The announcement by China’s president Xi during the UN General Assembly on Tuesday has caused high ripple effects around the globe – despite it being a mere half sentence: “(…) [China] will not build new coal-fired power projects abroad." While Xi did not provide any further details, NGOs and affected communities are clear about how the word “build” should be filled with meaning: The country has to end all support for new coal projects abroad, in terms of ownership, engineering contracts, insurance and/or public or private financial support.
Hasan Mehedi from ‘Bangladesh Working Group on External Debt’ comments: “Unlike South Korea and Japan, China should not limit its commitment to public financing. If China completely moved away from overseas coal, the coal plant pipeline in South and South East Asia would collapse. This way, a renewable energy future for countries like Bangladesh, Pakistan, the Philippines, Indonesia and Vietnam would be possible. Only like that, Xi’s other promise, ‘to step up support for other developing countries in developing green and low-carbon energy’, could turn out to be honest.”
Everyone agrees that Xi’s announcement is indeed good news for affected communities and the climate. However, its exact impact will only become clear, once more specifics are provided. “China will collect the reactions to Xi’s announcement, before it specifies next steps. Now, in the run-up to COP-26, all coal-finance recipient countries should write-up their expectation lists,” says Nora Sausmikat, China Expert at Urgewald. “In contrast to the cases of South Korea and Japan, China should also make sure that Chinese coal companies and commercial financial institutions stop their international coal activities as well. But: Whatever China decides, other countries that have so far made no such pledges as we have now heard on Tuesday, like for example Australia, will need to follow suit if they don’t want to be lagging behind.”
China’s support for coal expansion around the globe through the Belt and Road Initiative cannot be overestimated and is manyfold: Utilities from China are developing new coal plants all-over South and South East Asia, namely in Pakistan, Bangladesh, the Philippines, Indonesia and Vietnam and Cambodia.1 Chinese companies are also building new plants as engineering contractors, like CMEC for Kostolac B3 in Serbia, or Dongfang Electric for Tuzla 7 in Bosnia Herzegovina2. On top of that comes project-financing from Chinese public and commercial banks and insurances. For example, the 1320 MW coal plant Emba Hunutlu in Turkey is exclusively relying on financial support from Chinese institutions: The project will be realized solely with support from China Development Bank, Bank of China and ICBC.3 In Zimbabwe, the 2800 MW Sengwa power station will probably get cancelled, if ICBC (and with it the Chinese insurer Sinosure) is confirming its retreat from the project.4
Overall, China is number one in overseas coal financing. Chinese private (commercial) banks have supported 19 Chinese coal plant developers with expansion plans outside of China, amounting to USD 305 billion through underwriting and lending since 2016, as Urgewald’s research shows.5 And according to E3G, Chinese public (policy) banks are the last major providers of public finance for overseas coal plants, with over 40GW of coal in 20 countries in the pre-construction pipeline as of July 2021.6
However, to bring China on a Paris-Aligned transition path, retreating from international coal support is not enough. According to Global Energy Monitor, 238 coal plants with 250 GW of coal fired power are under construction or development in China.7 At the same time, China wants to become carbon neutral in 2060 and it also plans to reach peak coal consumption in 2025. "In order to show that it is serious about reducing the use of coal, China has to slash its huge coal plant expansion plans inside the country. And if China is really committed to do its share in limiting Global Warming to 1.5°, it needs to draft a domestic phase-out plan for coal power by 2040 and start decommissioning coal plants now,” Nora Sausmikat comments.
1 Global Coal Exit List 2020: coalexit .org
2 Europe Beyon Coal: https://beyond-coal.eu/2021/09/22/chinese-and-turkish-announcements-spell-end-to-new-coal-in-europe/
3 Global Energy Monitor: https://www.gem.wiki/EMBA_Hunutlu_power_station
4 Global Energy Monitor: https://www.gem.wiki/Sengwa_power_station
5 As of 31 Oct 2020; derived from the data published in February 2021: coalexit.org/finance-data
Hasan Mehedi | Bangladesh Working Group on External Debt