The Asian Infrastructure Investment Bank (AIIB,) the world’s newest development bank, held its Annual Meeting in South Korea earlier this week and agreed on a new energy strategy.
Leadership at the bank also issued statements noting they would not be investing in coal.
AIIB’s Vice President Thierry de Longuemar also confirmed that the bank won’t finance coal-fired power plants, sending an early signal about the bank’s plans to stay away from coal funding.
The AIIB president, Jin Liqun, said in his speech that the bank will have an important role to play as a facilitator and supporter of the Paris Agreement, and that the bank is “actively working to facilitate our clients’ transition to a less carbon-intensive energy mix.”
At the same time, Oxfam brought out an analysis this week, which shows that if the new bank does invest in fossil fuels, it would lead to high levels of climate change damages in Asia.
Each dollar invested by AIIB in fossil fuels would result in a climate damage bill for Asia that is many times higher.
These costs include things like damaged harvests, lost livelihoods, and farmland from saline intrusion, hitting the most vulnerable communities particularly hard.
Even though Australia, a major coal exporter, had tried to persuade the new bank to fund coal, the leadership of AIIB have strongly signalled they are not considering funding coal.
Australia had been trying to export outdated coal technology that could lock countries into dependence on Australia’s coal for many years to come.
However, it would not be in most countries’ interests.
This marks a growing awareness that investing in coal is not a sensible development strategy. China recently cancelled over 100 coal plants, mindful of the air pollution being caused.
In India, the prices of solar energy have recently fallen to a record low, making the price of solar energy lower than the average price for electricity from coal plants.
Implications for Bangladesh
Bangladesh still has several coal plants in the pipeline. In fact, data from the Global Coal Plant Tracker shows that Bangladesh has more than 15GW of coal plants underway. The Rampal coal plant, for example, has received criticism from scientists as it could damage the neighbouring mangrove forest.
The Sundarbans forest acts as a natural barrier protecting the coastal zone from cyclones, coastal erosion, and salinity intrusion, which are all impacts of climate change. Therefore, damaging this barrier could be particularly dangerous as it could make Bangladesh more vulnerable.
Bangladesh needs to develop a strategy which will mean phasing out coal power
Bad for business
Even ignoring the environmental impacts, coal is not a good investment.
For example, according to data by Bloomberg, more than half the assets in the global coal industry are now held by companies that are either in bankruptcy proceedings or don’t earn enough money to pay their interest bills.
Taking into account the cost of air pollution on health, and particularly the health impacts for children and babies, the true cost of energy from coal is much higher. For example, a study by Harvard Medical School in the United States has found that the true cost of coal is three times more, making it one of the most expensive forms of energy.
What’s more, coal plants do not help much with energy poverty. Studies have shown that distributed renewable solutions will be the cheapest and quickest way of reaching over two-thirds of those without electricity.
Bangladesh is also a member of the Climate Vulnerable Forum (CVF), a partnership of countries which are highly vulnerable to climate change. This group has made a declaration that they intend to shift to 100% renewable energy by 2050.
Bangladesh needs to develop a strategy to fulfil this commitment, which will mean phasing out coal power.
The China-led AIIB has vowed to focus on sustainable infrastructure and this should be applauded this week. Countries like Bangladesh should be able to take up the opportunities of the focus on sustainable infrastructure and sustainable energy. There is also an opportunity for policy planners in Bangladesh to rethink their long term coal-based plans in light of the growing evidence that coal is not a good investment for Bangladesh.
Saleemul Huq is Director, International Centre for Climate Change and Development at the Independent, University, Bangladesh and Senior Fellow, International Institute for Environment and Development based in London. Helena Wright is a Senior Policy Advisor, E3G.