonesia, Vietnam and the Philippines, the Energy Transition Mechanism will look to close down 50% of coal-fired power plants in those three countries, a goal which would cost between $30bn and $60bn. The bank plans to team up with other funding sources, including governments, philanthropy and private investors, to access low-cost loans to purchase the utilities. The plants will continue to operate until the loans are repaid, then they will be shuttered.
 
Under this model, it is estimated that a coal plant with 20 years remaining in its operational life might be able to close down six to eight years earlier. In addition to buying coal plants, the programme will also use incentives to pay certain operations to retire early and build renewable energy projects where appropriate. Coal is the dirtiest fossil fuel in terms of emissions, but it is widely used to generate power in regions such as Asia and remains one of the biggest issues dividing industrialised and developing countries as they seek to tackle climate change.
 
Asia’s addiction to coal has exasperated many environmentalists – but it is also an addiction that needs to be understood within context. Economic growth inevitably comes with rapidly increasing energy demand. And increasing energy demand across Asia can largely be attributed to its fast-growing population, expansion of access to electricity to more parts of the region, rapid urbanisation and industrialisation. Coal use in Asia is driven by especially energy-hungry sectors like construction and manufacturing; the same sectors that have significantly fuelled the region’s economic growth and development.
 
This is not to say that Asia shouldn’t be weaned off its addiction to coal – it should. But in addition to systematically shutting down coal plants, plans to gradually introduce Asian economies to low carbon energy alternatives need to be put in place. Energy demand in Southeast Asia alone is expected to increase by 60% by 2040 – a trend that needs to be taken into consideration in our global race towards net-zero.