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Coal makes a come-back in AIIB’s investment mandate

Australia, the world’s largest coal exporter, had been lobbying the bank for its fossil-fuel investment policies to cover coal- and gas-fired power projects.

The Australian government has welcomed an energy strategy proposed by the Asian Infrastructure Investment Bank that would not exclude fossil-fuel power generation investments. 

Despite identifying itself as a “green bank”, the China-led multilateral said in its latest strategy draft that fossil fuels will continue to play a significant role in the energy mix of most of its member countries, and thus that it would consider financing fossil-fuel generation investments, including gas- and coal-fired projects. 

“Carbon efficient oil and coal-fired power plants would be considered if they replace existing less efficient capacity or are essential to the reliability and integrity of the system, or if no viable or affordable alternative exists in specific cases, particularly in low-income countries,” said the AIIB in the draft, which will be finalised in June. 

Australia is the AIIB’s sixth-largest member, with a $3.7 billion stake in the bank. The federal government has been lobbying the institution to drop its ban on financing coal-powered projects since the AIIB launched first public consultations on its energy strategy last November. 

Australia’s Treasurer Scott Morrison said the new guidelines will help sustain Australian coal exports, while providing electricity options for poorer nations. “Australia’s national interest demands that coal continue to be part of our future energy equation, not just here in Australia, but around the world,” Morrison told The Australian

The country’s Resources Minister Matt Canavan said last Friday that the A$5 billion ($3.83 billion; €3.57 billion) Northern Australia Infrastructure Facility, which aims to support projects in northern Australia through concessional loans, has opened to applications for “clean coal” projects, with one party already registering interest. 

Australian leaders also seek to ask the country’s green financier, the Clean Energy Finance Corporation, to fund coal projects as long as “they can reduce greenhouse gas emissions”, according to local press reports. 

For its part, the AIIB aims to approve at least 10 to 15 projects in 2017, with a financing budget of up to $2.5 billion, said DJ Pandian, a vice-president at AIIB, in an interview with CCTV last month. 

The $100 billion Beijing-based bank, which approved $1.73 billion of loans last year, aims to rival the Washington-based World Bank and Japan-led Asian Development Bank as a source of financing for Asian infrastructure projects. The latter two have restricted their policies for financing coal-fired facilities as part of efforts to mitigate climate change.