Forum Network urgent concerns on ADB Energy Policy Review 2025

ADB 58th Annual Governors Meeting | Milan, Italy 

Gains and Losses during the 2021 Energy Policy Review 

The NGO Forum on ADB is a broad coalition of civil society organizations and grassroots networks across Asia directly impacted by ADB-funded energy projects. As the Asian Development Bank (ADB) prepares for the scheduled review of its 2021 Energy Policy in 2025, the Forum, as a core stakeholder, seeks to outline urgent concerns and recommendations to ensure the policy’s full alignment with climate science, human rights standards, and the Paris Agreement’s 1.5°C warming limitation objective. 

As stipulated in the current energy policy, the document will be reviewed after five years of implementation. Building on years of formal engagement in ADB’s consultation processes, the Forum emphasizes the need for a more robust and coherent energy policy framework—one that addresses existing policy gaps, strengthens accountability, meets ADB’s climate change obligations under international law, and promotes a just and sustainable energy transition. The current energy policy retained ambiguous language around fossil fuel financing, just transition principles, and emerging technologies. This upcoming review presents a critical opportunity for the ADB to adopt a more decisive and inclusive stance, revisit civil society recommendations, and reinforce its commitment to climate justice, human rights, and environmental integrity across the region.

Approach and Methodology of the Review Process: Call for Transparency and Meaningful Consultations 

The Energy Sector Office has demonstrated a commendable degree of openness in its engagement with CSOs, as reflected in the two meetings held in 2024 and earlier this year. However, despite this willingness to engage, critical gaps in communication and clarity persist regarding the current policy update process. While it is understood that a comprehensive overhaul is not anticipated, the update process still requires greater transparency and detail.

To begin with, there remains a conspicuous absence of a clear and concrete timeline for the policy review. Since last year, the information shared has been vague and, at times, contradictory. Given that the review is expected to unfold year-round, we urge the Office to provide a transparent breakdown of key action points, including how each phase of the review will be conducted and what form consultations with stakeholders will be organised. Moreover, we would like to express concern over the ambiguity surrounding the methodology of the review. As of now, it appears that two approaches are being considered: a line-by-line revision of the existing policy or the retention of the current framework supplemented by a separate report containing recommendations. The absence of a decisive direction on this matter limits stakeholders' ability to meaningfully engage and risks undermining the credibility and effectiveness of the entire review process for future amendments. 

Gaps in the Coal Ban Policy and Concerns on the Scope Expansion of the Energy Transition Mechanism

After years of collective advocacy, critical gaps remain in the current policy framework. The Bank’s continued disbursements to projects such as the Jamshoro Coal Power Plant in Pakistan reflect the inconsistent application of its energy transition commitments and an ongoing failure to address past coal investments' social and environmental harms. Equally concerning are recent pronouncements of expanding the scope of the Energy Transition Mechanism (ETM), suggesting that oil and gas may be included in the early retirement scheme, before the issues faced with the existing ETM model have been adequately addressed or resolved. As a concrete example, ETM’s pilot in Cirebon I and proposals in other countries have already faced resistance and hesitations even from the national governments, highlighting both conceptual and implementation flaws, particularly the risk of coal bailouts and prolonged reliance on aging infrastructure. 

While we welcome efforts to transition away from all fossil fuels, expanding the ETM to include gas, especially in the absence of transparent criteria for project selection, heightens the risk of carbon lock-in and misappropriation of transition funds. By doing this, ADB would once again send wrong market signals and further entrench fossil fuel interests, at the public’s expense.

We urge the Bank to reassess this direction and ensure the updated policy reflects reforms on the ETM model, with definitive and mandatory screening criteria for coal plants to retire, ra renewed focus on decommissioning instead of repurposing coal plants, full public disclosure of ETM-related studies, meaningful community and stakeholders’ consultation and decision-making, a mandatory reparation and transition plans, and exclusion of coal companies that continue expanding their coal assets and operations. We also call on the Bank to fully end all forms of coal financing—direct and indirect. This includes funding via financial intermediaries, general purpose funding for entities expanding their coal assets and operations, as well as any financing of captive coal units (and projects reliant on them), coal mines, and other linked relevant operations, co-firing technologies, and explicit favor for fossil fuel-linked companies.

End Fossil Gas Regime: End ‘Transition Fuel’ Narrative and All Forms of Gas Expansion

While we recognize ADB’s decision to end coal financing and exclusion of natural gas exploration and drilling activities, the continued support for fossil gas undermines global climate commitments and threatens the future of communities across its member countries. The ADB’s continued allowance for gas infrastructure—including T&D pipelines, LNG terminals, storage, and end-use facilities—even under so-called “conditional” terms, neglects both its commitment to universal energy access and its alignment with the Paris Agreement. The Guidance Note’s criteria for supporting gas-based power are fundamentally flawed, with vague metrics like 'comparable scale' and assumptions of economic viability, ignoring the declining costs of renewables and the well-documented volatility and long-term emissions profile of fossil gas.

The Bank retained its obsolete assumption on fossil gas as a ‘transition fuel’ despite the presence of scientific evidence from the IPCC and IEA that any natural gas power plants or LNG infrastructure will cause 1.5°C to be exceeded. This is indeed a clear violation of the global climate targets and runs counter to its position as a ‘Climate Bank’. If the goal of ADB is to be ‘Paris Aligned’, then it should halt support for fossil gas. 

In Bangladesh, the transition to fossil gas has taken a costly and uncertain turn—one that risks locking the country into stranded assets, debt, and deepened energy insecurity. Despite knowing Bangladesh lacks sufficient gas reserves, ADB invested in several unsustainable fossil gas projects. In the past 11 years, Bangladesh paid Tk 1,824 crore (approx. USD 150,267) in capacity charge for the Khulna 225 MW Combined Cycle Power Plant, which operated at an average plant factor of 27%, which was inevitable, for it was built on the assumption of a gas supply that did not exist in reality. Over the rest of its lifetime until 2036, the power plant would need Tk 4,200 crore (approx. USD 346,000) more in capacity charge. Despite this, ADB loaned USD 185 million in 2013 for the upgrade and expansion of gas transmission lines connected to the said plant. 

ADB further invested in a 165-kilometre-long gas pipeline project from Bheramara to Khulna, even though it was well aware that Bangladesh lacks a sufficient gas supply. Relying on imaginary gas, it channeled more funds invested in two gas-based power plants in Khulna with capacities of 225 MW in September 2019, and an 800 MW combined cycle power plant in Rupsha in June 2018. Due to the shortage of gas, these projects have remained idle for years, becoming a burden on the people. ADB has also financed $200 million in the 718 MW Reliance Bangladesh Liquefied Natural Gas and Power Plant. Bangladesh, being on the frontlines of the climate crisis, needs support for renewable solutions, not fossil fuel dependency. ADB must urgently change its energy policy and commit to a full transition to renewables.

Amid the climate crisis, continued investment in fossil fuel infrastructure and vulnerability to global market volatility risks locking countries into environmentally and economically unsound pathways. The gas value chain’s documented environmental and human rights impacts make it incompatible with a climate-resilient, Paris-aligned future. With renewables now cost-competitive, new gas projects only serve to delay the energy transition.

We urge a strategic, time-bound phase-out of support for fossil fuel projects—including midstream and downstream gas—across all modalities, including financial intermediary lending, technical assistance, infrastructure development, trade and supply chain finance, and policy advisory services. Recognizing the complexity of energy transitions, we emphasize that any continued engagement must be limited to initiatives with clearly defined pathways toward decarbonization, subject to rigorous climate-aligned emissions benchmarks and time-bound transition requirements, and publicly available alternative assessments.  This approach ensures that public and private sector efforts are aligned with long-term climate goals while allowing for a just and orderly shift to sustainable energy systems.

No More False Solutions: Stop Using Climate Finance for Decarbonization Detours 

ADB’s continued pivot toward false climate solutions reflects a troubling pattern of favoring unproven or harmful technologies that delay real decarbonization. Instead of phasing out fossil fuels, the Bank supports measures like carbon capture, utilization, and storage (CCUS), which has a poor track record and only serves to prolong fossil fuel reliance. Similarly, trends like fuel mixing—including green hydrogen—overlook the environmental costs of critical mineral extraction. “Clean energy” technologies such as Waste-to-Energy (WTE) and Refuse-Derived Fuels (RDFs) are misaligned with decarbonization goals, promoting wasteful production,  posing adverse risks, including stimulating waste importation, carbon lock-in, posing threats to community solutions, and building toxic indebtedness.

As a concrete case, a $73.9 million package for the establishment of a WTE facility in the Greater Malé region of the Maldives aiming to solve the country’s mounting waste problem by incinerating its wastestreams had influenced the passage of its Waste Management Act removing the proposed ban on waste importation into the country.  The project also contributed to the Maldives’ debt crisis for a “solution” it never needed, and required it for a USD 27.74 million counterpart fund, which never existed.  We stress that ADB must withdraw its support for WTE incinerators and cease neglecting the well-documented risks and hazardous by-products of incineration, many of which are regulated or banned under internationally binding environmental and health agreements.

Large hydropower remains a cornerstone of ADB’s energy portfolio. Yet, the Bank continues to underplay dam construction's severe social and environmental consequences, ranging from forced displacement and loss of livelihoods to structural safety concerns. Despite the  Independent Evaluation Department’s (IED)’s observation (2009-2019) about clear warnings on prioritizing less socially and environmentally disruptive options in hydropower investments, the current energy policy did not reflect this shift. The Bank continues to indirectly channel funds toward large-scale hydropower, as seen in the Sikkim Power Sector Development Project. The disaster at the Teesta Dam III in Sikkim, India—acknowledged even by the ADB—demonstrates the severe risks dams pose to downstream communities and ecosystems. Yet, ADB maintains its support for projects like the Balakot Hydropower Project in Pakistan. The development of are sources in Pakistan is being critically hindered by mega hydro projects. In the JPCL case, construction companies are aggressively exploiting historical water sources and water streams, stripping local communities of vital resources essential for their survival. This exploitation directly threatens community livelihoods and poses a growing risk to food security. In addition, widespread labor rights violations, flawed land acquisition practices, and unjust compensation offers have fueled strong resistance from affected communities. These unresolved grievances not only undermine the legitimacy of current projects but also jeopardize the long-term viability of sustainable energy development in Pakistan. We express deep concern over how utility-scale hydropower is still promoted as a climate solution and classified as renewable energy by the ADB, despite its substantial social, environmental, and economic impacts. We therefore assert that the Bank must drop financing—or refinancing—utility-scale hydropower projects.

We reiterate our grave concern about large geothermal projects, which are often dangerously categorized as renewable energy in the policy and various local contexts. Case in point, Indonesia has been showered with USD 300 million investment to build the Dieng 2 Geothermal Project. From the pre-construction phase until its full operation, the project has been plagued with serious human rights and environmental violations, ranging from intimidation and harassment, criminalization, forced displacement from their homes and livelihood, gas leaks, water pollution, public health hazards, and others. Despite these impacts, the project was only rated Category B for Environmental and Involuntary Resettlement risks, downplaying the destruction it wrought to the communities. We demand that the Bank classify geothermal projects as high-risk, refrain from financing, and remove them from the RE category on its energy sector investment portfolio. In Indonesia, geothermal projects have dried up water sources essential to communities and ecosystems. Without water, there is no geothermal energy. Moreover, drilling and extraction disrupt ecological balance and increase the risks of greenhouse gas emissions above Earth’s surface.

According to the Energy Sector Office, these technologies will likely be untouched in the policy update.  We demand that the Bank immediately halt support for these false solutions that are misleadingly framed as ‘low-carbon technologies’. We strongly recommend that ADB redirect its focus toward genuine, community-centered climate solutions that prioritize social justice, uphold Indigenous and local rights, and ensure environmental integrity. Even large-scale renewable energy projects must be subject to robust safeguards to avoid repeating the harms of extractive models.

No More “Mining for Climate Action”: Reconsider Climate-Smart Mining and CM2CET Framework 

ADB’s encroachment on critical minerals under the banner of “climate-smart mining” signals a concerning shift toward green extractivism. Through technical assistance, policy influence, and the CM2CET framework, the Bank fosters conditions that enable environmentally and socially risky extraction without directly financing it—thereby evading accountability for its impacts. This model, echoing the Bank’s past failures in the extractive sector, particularly in cases like the Marcopper disaster in the Philippines, must not be repeated under the guise of climate action. We urge ADB to remove mining activities from its climate finance portfolio, recognize local autonomy and the critical role of Indigenous and frontline communities, uphold transparency and no-go zones, and align with the UN’s guiding principles on transition minerals.

Alignment of ADB’s Finance Flows with the Paris Agreement’s 1.5°C Warming Limitation Objective

Since June 2023, the world has been in consecutive months of consistently breaching the 1.5°C threshold pre-industrial levels of surface air temperature. This calls for urgent and tailored solutions to the worsening planetary crisis. ADB has positioned itself as a key player in global climate action by adopting the Joint MDB Methodological Principles on Paris Alignment and developing guidelines for its implementation. However, how the ADB implements its Paris Alignment lacks transparency as its guidelines remain internal and unavailable to the public. The Joint MDB Methodology remains problematic with its narrow classification of what is ‘Universally Not Aligned’, which allows fossil gas and other high-emission technologies to slip through under ‘Specific Criteria Assessment’ and ‘Counterparty Approach’ both in direct and in intermediated financing. These loopholes allow fossil gas investments and false solutions as long as they are ‘aligned’ with national decarbonization plans, and for financial intermediary clients with fossil fuels in their portfolios to be regarded as ‘aligned’ as long as they commit to a ‘credible pathway’ to Paris alignment. Rather than serving as a safeguard, this framework legitimizes continued fossil fuel investments and false solutions, while diluting the Bank’s climate commitments. Despite presenting itself as a climate finance leader, ADB’s continued reliance on a weak alignment framework reveals its hesitation to fully move away from fossil fuels and commit to the 1.5°C goal. Its failure to comprehensively account for the emissions of its financed projects further undermines the credibility of its climate commitments. The ADB’s approach to Paris Alignment must be made public and adopt concrete procedures, which must go beyond generic alignment language. This includes requiring a rigorous, evidence-based, and publicly available alternative analysis for all proposed fossil fuel energy projects, assessing the economic and technical feasibility of renewable options, and accounting for the full societal cost of carbon. Ultimately, the ADB must close fossil fuel loopholes in its Paris Alignment, which includes adding fossil gas to the list of universally not aligned activities, and removing allowance for ‘false solutions’.

Moreover, Energy Sector Climate Finance should not be exposed to energy projects that are not Paris-aligned. This includes not only gas-dependent power generation and the flawed ETM scheme, but also transmission and distribution infrastructure tied to fossil fuels, household connectivity projects reliant on non-renewable sources, large-scale geothermal and mega-dam developments, waste incineration, co-firing technologies, and the emerging “mining for climate action” agenda. Channeling climate finance toward such initiatives risks greenwashing and undermines the credibility of ADB’s climate commitments.

Conclusion and Ways Forward 

As ADB undertakes its 2025 Energy Policy Review, the Forum strongly urges ADB to move beyond cosmetic commitments and adopt bold, decisive reforms that truly align with the 1.5°C objective, prioritize human rights, and reject harmful fossil fuel dependencies and false solutions. This review is not simply a procedural update—it is a litmus test of ADB’s integrity as a development and climate finance institution. To uphold its climate commitments and respond to the urgency of the planetary crisis, ADB must commit to ending all fossil fuel support, reject techno-fixes disguised as ‘low-carbon’ or ‘clean energy’ solutions, and center energy systems around equity, justice, and sustainability. This policy review must deliver the transformational shift that communities across all member countries rightfully demand.

ENDORSED BY: 

• Bank Climate Advocates (BCA) | USA

• Global Alliance for Incinerator Alternatives - Asia Pacific (GAIA-AP) | Regional 

• Indus Consortium | Pakistan 

• NGO Forum on ADB | Regional

• Recourse | Netherlands

• Urgewald | Germany 

AGM Statement_ Energy Policy Review 2025.pdf

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