Japan commits P1.26 billion to retire Philippine coal plants

MANILA, Philippines — The Japanese government has pledged a $25-million (P1.26 billion) grant to support plans to buy out coal-fired power plants in the Philippines and Indonesia and accelerate their retirement from operation in efforts to cut carbon emissions.

The grant will be channeled to the energy transition mechanism (ETM) led by the Asian Development Bank and is being piloted in the two Southeast Asian countries.

It is also the first seed financing for the ETM, which will be made up of a carbon reduction fund and a clean energy fund. The first aims to provide a blended finance mechanism to incentivize the early retirement of coal-fired power assets while the latter targets to invest in the growth and expansion of renewable power.

ADB president Masatsugu Asakawa said the Philippines and Indonesia have the potential to be pioneers in the process of removing coal from the region’s energy mix.

This will make a substantial contribution to the reduction of global greenhouse gas emissions and shifting their economies to a low-carbon growth path. Asia and the Pacific region has been heavily reliant on coal-fired electricity.

Japan’s Minister of Finance Masato Kanda said the ETM plays an important role in promoting the smooth transition from coal to cleaner energy while ensuring universal access to affordable and reliable energy.

“Our grant contribution will become a seed money to attract much larger amounts of donor contributions and private investment, so that we can achieve a successful transition with our important partners, including Indonesia and the Philippines,” Kanda said.

Finance Secretary Carlos Dominguez, for his part, said that a clean energy transition in the Philippines would create jobs, promote national growth and lower global emissions.

Under the partnership, ADB and the countries involved will conduct a feasibility study focusing on the optimal business model for each and leverage large amounts of commercial capital to trigger a decisive shift toward decarbonization.

Energy demand in the region is projected to double in nine years, with Southeast Asia among the most active in building new coal-fired plants.

In the Philippines, nearly 60 percent of the country’s generated power comes from coal. The government recently announced plans to declare a moratorium on new coal-fired power plants.

For the pilot phase, ETM will raise the financial resources required to accelerate the retirement of five to seven coal plants in Indonesia and the Philippines, while facilitating investment in alternative clean energy options.

A full scale-up of ETM in Indonesia, the Philippines, and possibly Vietnam aims to retire 50 percent of the coal fleet, or approximately 30 gigawatts over the next 10 to 15 years.

Doing so could cut 200 million tons of carbon dioxide emissions per year, the equivalent of taking 61 million cars off the road, potentially making the ETM the largest carbon reduction program globally.