African Development Bank

Fossil fuel exclusion policies

This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs

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Paris AlignmentReasoning
Some progressOnly upstream oil and gas exploration excluded.
 Alignment and Reasoning
Coal policiesNo evidence can be found for any official exclusion of coal despite President’s remarks.
Upstream oil and gas policiesOil and gas exploration excluded.
Downstream oil and gas policies No evidence can be found for any downstream oil and gas policies.
Supply-side energy efficiency No evidence can be found for any supply-side energy efficiency standards.

Explanation

Coal  

The AfDB’s Energy Sector Policy (2012) states the AfDB will still provide support for coal, as coal-fired power generation “is likely to form part of such an approach to help the continent increase its access to modern energy at an affordable cost”. 

The Bank sets out five broad criteria under which coal can be financed, based on development impact, a transition towards green growth, and environmental responsibility, use of most appropriate technologies, and offsetting measures. On development impact, it is stated that a power plant should contribute: (i) to poverty reduction, and (ii) addressing national and/or regional energy security needs”. Secondly on transitioning to green growth, the policy states “any coal power plant to be financed by the Bank will form part of a technologically and commercially feasible low-carbon and cost-effective strategy for energy resources”. Thirdly, the policy states that when supporting coal, technology should allow for “high-efficiency” and diversify the energy mix. On technology, the policy states the Bank will encourage assessment “for readiness for relevant Carbon Capture and Storage technologies”. Finally, the Bank will support countries that express interest in offsetting measures related to agreements agreed under climate negotiations, “or on a voluntary basis”.   

While the five criteria provide a framework for assessing coal investments, the AfDB’s coal policy does not use the words ‘exceptional’, or ‘rare’ and therefore can be seen as one of the least restrictive among the MDBs. The policy is also silent on the issue of coal mining.  

On 24 September 2019 at the UN Climate Action Summit, African Development Bank President Akinwumi Adesina pledged to scrap coal power stations across the continent and switch to renewable energy at United Nations climate talks. President Adesina said “Coal is the past, and renewable energy is the future. For us at the African Development Bank, we’re getting out of coal,”. Furthermore the Bank has set up a $500 million green baseload scheme, which will launch in 2020 and is set to yield $5 billion of investment that will help African countries transition from coal and fossil fuel to renewable energy. 

The last coal investment the bank made, which was in 2015, was a supplementary loan of about $4 million for a small, 125 megawatt coal-fired power plant in Senegal that it originally financed in 2009. 

Recommendation: The AfDB’s Energy Sector Policy should be reviewed and updated in light of the latest statements from the President of the AfDB. 

Oil and gas 

The AfDB energy policy states that the AfDB “will not support oil and gas exploration activities”. This may still permit investment in other upstream activities such as extraction of reserves. 

Recently, the African Development Bank (AfDB) joined a global syndicate of banks and other financial institutions to provide financing for Mozambique’s $20 billion liquefied natural gas (LNG) project. The regional development bank said it has concluded its bid to co-finance the project with a senior loan of $400 million. 

Supply-side energy efficiency 

No evidence can be found for any supply-side energy efficiency standards.

 

Last Update: November 2020

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