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Energy Transition Mechanism

Asia and the Pacific can only realize its climate goals if it pursues a transition away from coal-based energy in the near term. To accelerate this transition in the region, ADB is working with regional and international partners to support, study, and pilot a scalable Energy Transition Mechanism (ETM).

In the Spotlight

  Read the episode transcript

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.

The Benefits of ETM

ETM 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.

Accelerate climate action

Countries participating in ETM will be able to reach more ambitious emissions targets than under their current commitments.

Reduce energy costs

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

Drive investment

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

Provide 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.

 

The Importance of Safeguards and a Just Transition

ADB’s work on ETM will prioritize safeguards and a just transition, including high level consultations to avoid adverse impacts on the environment and people, and a commitment that the move toward renewable and sustainable economies will leave no community, industry, or worker behind.

Related Resources

The Challenge

The battle against climate change will be won or lost in Asia and the Pacific. If emissions from existing coal power plants are not addressed, the region will fail to meet the Paris Agreement targets.

over 50%

of global greenhouse gas emissions
originate in Asia and the Pacific

25%

of annual global emissions
come from coal-fired power plants

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

The Next Stage of ETM

"I am pleased with our progress on ETM over the past year. We have:

  • established the ETM Partnership Trust Fund, with support from Japan and Germany;
  • conducted technical and financial analysis, with input from investors and other stakeholders;
  • collaborated with NGOs on a range of concerns;
  • developed the Climate Investment Fund-Accelerated Coal Transition, or CIF-ACT, investment plan for Indonesia; and
  • engaged in fruitful discussions about the State Electricity Corporation’s (PLN’s) portfolio of coal-fired power plants.

Today, ADB will sign a landmark Memorandum of Understanding aimed at accelerating the retirement of the Cirebon-1 powerplant in West Java. This coal-fired plant would become the first to be retired under ETM.

We join our trusted partners PLN, Cirebon Electric Power, and the Indonesian Investment Authority in this endeavor."

- ADB President Masatsugu Asakawa
14 November 2022; Bali, Indonesia

What People Are Saying about ETM

  Read the full article (12 Nov 2021)
  • Sri Mulyani Indrawati

    "The ETM is an ambitious plan that enables all of us in Indonesia to upgrade clean energy infrastructure and accelerate the clean energy transition towards net zero emissions in a just and affordable manner. We need low-cost funding to build the new renewable energy and respond to growing demand."

    Sri Mulyani Indrawati
    Minister of Finance, Indonesia
    Chair, Coalition of G20 Finance Ministers for Climate Action

  • Carlos Dominguez III

    "This is envisioned to become the largest emission mitigation program in the world. This project will help us to accelerate the retirement of coal plants in the country by at least 10-15 years on average through a normative financing mechanism. It is intended to boost the growth of renewable energy in an equitable, scalable, and market-based approach. The clean energy transition in the Philippines will attract investments in renewable energy, create jobs locally, and promote national growth."

    Carlos Dominguez III
    Secretary of Finance and Chairperson-designate
    Climate Change Commission, Philippines

  • Michael Bloomberg

    "I want to thank the Asian Development Bank for its work, which will help bring many benefits. Cutting coal use doesn't just reduce the risks we face from climate change, it also reduces air pollution that kills so many people, including in Asia. Today's announcement will help to jumpstart more climate finance that helps to retire coal plants faster and improve many lives."

    Michael Bloomberg
    UN Secretary General’s Special Envoy on Climate Ambitions and Solutions

  • Janet Yellen

    "I am pleased by the Asian Development Bank's work to accelerate the decommissioning of coal facilities. The world needs forward-thinking creative approaches to financing, especially from the multilateral development banks. And we need to find creative solutions so that our public funds crowd in additional private investment, as the bank is aiming to do here."

    Janet Yellen
    Secretary, US Department of the Treasury