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ADB’s Environment Program in Asia and the Pacific

Remarks by
Gil-Hong Kim
Country Director,
Lao People's Democratic Republic Resident Mission
Asian Development Bank

4-5 March 2008
Lao PDR

Distinguished guests, ladies and gentlemen:

It is a great pleasure for me to participate in the Switch Asia Event organized by the European Commission. I am honored to share with you Asian Development Bank’s environment program particularly its program to promote the use of cleaner and resource-efficient technologies in Asia and the Pacific.

Asia has made remarkable economic progress in recent years, resulting in a significant reduction in the incidence of poverty. As a development finance organization focusing on Asia and the Pacific, the ADB has been directly involved in helping its developing member countries in the region put in place the policies, institutions, and project investments needed to support the region’s rapid economic growth and poverty alleviation. We do this in accordance with our mission to reduce poverty and improve the people’s quality of life in the region.

However, we also note that economic progress should go hand-in-hand with environmental conservation—in both urban and rural areas to ensure sustainability of the social and economic development.

Asia faces a range of environmental challenges—from rapidly expanding but poorly planned cities that strain service providers beyond their limits to rising energy demands that are currently being met by the burning of fossil fuels that pollute urban skies and generate increasing volumes of greenhouse gases (GHGs) causing global climate change. Increased threats from climate change add to the vulnerability of the poor requiring adaptation measures. Rural ecosystems are under pressure and so, too, are the communities that directly depend on them for their livelihoods. The direct key drivers of these environmental challenges are increasing demand for and consumption of resources.

For example, Asia's energy consumption has been rising steadily, and the need to further reduce poverty and meet the Millennium Development Goals means that it will continue to rise. Because of its high dependence on fossil fuels, Asia now accounts for 27% of the world’s energy-related greenhouse gas (GHG) emissions, three times its share 30 years ago. If Asia will meet the estimated energy investments of $6 trillion by 2030 using coal-fired power plants, Asia’s share in global GHG emissions could rise to 40% by then.

Rapid urbanization is generating enormous quantities of wastes to be treated or disposed of. The average daily output of solid waste alone from Asia’s largest cities has been estimated to be 760,000 tons, and is expected to increase to 1.8 million tons per day by 2025. This situation presents significant challenges, since Asian cities are already struggling to find new landfill sites in the face of the widespread “NIMBY” phenomenon or Not-In-My-Backyard phenomenon. Furthermore, the products we consume and the wastes we dispose of are exposing urban populations to a much wider array of potentially harmful chemicals than ever before – threatening our health.

III. ADB’s Response

ADB believes that without due regard for the environment and the natural resource base on which continued growth depends, growth will not be sustainable. Thus, its commitment to promote environmentally sustainable development in Asia and the Pacific is manifested in the five thrusts of its Environment Policy. These are:

• promoting environmental interventions to reduce poverty
• mainstreaming environment in economic growth
• maintaining global and regional life-support systems for sustainable development
• building partnerships to maximize impacts
• integrating environmental safeguards across all ADB operations

Let me brief you of ADB’s strategies and activities under each thrust.

Commitment to Environmentally Sustainable Development

ADB has had a long-standing commitment to promote environmentally sustainable development in the region. Since 1995 until end of 2007, ADB has supported 128 loan projects with environmental objectives amounting to about $ 9.5 billion. These are projects that support urban environmental improvement, the use of cleaner and resource-efficient technologies, and agriculture and natural resource management. Almost half of this amount supported urban environmental improvement, while about a quarter each supported agriculture and natural resources management, and the use of cleaner and resource-efficient technologies. Average annual lending comes close to $750 million or 12% of ADB’s annual loan approval. Examples of approved projects last year include the Anhui Hefei Urban Environmental Improvement Project in the PRC, the Tata Wind Power Energy Financing Facility in India, and Integrated Coastal Resources Management Project in the Philippines. Given its experience and expertise in these areas, ADB is well poised to respond to the growing demand for greater attention to environmental sustainability in its DMCs particularly with ADB’s emerging sectoral and thematic initiatives which are well underway. These include: the Clean Energy and Environment Program, the Sustainable Transport Initiative, natural resource management programs in the Greater Mekong Subregion, Central Asia and elsewhere, Water for All Program, the Urban Services Initiative, and the Climate Change Adaptation Program.

On-the-ground investments require complementary support through policy dialogue, institutional reform, knowledge transfer and capacity development. ADB assisted in mainstreaming environmental considerations into national development policies, plans and programs, drawing upon a wide range of new financial instruments and market-based measures. ADB also assisted sector ministries to build new capacities, develop policy tools that mainstream the environment, and strengthen the capacities of national and local environmental authorities as well as a host of other institutions vital to ensuring that economic growth proceeds in an environmentally sustainable manner. Examples of technical assistance approved last year include the institutional strengthening for water resource management in Lao PDR, enhancement of involuntary resettlement legal framework of Viet Nam, strengthening of government safeguard capacity in Indonesia, Pakistan, and Viet Nam, and a study on the use of market-based instruments to control water pollution in the PRC. ADB’s assistance in these areas since 1995 amounted to about $235 million for 330 technical assistance projects. Its 2007 assistance of $40 million represents more than a twofold increase over the preceding ten-year annual average of $17 million.

Many of Asia’s environmental challenges are of such scale that their solutions require regional cooperation. Through regional programs, ADB supports interventions to manage land degradation in Central Asia, prevent the fragmentation of biodiversity corridors in the Greater Mekong Subregion, and mitigate the impacts of transboundary dust and sandstorms in Northeast Asia, and urban and industrial air pollution. ADB’s ability to assist its developing member countries (DMCs) in dealing with global environmental concerns was further strengthened when it gained direct access to the Global Environment Facility funds in 2004.

Many of ADB’s regional programs are carried out in partnership with other multilateral development agencies, non-government organizations, academic institutions, and the private sector. Examples include the People’s Republic of China/GEF Partnership on Land Degradation in Dryland Ecosystems, Central Asian Countries Initiative for Land Management, Northeast Asia Dust and Sandstorms Network, Greater Mekong Subregion Core Environment Program, Clean Air Initiative for Asian Cities, and the Poverty and Environment Partnership.

Safeguarding the environment is a crucial consideration when projects and programs are being planned and implemented. ADB ensures that environmental safeguards are integrated into project design, construction, and implementation. Recently, projects have been increasingly responsive to environmental safeguards particularly during project processing. Increasing efforts are being directed at strengthening safeguards during project implementation. As some of you may be aware, we are currently updating our safeguard policies to improve their effectiveness and make them more relevant to changing client needs and new modes of lending. External consultations are currently ongoing, with the Mekong consultation scheduled in early March.

Program to Promote Cleaner and Resource-Efficient Technologies

After having briefed you of ADB’s contribution to promoting environmental improvement in the region, let me now focus on ADB’s strategies and activities to promote the use of cleaner and resource-efficient technologies.

Development finance organizations like ADB have a strong role to play in helping the region move towards a more resource-efficient pattern of development. We are in dialogue with governments concerning the environmental management policies needed at the national and municipal levels to shape the incentives facing both producers and consumers. And we are providing catalytic investments to lead the way with resource-efficient infrastructure.

Some examples can be seen in our urban, energy and water programs. We have invested for many years in municipal wastewater treatment and solid waste management facilities. We are now looking for ways to better incorporate attention to waste reduction and recycling into such projects. In the energy sector, we have recently established an Energy Efficiency Initiative to encourage greater attention to energy savings, and we plan to invest $1 billion annually in this field. I will talk more about this in a little while. In the water subsector, our work is actively assisting river basin authorities, national water and irrigation agencies, water supply companies and communities with their efforts to use this vital and scarce resource more efficiently across the region.

We also have committed to assisting the G8 3R (reduce, reuse and recycle) Initiative, by co-sponsoring sub-regional events and sharing knowledge on 3R. We are preparing a comprehensive report on current practices and promising measures to improve the application of 3R principles in Asia and the Pacific. The highlights version of this report has just been published and can be accessed from ADB’s environment website.

Now, let me brief you with the way ADB promotes cleaner and energy-efficient technologies. ADB is committed to helping our developing member countries increase the utilization of cleaner and energy-efficient and renewable energy technologies. Given the enormity of the challenge, we launched a strategic approach with our Clean Energy and Environment Program.

In 2006, our President announced ADB’s intention to increase its clean energy program to $1 billion a year. While this is only a small portion of the region’s energy needs, this can catalyze significant additional resources. But first, we need to raise awareness on new technologies, help put in place the right policy and regulatory incentives to encourage their use, and put together the right financing package to share the risks and to bring down the costs.

Last year, our Board of Directors approved the establishment of the Clean Energy Financing Partnership Facility. The Facility will allow us to design and implement innovative new financing mechanisms to deploy clean energy technologies in the region. You may ask how? We are trying different mechanisms or approaches. For example, we are developing credit enhancement products that will allow financing of clean energy projects by local financial institutions (LFIs) who have been unwilling to finance them in the past due to perceived risks or high financing costs. We are also exploring ways to introduce a performance guarantee to enable energy service companies to obtain financing from LFI for clean energy investments. We are requesting proposals from private sector financial institutions looking to establish equity funds for clean energy projects. Through these and other mechanisms, ADB proposes to share the risk for the use of new technologies to encourage greater deployment.

We have another initiative called the Carbon Market Initiative which provides up-front financing and continuous technical support to developers and sponsors of projects with greenhouse gas mitigation benefits that can qualify as eligible Clean Development Mechanism or CDM projects under the Kyoto Protocol.

ADB also has an "Energy for All" initiative to increase the access of about one billion people to modern, more efficient, and less polluting forms of energy. More importantly, we are currently reviewing our energy strategy that will also address energy efficiency in tandem with energy security, climate change, and sector policy reform and governance.

Finally, we at ADB believe that information sharing is vital if we are to fast track the uptake of cleaner and resource-efficient technologies. Despite the good practices that are being developed throughout Asia and the Pacific, many decision makers have difficulties in gaining access to such information. Thus, as part of our Clean Energy and Environment Program, we are also promoting wider knowledge production and sharing through our regional Knowledge Hubs: the Energy and Resources Institute in India for renewable energy, the Tsinghua University in the People's Republic of China (PRC) for climate change, and the Asian Institute of Technology in Bangkok jointly with UNEP for 3R (reduce, reuse, recycle). We expect that these knowledge hubs will generate innovative concepts, science, technology, and management development related to clean energy.

Ladies and gentlemen, let me close by thanking the organizers and participants to this event. There are clear signs that we are heading towards the right direction. Let us pool our resources to ensure that the social and economic gains that we have achieved so far will not be undermined by the challenges posed by climate change. Let us jointly confront this challenge by identifying real solutions that would increase the uptake of cleaner and resource-efficient technologies. I believe that together, we can help guide Asia’s growth trajectory toward an environmentally sustainable path.

Thank you.