Finance giants ‘drawing up plans to accelerate coal plant closures in Asia’
Financial firms including Prudential, BlackRock Real Assets, HSBC and Citi have reportedly signaled their support for a new proposal from the Asian Development Bank, designed to accelerate the transition away from coal-fired electricity.
According to Reuters, which broke the news today (3 August), the Asian Development Bank is planning to created public-private partnerships that can buy coal-fired power plants. Then, the partnerships can compel them to close before their working lifespan comes to a natural end. Power plants with a 50-year lifespan could be brought offline within 15 years, representatives from the Asian Development Bank told Asia.
The Asian Development Bank is reportedly planning a model that enables partnerships to purchase power plants at well below the typical cost, taking into account their decreasing returns as the energy transition continues. Returns will then be used to support renewable energy and energy storage. Development banks would take the biggest risk of the partners.
According to Reuters, the Bank is hoping to pilot the program in at least one nation ahead of COP26 in November, with Indonesia, Vietnam and the Philippines flagged as potential trial locations. This would enable the model to be proven in a real-world scenario. The scheme could then launch in earnest in the first half of 2022, with purchases comprising a mix of equity, debt and concessional finance. Plans have already been presented to the European Commission and to the Association of Southeast Asian Nations (ASEAN).
Reuters understands that firms including Prudential, BlackRock Real Assets, HSBC and Citi are planning to participate in the scheme from its inception. HSBC notably agreed, in May, to phase out finance for the coal industry by 2030 in the OECD and by 2040 in all other nations, following pressure from green campaign groups and investors.
“If you can come up with an orderly way to replace those plants sooner and retire them sooner, but not overnight, that opens up a more predictable, massively bigger space for renewables,” Prudential’s chair of insurance growth markets Donald Kanak said.
Since 2000, the world’s coal-fired power capacity has doubled, with growth in China and other Asian nations accounting for the bulk of the expansion, according to Carbon Brief. Moreover, according to Carbon Tracker, more than 600 new coal power units are planned across Asia at present, despite net-zero pledges from an increasing number of nations.
By some estimates, the global use of coal plants without emissions abatement measures will need to fall by 80% this decade if the world is to have the best chance of capping the temperature increase to 1.5C. The International Energy Agency’s (IEA) roadmap to net-zero by 2050 states that investment for new unabated coal plants and future fossil fuel supply projects must be stopped immediately.
In related news, BlackRock, the world’s largest investor, has launched two funds that it claims are aligned with the Paris Agreement’s 1.5C temperature pathway, following the first launch of such funds back in April.
The launch of the two exchange-traded funds (ETFs) took place on Thursday (29 July). They are listed on the Euronext Amsterdam Exchange.
BlackRock said in a statement that the financed emissions of the funds are at least 50% lower than typical funds in this investment universe, in terms of intensity. Funds will then see their emissions intensity decreasing by at least 7% each year.
“The range [of Paris-aligned funds] provides investors with transparent and cost-effective asset allocation tools by which they can align their portfolio with the transition to a net-zero economy, consistent with the objectives of the Paris Agreement,” BlackRock said in a statement.
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