China vows to halt funding of coal-based power plants abroad

China vows to halt funding of coal-based power plants abroad:

By Matthew Finnegan

About one month ago, President Xi Jinping of China announced that the nation will no longer finance coal power plants outside of the country. This comes only two months before the UN Climate Change Conference in the UK, named COP26. The announcement came with statements from President Xi in a speech in the General Assembly of the UN, where he stated that not only are they ending coal plant financing but also using the saved funds to finance renewable sources in its place, although no specifics of what sources were going to be used in particular or where these changes would happen were mentioned. [i] The announcement does not address China’s domestic construction of coal plants. It is reported that coal use will continue to grow in the nation. However, the overall goal of China is to be carbon neutral by 2060 and they recognize that emissions still need to grow in order to get there, estimating the emissions will peak some time before 2030. [ii]

This decision by China does come as a shock in some ways. South Korea and Japan have also been providing large amounts of funds abroad for coal power plants. But in April, South Korea announced plans to stop funding the projects, and then in May, Japan did the same too. [i] Due to this, there was an expectation that China’s power in funding these projects was going to grow as they take on the opportunities that would have previously been taken by South Korea or Japan. However surprising, the decision from President Xi might seem, it is none the less appreciated around the globe for its potential effect on Green House Gas (GHGs) emissions. [i][ii][iii]

The announcement also comes as a surprise due to the lack of diversity of the Chinese energy sources. As of 2019, Coal use is the primary energy source in China, sitting at about 58% of all energy consumption. Petroleum and other liquids account for another 20% and natural gas at 8%. Hydroelectricity accounts for another 8%, nuclear only at 2%, and then all other renewable sources at 5% together. In China, “Coal is King”. [ii][v] It was unexpected that China will stop funding these projects when they have seen firsthand how important they are in development within the Chinese borders. The decision just seems to come out of the blue, but again is a welcomed policy decision.

This decision will have major implications across the globe, both positive and negative.

People will argue that this is a start to lowering GHG emissions around the globe, which is a clear positive of the decision, but it is hard to be too excited when China is by far the largest emitter of GHGs. As of 2014, China was responsible for 30% of emissions. The next closet is the US, being responsible for 15%, followed by all of the European Union accounting for 9% of GHG emissions. There is the general understanding that these numbers have been decreasing in recent years, but China being far out front is still clear. But even still, the expectation is that China will continue to increase carbon emissions for a few more years. [ii] In spite of this, any effort to lower GHG emissions is helpful and to prevent terrible consequences there needs to be much more work done.

There are more than a dozen countries that have Chinese sponsored coal power plants in action, most of which are in other Asian nations. The major funders of these projects are the China Development Bank and Export-Import Bank of China, which have spent about $50 billion dollars in coal plants all around the world. They have funded 21 projects in Indonesia, totaling $9.3 billion dollars, 13 projects in Vietnam, totaling $8.8 billion dollars, 5 in India worth $7.1 billion dollars, and 7 in Pakistan totaling $5.3 billion dollars. There are more projects scattered around the globe in other countries including South Africa, Brazil, and Morocco among many more. [iv] With the large sum of money that is flowing into these other nations, this policy decision from China can be viewed as a negative. Some nations need the Chinese funding in order to take advantage of the rich resources within their own borders. They may have an abundance of coal yet without the finances from China there is not a good chance of harnessing that power to help further development.

This decision also seems to halt the progress of the belt and road initiative that was launched in 2013 by President Xi. The plan was to create a more interconnected Asia, with creating railways and energy pipelines expanding west from China. It is a plan to become more assertive and gain more political and economic power. [viii]. The announcement to stop funding coal power plants abroad seems to contradict the goals of the belt and road initiative. Some nations viewed this program as a poisoned chalice, tying their nations to China. [viii] This goes hand in hand with the point made previously though, that without Chinese funding these projects would never be completed. It is a double-edged sword; these nations need the funding for a clear benefit, but they are wary of the ties to China that come with it.

Conclusion:

In the US this year, we have also seen some dedication to carbon neutrality and fighting climate change. When President Biden took office, he acted on his promises regarding energy and the environment rather quickly. He has already rejoined the Paris Climate Agreement, with the goal of reaching net-zero carbon emissions by 2050 at the latest. In the US there is a different story when compared to China, as to the energy resources used for generation. As of 2020, coal only account for about 10% of the national energy consumption. Natural gas sits at 34% and petroleum at 35%. Nuclear takes up 9% of total consumption and renewables are 12%. [vi] We are still however the second largest emitter of GHGs being responsible for 15% of all emissions. [x]

For those interested in seeing emissions across the globe, by country and sources, and energy diversity for most nations, I recommend looking at the International Energy Agency’s website. [ix] It provides great information and gives a world perspective as well as specifics so help see the climate crisis in numbers and see how they are changing over time. It provides easy access for anyone that demonstrates the reality of climate change, and the actions need to be taken now in order to keep the consequences as small as possible.

This year is hopefully a turning point. Although there are some downsides to China’s announcement to halt coal plant construction abroad, it is more importantly a step in the right direction to address climate change. Pair this with Japan and South Korea also halting this kind of funding and President Biden rejoining the Paris Agreement, this year so far has had some stellar news regarding climate change. However, this is only a great start. Much more work still needs to be done. Chinese coal plant construction domestically is not going to be affected at all under this policy and will continue to increase in the coming years. During this time, new policies and technologies must be at the forefront of conversation to reverse the effects of climate change.

Citations:

[i] Azi Paybarah, China Says It Won’t Build New Coal Plants Abroad. What Does That Mean?, New York Times (2021), https://www.nytimes.com/2021/09/22/world/asia/china-coal.html

[ii] Lauren Sommer, Ahead of Climate Talks, China Vows to Stop Building Coal Power Plants Abroad, NPR (September 21, 2021), https://www.npr.org/2021/09/21/1039486454/china-coal-power-climate-change

[iii] Robin Brant, China Pledges to Stop Building New Coal Energy Plants Abroad, BBC (September 22, 2021), https://www.bbc.com/news/world-asia-china-58647481

[iv] Gallagher, Kevin P., China’s Global Energy Finance, Global Development Policy Center, Boston University, (2021) http://www.bu.edu/cgef/#/all/EnergySource/Coal

[v] US Energy Information Administration, China (September 30, 2020) https://www.eia.gov/international/analysis/country/CHN

[vi] US Energy Information Administration, US Energy Facts Explained (May 14, 2021) https://www.eia.gov/energyexplained/us-energy-facts/

[vii]The White House, FACT SHEET: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean Energy Technologies (April 22, 2021) https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/

[viii] Andrew Chatzky and James McBride, China’s Massive Belt and Road Initiative, Council on Foreign Relations (January 28, 2020) https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative

[ix] International Energy Agency, Data and Statistics, (2021) https://www.iea.org/data-and-statistics/data-browser?country=WORLD&fuel=Energy%20supply&indicator=TESbySource

[x] Environmental Protection Agency, Global Greenhouse Gas Emissions Data, (October 6, 2021) Global Greenhouse Gas Emissions Data | US EPA