China to stop building new coal power projects overseas

Coal-fired power plant. Adrem68. Creative Commons.

On the anniversary of its carbon-neutrality pledge, China has announced a new policy to stop building new coal-fired power plants abroad

Shi Yi Shi Yi September 23, 2021

The mounting calls for China to stop supporting coal power projects overseas have received an answer. Chinese President Xi Jinping announced through a pre-recorded video address to the United Nations General Assembly on 21 September that China “will not build new coal-fired power plants abroad” while at the same time increasing its support for developing countries to pursue green and low-carbon development.

The announcement ends speculation as to where China stands on the issue as one of the last remaining public financiers of overseas coal power projects, ahead of UN climate talks in Glasgow this November. Since 2013, China, Japan and South Korea have contributed 95% of all global public financing for coal power projects outside their own borders. China is the largest among the three, supplying USD50 billion that accounts for about 56 GW of total installed capacity.

Chinese-supported development of coal-fired power overseas has already slowed down in the past five years, thanks to the decreasing competitiveness of coal power compared with renewables and declining appetite from host countries. A report by the Centre for Research on Energy and Clean Air (CREA) shows that close to half of planned and permitted coal power projects with Chinese involvement have been either cancelled or suspended. In 2021 so far, China has not made any new coal investment overseas, except for three supply and engineering contracts that may or may not materialise.

Both Japan and South Korea have announced policies for ending public financing support for coal power projects abroad in recent months. With Xi’s announcement, all major public financiers of the industry have indicated their intention to exit the overseas market in one way or another.

China is the first developing country to take such a position, said Kevin Gallagher, director of the Boston University Global Development Policy Center. He now urges the private sector to follow suit. According to analysis by his centre, 87% of overseas coal financing comes from the private sector.

UN Secretary-General Antonio Guterres welcomed the announcement made by Xi. “Accelerating the global phase out of coal is the single most important step to keep the 1.5-degree goal of the Paris Agreement within reach,” he said in a statement.

Scope of pledge needs clarification

It is unclear how China will approach the overseas coal power projects that are already planned or under construction. According to data collected by the Global Development Policy Center, in mid-2019, 13.5GW of overseas coal power capacity with Chinese involvement had already been planned and 20GW was being built. The pandemic might have disrupted some of that. 

Wang Yi, a member of China’s Standing Committee of the National People’s Congress and vice president of the Chinese Academy of Sciences’ Institutes of Science and Development, told China Dialogue that the scope and coverage of the “no new coal” pledge remains to be clarified through follow-up policy documents.

“I think what is now almost certain is that Chinese policy banks and state-owned enterprises will no longer invest in new coal power overseas. But does the pledge cover all investment forms? What about projects initiated and fully financed by the host country? And will commercial deals won by private Chinese companies be affected by the pledge? These need to be clarified by follow-up policies,” he said. 

Source: China to stop building new coal power projects overseas | The Third Pole