Banking on Transition Technologies: Beware of Lock-In Traps

March 2, 2023
  • Recent guidelines on transition technologies for Asia have been influenced by Japanese energy policies, which validate and promote CCUS and ammonia co-firing in the Power sector. These guidelines may be inappropriate for countries in Southeast Asia where the circumstances differ from Japan and investing in renewable power is viable.
  • Banks seeking to achieve net-zero goals may face outsized negative outcomes associated with fossil fuel lock-in by following this guidance and financing such transition technologies. The guidelines also do not properly account for the life cycle emissions of the technologies.
  • Banks should develop robust internal underwriting standards for financing transition technologies that consider their own country’s economic, policy, and technological circumstances.