Strategy 2030 Energy Sector Directional Guide Summary: Inclusive, Just, and Affordable Low-Carbon Transition in Asia and the Pacific

Strategy2030 ENERGYSECTORDIRECTIONALGUIDESUMMARY Inclusive,Just,andAffordableLow-CarbonTransitioninAsiaandthePacific ThisEnergySectorDirectionalGuide(ESDG)providesthestrategicdirectionoftheAsianDevelopmentBank(ADB)fortheenergysector.TheESDGassessesthecurrentenergysectortrends,challenges,andopportunities,andhowADBcanbestpositionitselftoaddvaluetoenergysectordevelopmentintheAsiaandPacificregion.TheguidealsooutlinestheprioritiesandfocusfortheenergysectorinlinewithADB’sStrategy2030. TheguideaimstosupportADBstaffinconductingenergysectoroperationsinlinewiththe2021EnergyPolicyupto2030.Thefivepolicyprinciplesofthe2021EnergyPolicyarealsothefoundationsofthisESDGandcomprisetheESDG’svisionandapproach.TheESDGalignswithStrategy2030anditssevenoperationalpriorities. WhereWeAre Fromleft:ChildrenintheTondoneigborhoodinManilastudybycompactfluorescentlight(CFL)bulb;lowerelectricitybillshelpsmallstallowners. Energycutsacrossallaspectsofdevelopmentandisessentialtoinclusivesocioeconomicdevelopmentandgenderequality.Assuch,energyplaysanimportantroleinsupportingdevelopmentofothersectorssuchasagriculture,education,health,transport,urban, andwater. Ontheotherhand,energyproductionandconsumptionareresponsibleforalmostthree-quartersofglobalgreenhousegasemissions.Thisplacestheenergysectorattheforefrontofglobaleffortstoaddresstheimpactofenergyuseonclimate andenvironment. Theenergylandscapehaschangedradicallyoverthelastdecade.TheSustainableDevelopmentGoals(establishedin2015),theParisAgreementonclimatechange(adoptedin2015),andADB’sStrategy2030,publishedin2018,setambitioustargetsforprovidingreliableenergyaccesstoall,andamplifiedthecallsforactiononclimatechange. ThemainchallengesandemergingneedsforADB’sdevelopingmembercountries(DMCs)intheenergysectorstilllieinensuring(i)universalaccesstoelectricity,andcleancooking,heating,andcoolingoptionsforallhouseholds;(ii)energysecuritytosupporteconomicgrowth;(iii)sustainabilityacrossthedimensionsoffinancialviability,effectiveoperationandmaintenanceofinfrastructure,resiliencetoclimatechangeandextremeevents,climatemitigationvialower-carbonuse,health,andenvironmental impacts;and(iv)sectorgovernance,includingregulations,utilities’performance,andprivatesectorparticipation. ADB’senergysectoroperationshaveplayedasubstantialroleindeliveringenergyaccess,contributingtoeconomicdevelopment,andimprovinglivesthroughouttheregion.However,achievinguniversalenergyaccesstoareliable,efficient,andaffordableenergysupplyacrosstheregion,andsupportingalow-carbontransitionstillrequiretmobilizingsubstantialeffortsandresources. Asector-wideevaluationin2020byADB’sIndependentEvaluationDepartmentfoundthatADB’s2009EnergyPolicyhadbeenalignedwiththeneedsoftheenergysectorsinADB’sDMCsandStrategy2020andwasrelevanttotheADBprogramduringthereviewperiod. However,the2009EnergyPolicywasnolongeralignedwiththeSustainableDevelopmentGoals,theParisAgreement,andADB’sStrategy2030,thusneeding anupdate. ThenewEnergyPolicyofADBwasapprovedinOctober2021.ThevisionofADB’s2021EnergyPolicyis“supportinglow-carbontransitioninAsiaandthePacific.”Theobjectivesofthesectoroperationsare tohelpADB’sDMCsacceleratethedevelopmentofsustainableandresilientenergysystemsthatprovidereliableandaffordableaccessforall,fosterinclusiveandenvironmentallysustainableeconomicgrowthandsocialdevelopment,andsupportthelow-carbontransitioninAsiaandthePacific. WhereWeWanttoBe Fromleft:TheTheppanaWindFarmprovideselectricityinafarmlandinThailand;DepartmentofEnergytechnicianinManilatestsCFLbulbs. Toachievetheenergysector’svisionandobjectives,ADB’s2021EnergyPolicywasdevelopedbasedonthefollowingfiveprinciples: i.Supportingeffortstobringaffordable,reliable,sustainable,andmodernenergytoall,toeradicateextremepovertyandreducesocialinequalities; ii.SupportingDMCstotackleclimatechange,enhanceenvironmentalsustainability,andbuildclimateanddisasterresilience; iii.Supportingtheinstitutionaldevelopment,financialsustainability,andgoodgovernanceofenergysectorinstitutions,companies,andprivatesectorparticipation,andassistingincreatingthepolicyframeworksneededtomanagethe energytransition; iv.Promotingregionalenergycooperationandtheintegrationofenergysystemstostrengthenenergysecurityandincreasecross-borderaccesstocleanerenergysources;and, v.Continuingtocombinefinance,knowledge,partnerships,anditscountry-focusedapproachtodeliverintegratedsolutionswithcomprehensiveandmagnifieddevelopmentimpacts. Recognizingthemassivefinancingneedsintheenergysectoracrosstheregion,ADB’sresourcesmustbeprioritizedtotacklethemostdemandingenergychallenges.ADB’sassistancewillfocusonmeetingtheemergingneedsandaddingvaluetoitsclientsin theregion. ThisESDGadoptsacommonbutdifferentiatedapproachinlinewitheachDMC’slevelofeconomicdevelopment,resourceendowment,respectivecapabilities,andnationallydeterminedlow-carbontransitionpathway. Theareasofdeliverywillfocusonthe“4Ds”—decarbonization,decreasingenergyintensity,digitalization,anddecentralization. ADBwillfacilitatethelow-carbontransitionbyassistingitsDMCsin i.acceleratingthedeploymentofrenewab