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"ADB's Clean Energy Initiatives"

Statement by
Haruhiko Kuroda
President
Asian Development Bank

At the 7th ASEM Finance Ministers' Meeting

9 April 2006
Vienna, Austria

Your Excellencies, ladies and gentlemen:

Asian economies have achieved rapid economic growth over the last several decades, lifting hundreds of millions of people out of poverty. This remarkable achievement, however, has come at an enormous environmental cost. Strong regional growth has driven up Asia's use of energy - and its energy needs - putting the natural environment under increased stress.

Between 1973 and 2003, Asia's energy consumption grew by 230%, compared with an average worldwide increase of 75%. As a consequence, Asia's share of greenhouse gas (GHG) emissions soared from less than one-tenth of global emissions to nearly one-quarter of the world's total.

Clearly, Asia needs energy to maintain rapid economic growth and continue its record of poverty reduction. But at the same time, energy production and consumption need to move to a more sustainable path.

The International Energy Agency estimates world investment needs for energy infrastructure at around $16 trillion through 2030. With its share of energy use approaching 30% of the world's total, Asia's energy infrastructure needs could reach $4 to $5 trillion over the next 15 years. It is crucial to ensure that these enormous investments are directed toward sustainable energy supplies, sustainable use systems and those technologies most efficient at mitigating the adverse impact on the global climate.

As Asia's partner in development, ADB is actively engaged in promoting environmental sustainability at the national and regional levels. Among other efforts, ADB has established several trust funds to support capacity building, institutional development, and project development activities in the areas of renewable energy, energy efficiency, and climate change mitigation and adaptation.

ADB is now working on an Energy Efficiency Initiative (EEI) that will define a cohesive way forward for the region to promote greater energy efficiency from both the supply and demand sides. This approach recognizes that energy efficiency improvements can slow or reduce the pace of greenhouse gas emissions without sacrificing economic growth or the standard of living.

Under the EEI, ADB is also studying a range of technical and policy issues to help the region manage its transport-related emissions. These issues include those related to clean fuels and vehicles, alternative fuels, fuel economy standards, and public modes of transport.

Another key outcome that we expect to obtain from the EEI is a menu of innovative financing instruments and modalities that will promote further investment in clean energy, both by the public and private sectors. ADB is currently holding consultations with various stakeholders and plans to fully launch this initiative in the middle of the year.

The Carbon Market Initiative (CMI) is one of the key features of our clean energy and environment endeavor. In my view, it represents a unique opportunity for ADB and its shareholders in Asia-Pacific and Europe to channel investment and technical support to clean energy projects that address both energy security and climate change. Currently, the application of cleaner energy technologies in developing countries is constrained by a shortage of adequate finance and capacity. As a result, many such projects face a critical upfront barrier that prevents them from being undertaken in the first place.

The proposed CMI can help remove this barrier by providing:

• Upfront co-financing for clean energy projects through an Asia Pacific Carbon Fund;
• Carbon credit marketing support to enhance these projects' financial viability; and
• Carbon market technical support to developing Asian countries.

The CMI has the potential to create a "win-win" outcome for both project sponsors in developing countries, and carbon credit buyers in developed countries who are striving to meet their commitments under the Kyoto Protocol. Developing countries can benefit from having additional upfront financing for clean energy projects with appropriate carbon market technical support.¹ The developed countries can benefit from having alternative sources of reliable carbon credits to meet their Kyoto commitments.² The proposed initiative can cut risks to all parties, mobilize additional funding, and increase the number of clean energy projects.

ADB is committed to a cleaner environment in Asia and the Pacific. We look forward to working with all our development partners to help bring concrete, lasting solutions to the table for slowing climate change while ensuring sustainable growth for Asia and the Pacific.

Thank you.