Asia and the Pacific can only realize its climate goals if it pursues a transition away from coal and other fossil fuel-based energy in the near term. To accelerate this transition in the region—where coal and other fossil fuels remain leading sources of electricity—the Asian Development Bank (ADB) is working with regional and international partners to support, study, and pilot a scalable Energy Transition Mechanism (ETM).

What is ETM?

ETM is a scalable, collaborative initiative developed in partnership with developing member countries (DMCs) that will leverage a market-based approach to accelerate the transition from fossil fuels to clean energy.

Public and private investments—from governments, multilateral banks, private sector investors, philanthropies, and long-term investors—will finance country-specific ETM funds to retire coal power assets on an earlier schedule than if they remained with their current owners.

In parallel, proceeds from the assets or other investments will be mobilized toward renewable energy plants and enabling infrastructure such as grids and storage to provide clean energy. The precise structure of ETM and corresponding transactions will be determined by regional and local needs and conditions.

The benefits of ETM

ETM has the potential to be one of the biggest carbon reduction programs in the world. It will be a win for the climate, a win for local communities, and a win for developing economies. It will significantly shorten the life of legacy coal-fired power plants and unlock new investments in sustainable and renewable energy. 

Accelerating climate action: Countries participating in ETM will be able to reach more ambitious emissions targets than their current commitments.

Reducing energy cost: Speeding up the retirement of coal-fired electricity will increase the demand for clean energy by 2-3 times, lowering overall energy generation costs in the long run.

Driving investment in the energy transition: ETM will help unlock or “crowd in” investments in cost-effective renewable generation and support and enable technologies such as smart grids, hydrogen, electric vehicles, and other clean technologies.

Providing a scalable model: ETM has the potential to be scaled up to other parts of Asia and the Pacific, as well as Latin America and Africa, which could drive significant reductions in global emissions. 

Next steps

ADB embarked on pre-feasibility studies that included financial and technical analysis in three pilot countries—Indonesia, the Philippines, and Viet Nam—as well as regulatory and institutional assessments to validate the ETM concept.  

ADB then moved on to full feasibility studies for additional system-level analyses, as well as detailing the valuation of initial target coal plants, structuring the country funds, and preparing the Southeast Asian regional partnership platform for a potential pilot program.  

Active discussions with DMCs and strong engagement with civil society groups are key components of ETM that will help ensure that the benefits of the shift to low-carbon, resilient economies are shared equally and no individual, community, or region is left behind.

ETM fast facts

The battle against climate change will be won or lost in Asia and the Pacific. To aid in that fight, ETM is a ground-breaking initiative that will accelerate the transition from coal and other fossil fuels to clean, renewable energy. If emissions from existing coal power plants are not addressed, Asia and the Pacific will fail to meet the Paris Agreement targets. Below are figures and quick explainers that detail, both quantitatively and qualitatively, the need for, status, and objective of ETM.

The challenge

  • 25% of annual global emissions come from coal-fired power plants
  • 50% of global greenhouse gas emissions originate in the Asia-Pacific region
  • 90% of young (≤20 years) coal-fired power plants are in Asia
  • 62% of Indonesia's electricity comes from coal
  • 57% of the Philippines' power generation comes from coal

Where we are now

Status: A pre-feasibility study has been completed and a full feasibility study is underway to determine the financial structure of ETM, identify candidate coal plants for inclusion in a pilot program, and design just transition activities.

Indonesia's commitment: The country announced that it is aiming to phase out coal-fired power plants to achieve carbon neutrality by 2060.

The Philippines' commitment: The country announced a moratorium on new coal-fired power plants in October of 2020.

What's next

Pilot: The pilot will seek to retire or repurpose 5-7 coal-fired power plants in the pilot countries in the near-term. Repurposed plants will be converted to renewable energy generation or alternative uses.

At scale: Ultimately, retiring 50% of the coal fleet in ETM's three pilot phase countries (Indonesia, the Philippines, and Viet Nam) would reduce CO2 emissions by 200 million tons annually, the equivalent of taking 61 million cars off the road.

Global: ADB is working with DMCs and key partners to ensure ETM is a replicable and scalable mechanism that can be successfully adjusted and adopted in various regions and contexts.