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AIIB finds fuel plant in Bangladesh appropriate with Paris objectives



AIIB’s fast-tracking of a 600MW LNG plant might set a precedent for extra growth finance to fossil fuel tasks, campaigners warn

The Asian Infrastructure Funding Financial institution (AIIB) is fast-tracking a bid to again a gas-fired energy plant in Bangladesh, after concluding the venture is consistent with the Paris Settlement.

The Beijing-headquartered growth financial institution is contemplating help for a 584MW fuel plant in Narayangonj on the outskirts of Dhaka. A report from the Bangladesh Energy Improvement Board exhibits the plant shall be fuelled by LNG.

Dwindling home fuel assets, efforts to shift away from coal and section out polluting diesel crops and the dearth of renewable capability has led Bangladesh to more and more depend on LNG to satisfy its vitality wants.

However hovering costs attributable to Russia’s invasion of Ukraine have left the South Asian nation priced out of the market and going through common energy outages.

“There’s no gas to supply this new power plant. It’s not justified and ridiculous,” Hasan Mehedi, secretary of the Bangladesh Working Group on Exterior Debt, an alliance of 43 native organisations, instructed Local weather House Information.

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Customary Chartered Financial institution is lead lender on the $613 million venture, which is beneath building. AIIB’s proposed contribution is a $110m mortgage.

To construct the plant, venture developer Distinctive Meghnaghat acquired 21 acres of agricultural land from native villages, affecting 343 landowners and fishers, based on venture paperwork.

The fast-tracking course of permits the financial institution’s president to greenlight help with out going by the board. He might make the choice this month.

Paris alignment

AIIB discovered the venture to be consistent with the objectives of the Paris Settlement. Petra Kjell Wright, a growth finance campaigner at Recourse instructed Local weather House this was the primary time the financial institution had talked about a Paris alignment evaluation. However it has not printed its methodology.

The financial institution has pledged to totally align its operations with the Paris objectives by July 2023. In accordance with E3G analysts, it has work to do to get there.

The Worldwide Vitality Company has warned that “a huge decline in the use of fossil fuels” is required to restrict warming to 1.5C – the extra bold finish of the Paris Settlement’s objectives.

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The venture paperwork present that renewable options had been barely thought of. They state that renewable vitality “remains a niche area that does not have the capacity to provide the power delivery at the scale and reliability in view of the existing power deficit scenario”.

Land shortage, excessive preliminary price and the dearth of infrastructure for large-scale era are listed as limitations.

Kjell Wright described the evaluation as “very weak” and with “loopholes so big that a gas-power plant can jump through them”.

“This is public finance and taxpayers money and it should play a role in the trajectory towards renewable. Public finance should help countries leapfrog to renewables and not pull them back to the fossil fuel economy,” she stated.

A spokesperson for AIIB stated the venture will assist the federal government keep away from utilizing extra polluting and fewer environment friendly crops and complement the event of renewable vitality.

‘Clever framing’

Multilateral growth banks, together with AIIB, have been engaged on a joint framework to evaluate tasks in opposition to the objectives of the Paris Settlement.

A draft from November 2021 guidelines that mining or burning coal isn’t aligned with the Paris deal but it surely doesn’t explicitly exclude help for oil and fuel. As a substitute, banks are requested to reply a sequence of broad questions to find out whether or not the venture is Paris-compatible.

“With a bit of clever framing and number crunching, there are ways of showing that nearly every project apart from coal and peat is Paris-aligned,” stated Sonia Dunlop of suppose tank E3G.

The approval of the Narayangonj fuel venture might set a precedent for a way different MDBs assess comparable venture, she added. “This is hugely concerning”.

Final month, AIIB permitted an up to date vitality technique proscribing financing for coal and oil tasks and fuel drilling. However it permits funding for fuel infrastructure and energy era in sure circumstances, together with if it displaces extra polluting fuels and doesn’t displace clear ones.

Delaying the vitality transition

Greater than half of Bangladesh’s electrical energy era comes from fuel, whereas grid-connected photo voltaic accounts for simply over 1% of the combo.

To maintain up with rising electrical energy demand, Bangladesh’s LNG imports have surged. A latest evaluation by Ember discovered that, primarily based on present plans, Bangladesh might spend $11 billion on spot market LNG between 2022 and 2024. Investments in solar energy might have decreased this by 1 / 4 and saved as much as $2.7bn.

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Shafiqul Alam is the lead vitality finance analysts for Bangladesh for the Institute for Vitality Economics and Monetary Evaluation (Ieefa).

He instructed Local weather House: “Given high LNG prices on the international market and the fact Bangladesh is already facing a gas shortage… this is an opportunity for Bangladesh to transition and design a clear pathway for renewable energy.” Rising the fossil gas pipeline will solely delay that transition, he stated. “The government should keep space for renewables and not invest in new LNG-based plants apart from the ones are under construction.”

As of August 2021, AIIB had invested $605m within the vitality sector in Bangladesh. In accordance with evaluation by the Bangladesh Working Group on Exterior Debt, none of this went to photo voltaic or wind tasks.

Mehedi, of the working group, stated Bangladesh had put in 9 grid-connected photo voltaic crops. “Solar is bankable and profitable so why are we going for LNG?”

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