| Project Detail |
Project Name Enabling the Development of Inclusive, Resilient, Diverse, and Responsible Critical Minerals and Clean Energy Technology Manufacturing Supply Chains Project Number 58185-001 Country / Economy Regional Indonesia Mongolia Uzbekistan Viet Nam Supply Risks threaten the tripling of renewable energy capacity by 2030. The global stock take agreed at the United Nations Climate Change Conference (COP28) outlines mitigation actions to reach Paris Agreement goals. Two key actions included in the UAE Consensus limiting global warming to 1.5 degrees Celsius underscored the urgent need to tripling renewable energy capacity and doubling the average annual rate of energy efficiency improvements by 2030. The accelerated shift to clean energy systems will require a radical increase in clean energy technology (CET) manufacturing capacity. Given the high mineral- and material-intensity of key energy transition technologies, the world is already experiencing an unprecedented demand growth for extracting and processing critical minerals (CM) and materials. However, CM production and CET manufacturing are vulnerable to supply chain disruptions due to geographic concentration, long lead times for capacity expansions, and financial risks (including volatile mineral prices). Enabling the development of reliable and resilient supply chains emerges as an essential strategy for Asian Development Banks (ADBs) developing member countries (DMCs) to facilitate the implementation of their energy transition plans. Asia and the Pacific is well placed to become a manufacturing leader for clean energy technologies, given the regions endowment with CM, strong manufacturing base, good integration in global supply chains, and quality labor force. CET supply chains, however, cannot be truly secure, reliable, and resilient unless their production along the value chain adheres to strict environmental, social, and governance (ESG) standards and is fully decarbonized. While the growing demand for minerals and metals provides economic opportunities for resource-rich developing countries and the industry alike, significant challenges will likely emerge, if the climate-driven clean energy transition is not managed responsibly and sustainably. If not managed from the outset of this unprecedented expansion of the industry, the fossil fuel-dependent and highly energy- and water-intensive mining and metals industries, which contribute to approximately 8% of the global carbon footprint, can result in a carbon lock-in and harm the environment, workers, communities, and societies. At the same time, adopting sustainable and responsible practices bolsters the security of supply in critical minerals. Driven by stakeholder expectations, Group of Seven countries governments have increasingly adopted strict regulations requiring domestic companies to ensure the integrity of their supply chain. Governments in developing Asia need assistance in setting the right incentives for private sector companies to implement improvements to address environmental, social, and governance risks, including water security, greenhouse gas emissions, biodiversity, human rights, communities, and corruption. Project Rationale and Linkage to Country/Regional Strategy Assistance needs of Asian Development Bank (ADB) developing member countries (DMCs). For low- and middle-income DMCs of ADB to seize the tremendous growth opportunity from the clean energy transition and to secure their CM and CET supply chains, governments need capacity building, policy and regulatory design support, as well as assistance in developing their processing capacity. They need support in (i) establishing an enabling environment and regulatory framework that catalyzes private sector investments in mining, minerals production and processing, and CET manufacturing while addressing the myriad of ESG risks and other risks that could set off supply chain disruptions; (ii) trade facilitation and economic corridor development; (iii) project identification and development must be enhanced; and (iv) blended financing solutions to de-risk supply chain investments in CM and CET manufacturing. Moreover, governments need to invest in (i) detailed geological surveys; (ii) reinforcing infrastructure and logistics value chain, from constructing necessary roads and railway networks, ports, and building logistics hubs; (iii) digitizing the value chain to facilitate traceability of minerals and technology components; (iv) putting in place decarbonized energy supply; and (v) upskilling a specialized labor force. Several ADB DMCs and private sector clients approached ADB and ADB has begun to commit initial knowledge solutions, technical assistance, and lending support. Urgent need for guidance on environmental, social, and governance standards. While the regions assistance needs are vast, ADBs support to the development of inclusive, resilient, and responsible critical minerals and CET supply chains to date has remained limited. ADB support lacks strategic guidance. ADB at present does not have an established extractive industries practice or a manufacturing practice. At the same time, there is no contra-indication for ADB to support its sovereign and non-sovereign clients in this area. Given the complexities involved, an initial review of ESG risks and other risks can support the definition of adequate strategies for the identified DMCs and will provide a wider ADB that will also need to (i) define the goals and focus of its assistance; (ii) set a lending target; (iii) estimate additional staffing needs; and (iv) identify additional measures to achieve the goals, Hence, there is an urgent need for a cohesive guide in this area. In contrast, ADB peer multilateral institutions, including the African Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the International Finance Corporation, the Islamic Development Bank, and the World Bank have established extractive industries practices and approaches. Moreover, peer organizations are in the process or have concluded reforming their approaches and raised partnerships and trust fund resources to respond to climate and market needs. The TA will support technical studies focusing on supply chain issues in critical mineral and clean energy technology in four DMCs (footnote 1) and develop strategic guidance on the upstream and midstream engagement in critical mineral and clean energy technology supply chains. The TA will also support essential stakeholder consultations and incorporate feedback received into the guidance. |
