- An investigation has revealed that the Asian Development Bank’s $600 million loan to “promote the use of clean energy” in Indonesia can also be used to support the construction of new coal power plants.
- These new plants include Java 9 & 10, part of a planned expansion of the notorious Suralaya Power Station, Southeast Asia’s largest and dirtiest coal complex.
- The news raises questions about the seriousness of the bank’s climate commitments, including a no-new-coal pledge, on the eve of its 2024 Annual General Meeting next week.
A range of new coal power projects, including the 2,000-megawatt expansion of Southeast Asia’s largest and dirtiest coal plant, are getting backing from the Asian Development Bank (ADB), according to a new report from the environmental and human rights groups Inclusive Development International, Recourse, Trend Asia and the NGO Forum on ADB. Inclusive Development International discovered the funding as part of an investigation into development finance support for coal in Asia.
The ADB describes its $600 million loan to Indonesia’s state-run electricity utility—Perusahaan Listrik Negara, or PLN—as an effort to “promote the use of clean energy,” but as the new report reveals, the 2021 loan is effectively providing support to all of PLN’s 10-year business plan. That plan includes expansion of Indonesia’s notorious Suralaya Power Station through the construction of two massive new plants known as Java 9 & 10, which local communities and environmental advocates staunchly oppose, and more than a dozen other coal projects.
“ADB’s loan agreement doesn’t just fail to exclude coal. If you look closely, it actually allows PLN to use ADB funding for coal-fired power plants,” said Dustin Roasa, research director at Inclusive Development International and author of the report. “The loan’s eligible expenditures expressly cover anything in PLN’s 10-year plan, which does not shy away from new coal, or other fossil fuel projects.”
The report notes that the ADB has denied, through a spokesperson, that the loan can be used for coal-fired power plants, but there is no coal exclusion clause in the loan agreement itself. Even if the bank had adequately excluded coal on paper, in practice it would have been unable to enforce such a restriction because the money from the loan is disbursed into PLN’s general bank account, according to company reporting, where it is mixed with the rest of the utility’s funds. This falls short of the ADB’s own green financing standards, which require funds be placed in a separate account, allowing for easy tracing and verification.
“Publicly funded institutions like the Asian Development Bank must include robust coal exclusions in contracts with clients and financial intermediaries in order to end coal finance for good,” said Daniel Willis, finance campaigner at Recourse. “Without these, general purpose loans, or even funds earmarked for green projects, could end up supporting coal expansion. Given the urgency of the climate emergency, development banks must also add all fossil fuels to their lists of Prohibited Activities for financing.”
The new report is being released days before the ADB’s annual general meeting in Tbilisi, Georgia, next week. At its last annual meeting in May 2023, bank President Masatsugu Asakawa announced $100 billion in climate-friendly financing, including funding for renewable energy projects and the early retirement of coal plants, and reaffirmed the bank’s pledge to stop financing new coal. By backing the Indonesian government’s coal expansion plans, it is not only violating that pledge and, it appears, the no-new-coal commitment in its Energy Policy, it is undermining its investments in clean energy in the country.
“Any new coal plant built in Indonesia is likely to operate for 35 to 40 years. By backing PLN’s coal development plans, the Asian Development Bank is helping to lock Indonesia—a country that is critical to the fight against global climate change—into a future at least partly dependent on the dirtiest of fossil fuels. The consequences of this decision, which will make it difficult for Indonesia to meet its Paris Agreement emissions targets, are global. But they will be felt most acutely by the people of Banten,” said Novita Indri, energy campaigner at Trend Asia.
The human cost of the ADB’s support for new coal
The new report includes original reporting and interviews with residents and environmental defenders in Banten Province, Indonesia, which illustrate the devastating real-life impacts of the ADB’s support for new coal power development there. Residents describe how pollution from an earlier ADB-backed expansion of the Suralaya Power Station has displaced families, reduced fish stocks and agricultural yields, and sickened their children.
Pollution from the Suralaya complex and other nearby coal plants kills an estimated 2,500 Indonesians per year and causes numerous health problems, including respiratory disease and cancer. Banten Province already has some of the highest rates of acute respiratory infections in the country and it is estimated that the added pollution from the Java 9 & 10 plants will cause between 2,400 and 7,300 premature deaths over their expected 30-year lifespan.
What the ADB can do instead to support the people of Banten Province
In addition to ceasing its ongoing support for new coal development, the ADB has the obligation to provide remedy for the impacts of its past coal funding, including its support for earlier development and expansion of the Suralaya Power Station in the 1980s and 1990s. As PLN’s benefactor, the ADB also has considerable leverage over whether and how it moves ahead with elements of its 10-year business plan, including the construction of the Java 9 & 10 plants. While the ADB is not subject to a recent complaint filed against other Java 9 & 10 financiers, it has substantial influence to push for the communities’ demands to be met, including their call for the project to be canceled, phased out early, or at the very least brought into compliance with international standards.
“The facts on the ground are clear, the ADB must seize the opportunity of its upcoming Energy Policy Review to close off loopholes for continued financing of coal and other fossil fuels, including through financial intermediary arrangements. In addition, as asserted by community rights advocates and social movements in Indonesia as well as elsewhere across the region where the ADB has bankrolled the development of coal projects, it is critical that the institution’s management and board—who stand culpable for the harms, losses and damages wrought on affected communities and ecologies—first and foremost prioritise addressing outstanding grievances and demands for reparative justice from those living and working in surrounding areas,” concluded Tanya Roberts-Davis, Just Transitions Advocacy Coordinator at the NGO Forum on ADB.
About Inclusive Development International
Inclusive Development International is a non-profit organization that works to advance social, economic, and environmental justice by supporting communities around the world to defend their human rights and environment in the face of harmful corporate activities. Learn more at: https://www.staging.inclusivedevelopment.net
About NGO Forum on ADB
The NGO Forum on ADB is an international network of over 300 affiliated civil society—most of which are based in the Asia Pacific region—that supports efforts of affected communities and allied groups to expose and oppose the social, environmental and climate harms wrought by projects, plans and policies of the Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB). The Forum also supports collaboration between member and allied groups across national boundaries to challenge regional programs advanced by these banks, such as the ADB’s Energy Transition Mechanism.
About Recourse
Recourse campaigns to redirect international financial flows away from dirty, harmful investments, towards greener and more inclusive development. Recourse works in partnership with others to support communities in their struggle for their rights to be respected and their voices to be heard, and holds financial institutions to account for harms to people and the environment.
About Trend Asia
Trend Asia is an Indonesian independent civil society organization that, in light of the opportunities and threats posed by global climate change, is working to drive Asia’s energy and development transformation away from fossil fuels and wasteful consumption and production and toward a sustainable, clean and renewable energy, people-powered future.