Japan will withdraw financing for key coal-fired power plant projects in Bangladesh and Indonesia under efforts aimed at accelerating a global phase-out of the dirtiest fossil fuel.
Asia’s second-largest economy will stop providing government-backed yen loans to the Matarbari 2 coal expansion project in Bangladesh and the Indramayu plant in Indonesia, the Foreign Ministry said in a statement.
The policy reversal came in response to international criticism of coal-fired power, a major source of greenhouse gas emissions blamed for climate change.
The move comes days ahead of a meeting of Group of Seven nations, which agreed last year to stop international financing of coal projects.
Japan had maintained the plants were exempt as "ongoing cases," prompting environmental groups to accuse the country of breaking the G7 promise.
Japan accounted for more than half of the $6.6 billion (¥893 billion) of coal support from G7 countries in 2019, according to Bloomberg NEF.
Indonesia and Bangladesh were conducting surveys for the projects with Japan's backing, but neither cases have advanced to construction.
"We decided that we cannot proceed any further with these cases as subjects to yen loans," Foreign Ministry Press Secretary Hikariko Ono said at a news conference Wednesday.
She also said the government will continue to assist developing countries in the quest for a decarbonized society.
Bangladesh now plans to build a liquefied natural gas-powered plant for the Matarbari project, connected with an LNG terminal, The Daily Star reported, citing Bangladesh state minister Nasrul Hamid.
Japanese companies are also withdrawing from the coal sector amid scrutiny from activist investors. Sumitomo Corp. and Toshiba Corp. have both indicated they won’t take new orders for coal-fired projects, while commercial banks have also made similar pledges.