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Green groups accuse ADB of funding Indonesia coal plants despite clean energy promises
The report by four NGOs alleges the ADB loan given in 2021 to Indonesia's state power company to fund its ten-year business plan and "promote the use of clean energy" has no clause blocking spending on new coal facilities.
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Environmental activists from the Indonesian Forum for the Environment (WALHI) hold a protest to condemn Japan and its export credit agency, the Japan Bank for International Cooperation (JBIC), over the country's public funding for gas and LNG projects in front of Japanese embassy in Jakarta on April 25, 2024. (AFP/Bay Ismoyo)
G
reen NGOs have accused the Asian Development Bank of indirectly financing coal plants in Indonesia through a $600 million loan despite promises to no longer fund projects tied to the fossil fuel, according to a new report.
The report by four NGOs alleges the ADB loan given in 2021 to Indonesia's state power company to fund its ten-year business plan and "promote the use of clean energy" has no clause blocking spending on new coal facilities.
The state-owned electricity company (PLN) plan contains more than a dozen new coal projects, including an expansion at Java island's Suralaya, one of the biggest coal-fired plants in Southeast Asia, which will add two generating units to eight in operation.
"ADB's loan agreement doesn't just fail to exclude coal. It actually allows PLN to use ADB funding for coal-fired power plants," said Dustin Roasa, research director at Inclusive Development International, which published the report Wednesday.
"The loan's eligible expenditures expressly cover anything in PLN's 10-year plan, which does not shy away from new coal."
The report gives locals' accounts of how a previous expansion at Suralaya in Banten province neighbouring capital Jakarta "displaced families, reduced fish stocks... and sickened their children".
The impact of pollution from Suralaya costs Indonesia $1 billion every year because of preventable deaths, work absences and medical costs, a study published last year by the Europe-based Centre for Research on Energy and Clean Air (CREA) said.
"Publicly funded institutions like the Asian Development Bank must include robust coal exclusions in contracts... in order to end coal finance for good," said Daniel Willis, finance campaigner at NGO Recourse.
The report said the loan entered PLN's general bank account and was not put into a separate account that could be monitored, allowing it to be spent however PLN wants. It did not claim the loan was directly used to fund Suralaya.
PLN and the ADB did not respond to an AFP request for comment about the report, which was released ahead of the bank's annual meeting in Georgia next week. The report said the ADB has previously denied the loan could be used for coal-fired power plants.
The bank provides loans and grants for projects in the poorest countries in the Asia-Pacific region and has pledged to not fund "new coal-based capacity for power and heat".
The ADB has a financing scheme for Asian governments to retire coal plants and in December agreed on a deal with the owners of the Cirebon-1 coal-fired power plant in Indonesia to shut it down seven years early.
In response to the claims, the ADB said in a statement on Friday that its 2021 energy policy formalized its existing practice of not financing any new coal-fired power plants. “We are fully committed to this. ADB does not support coal mining, processing, storage, transportation, nor any new coal-fired power generation".
The Sustainable and Reliable Energy Access Program in Indonesia sought to enhance access to sustainable and reliable energy for people in Western and Central Java, the ADB said, adding: “It is a results-based loan which means that the borrower must achieve certain disbursement-linked indicators such as upgrading power lines and promoting clean energy before loan tranches are paid out.”
An independent agent appointed by the ADB verified the indicators twice a year. Eligible expenditures under the loan agreement did not include support for coal-fired power plants, the lender noted, adding: "Together with ADB’s safeguards policy and the verification process, the loan does not violate ADB’s energy policy".
Editor’s note: This story has been updated with comment from the ADB.
