The Energy Transition Mechanism (ETM) being spearheaded by the Asian Development Bank (ADB) has the potential to be not just a powerful tool in the battle against climate change, but also for revamping the energy sectors of Asia and the Pacific.
ETM aims to accelerate retirement or repurposing of fossil fuel plants while simultaneously creating space and investment opportunity for renewable and clean energy technologies. Retiring 50% of the coal fleet in three of ETM’s pilot countries—Indonesia, the Philippines, and Viet Nam—could cut 200 million tons of CO2 annually, the equivalent of taking 61 million cars off the road. That would make it one of the biggest carbon reduction programs in the world.
This work will have wide-ranging consequences, including changes in terms of employment, supply chains, and infrastructure as countries transition from energy systems dependent on fossil fuels to ones that are based on clean energy.
That’s why, throughout the ETM process, ADB is prioritizing the importance of safeguards and a just transition, to provide opportunities for participation at every stage of this work to help mitigate any environmental and socio-economic consequences.
Safeguards are integrated into all of ADB’s interventions and are underpinned by the ADB Safeguard Policy Statement (2009), which is currently under review. The SPS aims to promote the sustainability of ADB-funded projects and programs with the aim of avoiding, minimizing, mitigating, and/or compensating potential adverse impacts of projects on the environment and affected people, such as women, the poor, and the vulnerable.
That can be done through a Strategic Environmental and Social Assessment (SESA), which is one way multilateral development banks like ADB can assess safeguards at the program level.
The SPS encourages the use of SESA where policy changes will have significant regional and sectoral impacts, such as those anticipated through energy transition.
For ETM, the SESA process will provide a systematic tool to evaluate the sustainability performance of different options for coal retirement and renewable energy development. The SESA aims to ensure that the potential significant environmental and socioeconomic effects and impacts of implementing ETM are identified and assessed together with measures for their mitigation, and that the results and recommendations are communicated to decision-makers, stakeholders, and people who are affected.
Just transition has been part of the global climate policy discussions since 2015’s Paris Agreement, which committed to “the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities.” Given the scale and pace needed to reach climate goals, signatories recognized that such a transition had the potential to both create opportunities for economic diversification and jobs, and negatively impact people and communities.
ADB is in the process of mainstreaming just transition across its entire operations—and particularly making just transition a core part of ETM. Transitioning from coal to cleaner energy will have many benefits but it may also introduce negative socioeconomic impacts to regions and countries such as direct job losses caused by early retirement of coal-fired power plants, indirect job losses in industries within the coal-value chain and in the informal sectors that depend on it, and slowdown of economic activity along the supply chain.
Integrating just transition as part of ETM ensures that the negative socioeconomic impacts are minimized through implementation of different policies and programs. For example, retraining and reskilling programs will provide vulnerable workers, in many cases women, new opportunities in emerging industries. More broadly, just transition will aim to address overarching, long-term transition issues beyond ETM; for instance, by creating an enabling environment for renewable energy investments to foster economic diversification and more stable job opportunities for future workers.
Significant consultations and outreach are ongoing as part of ADB’s safeguards and just transition work, not just with the communities themselves, but also with government leaders and civil society. This process will be iterative and collaborative and will provide a forum to engage with stakeholders and identify and solve differing views. ADB wants to give voice to those who may be affected, listen to their concerns, and work together to find the best solutions.
Ultimately, ADB believes ETM will be not only good for reducing greenhouse gas emissions and combating climate change, but, through the work of safeguards and just transition, it will open up opportunities with the potential to make the economies of Asia and the Pacific more equitable, more sustainable, and more inclusive.