Despite climate promises at the UN: China continues to finance coal projects abroad

Created: 09/28/2022, 14:54

From: China.Table

No more money for coal projects abroad: China's head of state Xi Jinping promised - virtually - at the UN General Assembly in September 2021 © Mary Altaffer / afp

China's President Xi Jinping announced at the UN in September 2021 that construction of new coal projects abroad would be halted.

But coal-fired power plants are still being built with support from China.

• China's head of state Xi Jinping announced the end of coal projects abroad a year ago.

• Nevertheless, new coal-fired power plants are still being planned in several countries with Chinese support.

• Nevertheless, experts see Xi's announcement as a positive signal for climate policy.   

• This text is 

  available to IPPEN.MEDIA

   as part of a cooperation with the 

  China.Table Professional Briefing -

  China.Table

   first published it 

   on September 22, 2022.

Berlin/Beijing – The announcement in New York was considered a milestone in climate protection: "China will no longer build any new coal-fired power plants abroad," said Head of State Xi Jinping at the UN General Assembly in September 2021. The People's Republic was the last major state donor up to that point for coal projects around the world.

China's major development banks had injected nearly $52 billion into 66 overseas coal-fired power plants between 2000 and 2019 after Western development banks gradually went out of business.

But a year later, the balance of this promise is tarnished: Because of loopholes and gray areas, 18 new coal-fired power plants with a capacity of 19.2 gigawatts could apparently still be built, although they contradict Xi's words.

This is shown by an analysis by the think tank Center for Research on Energy and Clean Air. According to this, these charcoal piles would cause around 94 million tons of CO₂ per year.

Some of these power plants are to be built in industrial parks that are being promoted as part of the New Silk Road.

In addition, power plants are being expanded with Chinese support and projects that were decided before Xi's announcement can still be implemented.

China continues to build power plants for industrial parks abroad

The analysis shows examples of where China is continuing to finance coal: In Indonesia, a power plant is to be built in an industrial park and supply the nickel and steel industries.

The contract was only signed on February 14 of this year - a good five months after Xi's announcement.

Another industrial coal-fired power plant in Indonesia is set to be upgraded with Chinese equipment, CREA analysis shows.

In Laos, on the other hand, a coal-fired power plant that was decided years ago is being built, the planning of which has been interrupted in the meantime.

Another new contract for a construction project was signed on May 24, 2022.

A Chinese company is also said to supply parts for the construction.

The 660 megawatt project is officially referred to as the Clean Energy Generation Project.

According to CREA, however, the published information very strongly points to a coal-fired power plant.

In addition, China remains willing to upgrade existing coal-fired power plants abroad to meet new emissions standards.

This would limit the emission of sulfur and nitrogen oxides and thus reduce air pollution at the power plants.

However, if the power plants were to remain online longer than originally planned as a result of the modernization, CO₂ emissions could increase overall, according to the CREA analysts.

This risk exists particularly with old power plants, for example in Indonesia and India, says Isabella Suarez from CREA.

Despite these loopholes, however, Xi's announcement is still seen as a major milestone.

China's ban on building coal-fired power plants abroad "is of enormous importance for climate protection and the energy transition worldwide," Suarez told

.

This is also due to the fact that other sources of financing are increasingly drying up.

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Coal: China's last major state lender in the world

China was the last major state donor.

But even before Xi's announcement, 87 percent of public and private funding to build coal-fired power plants came from outside China, according to calculations by Boston University's Global Development Policy Center.

Cecilia Springer, deputy director of Boston University's Global China Initiative, said the majority came "from institutional investors and commercial banks from Japan and Western countries."

Developing countries that want to continue building coal-fired power plants will hardly find any financing options in the future," says the expert from Boston University.

In addition, boilers, steam turbines and generators from China have a major cost advantage compared to offers from other regions of the world.

If this equipment can no longer be installed abroad, coal-fired power plants will become more expensive and therefore less likely, even if private financiers would finance them.

The Celukan Bawang 2 coal-fired power plant on the Indonesian island of Bali was financed by China and built by the China Huadian group (archive image).

© Sonny Tumbelaka/afp

China: Hardly any money for gas, increase in renewable energies

According to Cecilia Springer, although China itself wants to rely more on natural gas instead of coal in the future, there are hardly any signs of major investments by Chinese development banks in gas projects in the Global South.

"Up to now, China has provided hardly any development financing for gas-fired power plants," says the expert.

And an increase in investments is not to be expected either.

Because "China's domestic natural gas industry is small and does not have the same incentives for global expansion as China's domestic coal and hydroelectric power industries." However, Chinese companies would make foreign direct investments in the gas sector.

However, this is due to the demand from the host countries - and not to China's strategic interests.

According to Springer, natural gas also hardly plays a role in the political guidelines for financing and investments abroad, which were revised after Xi's UN announcement.

Rather, the emphasis there is on renewable energies.

In his UN speech, Xi also emphasized that "China will increase support for other developing countries in the development of green and low-carbon energies".

So far, China's development banks have been reticent about overseas wind and solar energy projects.

They “considered the risk of being financially viable to be too high.

And there was no demand from host countries for renewables.

They preferred traditional energy sources,” says Springer.

But the Boston University scientist is optimistic.

If China overcomes its own economic problems and approves more development financing again, the country will also invest more internationally in renewable energies.

In recent years, China's wind and solar companies with foreign direct investments have been involved in numerous wind and solar projects.

These companies have supported most of the 20 gigawatts of wind and solar capacity financed by China.

Suarez is also optimistic: “We assume that the number of

Renewable energy projects abroad will increase – and this will be pursued systematically, as was the case with coal.”

China: Poorer countries are entitled to fossil fuels

The joint declaration with Russia and India at the summit of the Shanghai Cooperation Organization (SCO) on September 15 and 16 in Samarkand shows how difficult it is for China to leave fossil fuels behind.

In it, the members of the economic and security policy alliance – who are among the biggest emitters of CO₂ – insist on the right of emerging countries to use oil and natural gas for their economic development.

The SCO members call for a "balanced approach between emission reduction and development" of the states.

Leaders called for increased investment in oil and gas production and exploration.

You directly contradict the calculations of the International Energy Agency (IEA).

This warns that in order to comply with the 1.5 degree target, no new fossil infrastructure may be built worldwide with immediate effect.

By Nico Beckert

Nico Beckert has been the editor for the

 since January 2021 

.

His main topics are German-Chinese relations, economy and finance, the New Silk Road and Chinese climate policy.

Previously, Beckert wrote as a freelance author for the Tagesspiegel and the Freitag.

This article appeared on September 22, 2022 in the China.Table Professional Briefing newsletter - as part of a cooperation, it is now also available to the readers of the IPPEN.MEDIA portals.