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p. 1 of 21 BACK | NEXT Introduction: Looking ahead Past policies and operations Changing context of the policy review Future assistance in the changing context Conclusions

Energy 2000: Review of the Energy Policy of the Asian Development Bank

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Introduction: Looking ahead

1. Currently, just over a billion people in the industrialized countries use nearly 60% of the world’s commercial energy supply, while 5 billion people living in the developing countries consume the remaining 40%. The billion well-off people use 25 times as much energy as the poorest billion, and about 1.6 billion people have no access to reliable modern forms of energy such as electricity, gas, and liquid fuels. Many of these people live in the developing member countries (DMCs) of the Asian Development Bank (ADB), and most of them are poor. To alleviate this situation, energy supplies need to be expanded to progressively reach out to all those who do not have access to modern forms of energy. The poor, in particular, need to be provided with a minimum amount of energy at an affordable price. To achieve this goal, energy needs to be produced and supplied at least cost. Cleaner production processes for energy need to be adopted to minimize environmental degradation, something that often affects the poor the most. ADB’s goal in the energy sector will, therefore, be to increase the availability of energy in a least-cost and environmentally friendly manner and to improve access to energy for people in its DMCs, particularly the poor.

2. In pursuing this goal, ADB will undertake interventions in the energy sector that will support the overarching objective of poverty reduction. The operational priorities that will be particularly relevant to the energy sector are (i) environmental protection, (ii) good governance, (iii) private sector development, and (iv) regional and subregional cooperation. Environmental improvement will be promoted through the continued support for enduse efficiency, renewable energy, improvement in technical efficiencies, and switching to cleaner fuels. Economic efficiency will be promoted through well-sequenced restructuring processes and the creation of an enabling environment for private sector investment that will facilitate development of competitive markets. Increasing access to energy for the poor, particularly those in rural areas, will receive special attention. Investments in the rural energy sector will aim to have a direct impact on employment generation by opening opportunities for small and medium enterprises. The availability of environmentally clean forms of energy in rural households as replacement for firewood and biomass will help reduce indoor pollution and contain its adverse impact on health, particularly for women. Through access to electricity and other forms of modern energy, communities will be enabled to improve the various facilities that benefit the poor, such as basic education and primary health care, and increase economic opportunities by raising productivity through the use of mechanized implements. A cleaner environment based on less polluting energy generation will be encouraged to benefit all. Through these various approaches, ADB’s energy sector assistance will aim to improve the quality of life of the people, particularly of the poor, in the Asian and Pacific region.

3. The 1995 Energy Policy¹ called for a review in three years. The review has been delayed, partly because of the uncertainties in the sector and the region arising from the Asian financial crisis and partly to await adoption of the Poverty Reduction Strategy in November 1999² that made poverty reduction the overarching goal of ADB. The review takes into account comments and suggestions received after its circulation through the Internet³. The rest of the paper is divided into four sections: background describing the past energy sector policies and operations; the changing context, as underpinned by recent developments relevant to ADB’s energy sector policy and operations; future assistance in this changed context; and conclusions. Notwithstanding the changed circumstances in the region, most of the policy directions contained in the 1995 Energy Policy continue to remain relevant and valid, and the logic of the associated discussions in that paper continues to be robust. Future ADB assistance will need to focus on activities that help reduce poverty, promote private sector investment in DMCs, address regional and global environmental impacts, and enhance regional cooperation and trade in the energy sector.

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