ADB Approves $82.5 Million for Cambodia’s Second-Phase Energy Transition Plan

The Asian Development Bank (ADB) has approved a $82.5 million financing package for the second phase of Cambodia’s Energy Transition Sector Development Program (ETSDP) — a transformative initiative designed to accelerate the country’s clean energy transition through policy reforms, institutional strengthening, and targeted investments in new technologies.

The program, cofinanced by the ASEAN Infrastructure Fund, the Asia–Pacific Climate Finance Fund, the Green Climate Fund (GCF), and the United Kingdom through the ASEAN Catalytic Green Finance Facility (ACGF), represents a crucial step in helping Cambodia achieve its ambitious goal of reaching 70% renewable energy in its power mix by 2030.

Building on the Success of Phase One

The first subprogram, approved in 2022, established a strong policy foundation for the nation’s energy transition. It introduced critical measures to guide Cambodia toward a renewable and energy-efficient development pathway, including the creation of national strategies for clean energy investment and the strengthening of institutional frameworks for sustainable power generation.

Phase two builds on these reforms, focusing on regulatory advancements that promote energy efficiency and attract private sector participation. A central achievement of Subprogram 2 is the introduction of Minimum Energy Performance Standards (MEPS) — Cambodia’s first-ever national regulations mandating energy efficiency benchmarks for electrical appliances.

The MEPS will initially target air conditioners, which account for a significant share of household electricity consumption, before expanding to other high-energy appliances. The new standards aim to reduce electricity demand, lower carbon emissions, and stimulate market demand for high-efficiency products.

Creating an Energy Efficiency Revolving Fund

One of the most innovative features of Subprogram 2 is the establishment of the Energy Efficiency Revolving Fund (EERF), a financing mechanism designed to facilitate affordable credit for small and medium-sized enterprises (SMEs) investing in energy-efficient technologies.

The fund will operate through a financial intermediation structure, enabling local banks to extend loans to businesses for projects such as:

• Upgrading industrial equipment to more efficient models,

• Retrofitting commercial buildings for lower energy use, and

• Installing renewable energy systems like solar panels and efficient cooling systems.

By mobilizing domestic financial institutions and catalyzing private capital, the revolving fund is expected to create a self-sustaining financing ecosystem that drives long-term investment in energy efficiency.

“ADB is honored to support Cambodia in its ambitious and transformative journey in the energy sector,” said Anthony Gill, ADB Acting Country Director for Cambodia. “Through a comprehensive reform package combining policy support with strategic investments, this program will help turn the government’s ambitious vision into reality — ensuring Cambodia’s growth remains sustainable and affordable.”

Supporting Cambodia’s Climate and Energy Goals

Cambodia’s energy demand has tripled since 2010, driven by rapid urbanization, industrial growth, and rising household consumption. Although the country has expanded its renewable energy capacity — particularly in hydropower and solar — it remains dependent on fossil fuels and imported energy to meet its growing needs.

The ADB-supported ETSDP seeks to change that trajectory by:

• Strengthening policy and regulatory frameworks for renewable energy and energy efficiency;

• Enhancing institutional capacity to manage and monitor reforms;

• Promoting private sector investment in clean technologies; and

• Improving access to sustainable financing mechanisms.

The program aligns with Cambodia’s Long-Term Strategy for Carbon Neutrality (LTS4CN), which aims to achieve net-zero emissions by 2050. It also complements ADB’s broader regional strategy under the ASEAN Energy Transition Partnership, which supports member states in mobilizing climate finance and scaling up renewable energy adoption.

Regional and Global Co-Financing Partners

The success of the ETSDP reflects strong multilateral cooperation. Its cofinancing partners include:

• ASEAN Infrastructure Fund (AIF): Supporting cross-border connectivity and sustainable infrastructure.

• Asia–Pacific Climate Finance Fund (ACliFF): Providing innovative financing solutions for climate adaptation and mitigation.

• Green Climate Fund (GCF): Mobilizing resources to accelerate low-emission development.

• UK Government (via ACGF): Strengthening green finance mechanisms in ASEAN countries.

Together, these partners have committed grants, concessional financing, and technical assistance to ensure the program delivers tangible environmental and economic benefits.

Laying the Groundwork for Phase Three

The third phase of the Energy Transition Sector Development Program, expected in 2027, will expand reforms even further. It aims to:

• Introduce technical standards for renewable energy systems, building efficiency, and industrial operations;

• Broaden MEPS coverage to additional household and commercial appliances;

• Deepen the engagement of private investors and developers in renewable energy projects; and

• Strengthen national institutions to sustain regulatory and financial innovations beyond the program period.

Through these sequenced reforms, the ETSDP serves as a blueprint for sustainable energy transition — combining governance, finance, and innovation to ensure that Cambodia’s energy future is cleaner, more resilient, and more inclusive.

Toward a Sustainable Energy Future

Cambodia’s partnership with ADB underscores the growing recognition that energy efficiency is as vital as renewable energy in achieving climate goals. By addressing both the supply and demand sides of the energy equation, the program positions Cambodia as a regional model for balancing economic growth with environmental stewardship.

“Energy efficiency is the invisible fuel of the future,” said Gill. “By investing in smarter technologies and better policies today, Cambodia is ensuring that its next decade of growth is powered by clean, sustainable energy.”