The World

China Just Made Its Most Effective Climate Move Yet

Xi Jinping and Li Keqiang are surrounded by other Chinese officials.
Chinese President Xi Jinping arrives with Premier Li Keqiang for a reception at the Great Hall of the People in Beijing on the eve of China’s National Day on Thursday. Greg Baker/AFP via Getty Images

This story was originally published by the Guardian and has been republished here as part of the Climate Desk collaboration.

President Xi Jinping’s announcement that China will stop funding overseas coal projects could buy the world about three more months in the race to keep global heating to a relatively safe level of 1.5 degrees Celsius, experts say.

Although the impact will depend on implementation, China’s declaration should also help to kill off coal, which has been humanity’s primary power source for most of the last 200 years.

Advertisement

Ending Chinese coal financing has long been near the top of climate activists’ wish lists. For more than a decade, China has been the lender of last resort for overseas governments seeking finance for thermal power plants. That role has accelerated since the 2013 start of the country’s Belt and Road Initiative.

Advertisement
Advertisement
Advertisement

Xi’s declaration is likely to affect at least 54 gigawatts of China-backed coal power projects, which are in active development but not yet under construction, according to the Centre for Research on Energy and Clean Air.

Lauri Myllyvirta, the center’s lead analyst, said this was equivalent to about three months of global emissions. “These plants, if built and operated, would have emitted around 250 to 280 megatons of CO2 a year, which is roughly equal to the total emissions of Spain. Assuming an operating life of 35 years, the cumulative emissions would amount to 10 gigatons, or a year of China’s emissions, or three months of global emissions,” he calculated.

Advertisement

These figures are based on several assumptions. China provides scant information about the scale of its overseas coal financing. At the very least, there is evidence that 40 percent of the heavy equipment at new coal plants outside China and India comes from China.

It is also not clear yet whether Chinese banks and power firms will only pull out of projects that are at the planning stage, or also pull out of those projects under negotiation or at an early stage of construction. This year alone, Chinese companies have facilitated an additional 10 new coal-fired power plant projects in Bosnia and Herzegovina, Indonesia, Turkey, Vietnam, and the United Arab Emirates, according to Just Finance International, which monitors Belt and Road coal projects in Europe and internationally. China does not publicly disclose whether these contracts have reached financial closure.

Advertisement
Advertisement

“While we welcome China’s pledge, we are waiting to see how much weight this announcement will hold,” said Wawa Wang, program director of Just Finance International. “Whether Beijing will deliver on this exit from building coal-fired power plants depends on whether it introduces a time-bound exit which reins in all forms of support—finance and construction combined—for all its overseas coal and associated projects.”

Advertisement

The immediate impact is likely to be felt in the countries that rely most heavily on Chinese funding for new coal projects: Indonesia, Vietnam, Bangladesh, and Pakistan. In Vietnam, for example, the government recently announced plans for an additional 20 gigawatts of thermal power. “Those countries will need a rethink,” said Myllyvirta. “This announcement leaves several projects up in the air.” The governments in these nations will now have to decide whether to find alternative funding from the private sector, where the borrowing costs can be high—as Pakistan has recently found out—or to shift to renewables, which Xi has promised to support.

Advertisement

Despite the uncertainties over implementation, Myllyvirta said China’s announcement would accelerate decarbonization: “Countries now know that going forward, there is no financing on the table for coal. That should clarify things a lot. Chinese delegates are going to visit Indonesia or Vietnam or Pakistan and they will be saying, ‘We don’t do coal any more, but we can help with clean energy.’ That will make a difference.”

Advertisement

Depending on implementation, other possible beneficiaries of this announcement could be the rhinos, giraffes, cheetahs and other endangered species at Zimbabwe’s Hwange National Park, where two Chinese companies had hoped to extract the fossil fuel.

Another positive knock-on effect would be to push Japan to follow suit. The government in Tokyo has already taken steps in this direction but left a door open for financing by its private-sector institutions. Its geopolitical reason had been that it did not want to leave China as the only option for regional energy projects. With Xi’s announcement, the Japanese government now has no excuse not to slam the door shut for good. Likewise for South Korea, formerly one of the world’s biggest coal backers, which has recently moved toward decarbonization.

Advertisement
Advertisement

U.N. Secretary-General António Guterres said China’s promise was not just welcome but essential. “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. But he stressed this was not enough. At the forthcoming COP26 climate summit in Glasgow, he said, all nations, especially the rich, need to be more ambitious in cutting carbon pollution. “Let us be reminded that based on the present emissions-reduction commitments of member states the world is on a catastrophic pathway to 2.7 degrees Celsius of heating. We need decisive action by all countries, especially the G-20, to go the extra mile and effectively contribute to emission reductions.”

Advertisement
Advertisement

Pressure will now increase on other countries and financial institutions to accelerate the shift. At the OECD, the U.S., the EU, and other countries including South Korea now support a proposal to end official export-financing support for unabated coal power and associated facilities by 2021. However, several leading institutions, including Vanguard, BlackRock, Capital Group, and Barclays, remain substantial funders of this fossil fuel.

With coal now seemingly in terminal decline, climate activists are turning their sights toward oil, gas, and domestic coal power in China and India. Since 2010, China has been the biggest consumer of energy in the world, overtaking the U.S.

Close to 58 percent of China’s power comes from the country’s 1,058 coal plants, almost half the total in the entire the world. This makes China far the biggest carbon emitter, pumping more than 1 out of every 4 gigatons that enters the atmosphere. Many regions of China have staked their future on coal, but roughly half the country’s plants will have to close if the government 2060 net-zero target is to be achieved.

Advertisement