Coal to clean power transition: How countries responded at COP26
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Bangladesh is associated with the ETC, but it is not a member of the PPCA. Hence, Bangladesh could seek financial and technical support from the ETC with a view to phasing out of coal energy and promoting clean energy.
Commitments on stop financing fossil fuels abroad by 2022
A group of 20 countries and multilateral development banks (MDBs) have committed to stopping financing fossil fuel abroad by the end of 2022. This commitment includes not only stopping funding coal-based power generation but also oil and gas-based power generation. More importantly, it includes diverting the funds to clean energy development abroad.
The countries that signed the pledge include the US, Canada, Denmark, Italy, Finland, Costa Rica and a number of MDBs, including the European Investment Bank and the East African Development Bank. Major Asian countries that invest in fossil fuel abroad, such as China, Japan and South Korea, are yet to sign the pledges. However, China has recently committed to stopping investing in new coal power generation abroad that partly covers its commitment.
Since China, Japan, Korea and India are major investors in fossil fuel-based power generation in Bangladesh, lack of their commitments in signing the pledges would make it difficult for Bangladesh to shift from fossil fuel-based power generation financed by these countries. Moreover, Bangladesh would lose the opportunity to shift the funding of these countries from fossil fuel to clean power generation.
According to an estimate, if the commitment of the countries and MDBs is realised, about $18 billion could be made available for investment in clean power projects globally. Despite the funding opportunities, the required funding for clean power for net-zero carbon emission would be much higher. At least $2-4 trillion per year would be required for low carbon technologies till 2050.
Commitments on domestic coal or fossil fuel use reduction
While countries are making commitments on their role on coal and fossil fuel use or investment abroad, in most cases, they are reluctant to make commitments on their domestic coal use.
China has expressed its willingness to reduce coal use by 1.8 per cent for power generation over the next five years. Similarly, Indonesia, one of the largest coal producers, has made a commitment to ending coal use by 2040. As part of the mechanism, it plans to retire a number of operational coal plants using credit support from the Asian Development Bank.
The Philippines would retire 50 per cent of its coal-fired power plants by 2030-2035. The ADB, under its Energy Transition Mechanism, would provide seed fund to raise low-cost capital for these countries to make it faster to retire coal-fired power plants in Indonesia and the Philippines. Such a financing mechanism could work in Bangladesh to allow early retirement of coal-based power plants that are now in operation or under construction.
Commitments made by Bangladesh
Bangladesh’s prime minister said at the Climate Summit that the plans to build a total of 10 coal-fired power plants have been scrapped. According to the Bangladesh Working Group on External Debt, Bangladesh has another nine coal-fired power plants that are either in operation or are being constructed with a combined generation capacity of 9,875 megawatts.
The two plants that are in operation – Barapukuria and Payra -- would generate 1,845 MW. The rest seven plants with a possible generation capacity of 8,030 MW are at various stages of construction. Of the under-construction plants, three have progressed at a considerable level: Rampal (80 per cent), Matarbari (60 per cent) and Banshkhali (55 per cent). The rest made little or no progress, with implementation within the range of 0-35 per cent.
The projects are being implemented in either public or private sector with financial support from a number of Asian countries, including Japan, China and India.
In case of phasing out of coal-based power plants, Bangladesh could take a phase-wise approach. Under the approach, the plants that have made limited progress (five plants) could be targeted for retirement at the stage of construction. The rest of the plants could be considered for gradual retirement with the availability of financial support from MDBs or development partners.
Bangladesh could take support of the Energy Transition Council to help provide technical support to phase out the coal-fired power plants.
As China has recently committed to stopping investing abroad in new coal projects, it is expected that China-backed Bangladeshi projects will be phased out in the coming years. In the case of other coal-fired power projects, Bangladesh could take lessons from Indonesia or the Philippines to seek funds from the ADB to retire the projects. Bangladesh could seek technical and financial support from Japan and India in the construction of renewable energy projects.
It is better to put more emphasis on domestic-led initiatives on reducing coal power and enhancing clean energy. In this case, support of the neighbouring countries will supplement our domestic initiatives.
The author is research director of the Centre for Policy Dialogue.