CEED on AIIB’s latest Energy Sector Strategy update

In November 2022, the Board of Directors of the Asian Infrastructure Investment Bank (AIIB) approved the latest update of the Bank’s Energy Sector Strategy (ESS). It comes after a series of consultations heavily criticized for glaring shortcomings in transparency and conduciveness.

The resulting update testifies to AIIB’s failure to sufficiently take into account the energy development needs of its stakeholders in Asia. By promoting gas as a transition fuel, the ESS proves itself blind to realities faced by households and businesses across the region of increasingly unaffordable energy from gas, as exacerbated by the Russia-Ukraine war. One can look to Bangladesh as example, whose gas industry is also backed by AIIB: consumers are now paying the price of having an electricity generation mix of 44.53% gas. Rampant and prolonged outages are plunging households into darkness as rising rates also drive them to deeper poverty.

In aggrandizing the role of gas in the global energy transition we need today, AIIB emboldens companies, governments, and entire regions ambitously pursuing large new capacities for fossil gas, like Southeast Asia, to tie their populations to volatile power rates and energy insecurity. As of October this year, Asian benchmark prices for LNG have risen by roughly 12 times from early 2021 levels. Latest forecasts warn of extreme market volatility for LNG throughout 2023 and tight, even ‘sold out,’ supply for the next several years.

AIIB’s promotion of gas also proves that we have been talking to a brick wall in calling on the Bank to align its energy portfolio and policies to the 1.5°C Paris goal. It allows financing for new midstream and downstream gas development at a time when what is necessary is an immediate halt to fossil fuel expansion and an urgent and managed phaseout of existing fossil fuel facilities.

Moreover, the ESS provides no commitment of helping limit global temperature rise to no more than this threshold, even as going beyond it means catastrophe for the Bank’s climate-vulnerable member countries. AIIB skirts around the goal with pledges to ramp up energy efficiency while keeping silent over the need to stop emissions at their source.

The AIIB cannot embody its “lean, clean, and green” promise for as long as it fuels gas, which goes against every development interest of its member countries.

We welcome the AIIB’s affirmation that it “will not finance thermal coal mining, coal-fired power and heating plants, or projects that are functionally related to coal” – a direction that is already long-overdue for all development banks. The Bank’s pursuit of assisting in the phaseout of coal-fired power generation is also a step forward, but we raise alarm over loopholes that the AIIB stubbornly leaves open for transitioning coal facilities into similarly detrimental energy, such as gas.

We challenge the AIIB to produce an energy sector strategy that would drive Asia to an energy secure and sustainable future. AIIB must advance renewable energy, especially distributed and community-based renewables, following stringent safeguards to prioritize the wellbeing of the environment and affordability of energy for consumers.

Read CEED’s full position paper below: