We are seeing a turnaround in China’s energy strategy as the country finally pledges to end the construction of new coal plants overseas, having strongly backed coal developments at home and abroad until now. But will these mean the halting of existing coal plans in its Belt and Road Initiative (BRI), and will it also take action on its domestic coal production as it eases output abroad? China has pledged to stop constructing coal power plants overseas in a move that may encourage greater international support for its BRI. China’s President Xi Jinping stated that the change in energy policy reflects the country’s willingness to support international efforts at decarbonization and the shift to greener energy, with China aiming for net-zero carbon emissions by 2060.
China’s BRI is aimed at developing infrastructure, both physical and digital, to connect the Asian states to the Middle East, Africa, and Europe. However, many of these projects centered around coal energy, attracting criticism from the U.S. and Europe, which are aiming to stop coal production and decarbonize over the coming decades.
China is thought to have devoted 46 percent of its BRI energy investment to coal in 2015. However, so far this year China has not funded any overseas new coal plants, showing its willingness to fall in line with international expectations. A big shift was seen in China’s BRI investments in 2020, with renewable projects such as hydro, solar, and wind power developments making up 57 percent of its energy investments.
South Korea and Japan made similar commitments earlier this year, meaning all the world’s top economies have now pledged to end state financing of overseas coal plants. Some countries have moved faster than others, with the U.K. aiming to stop all coal production by 2024, earlier than its original 2025 deadline. All of this marks a major shift in energy strategy, slowly decreasing dependence on the dirtiest form of fuel.
But while environmentalists are happy about the change, it cannot be overlooked that many poorer Asian countries continue to rely on coal to fuel their nations. Without investment in new coal technology, many states may have to rely on aging coal facilities for their power.
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At present, just five states produce 80 percent of Asia’s coal, China, India, Indonesia, Japan, and Vietnam. Yet, it is hoped that within the next decade renewable energy projects will become more economically viable than coal production, as we see them overtake coal in India and Indonesia by 2024. President Xi Jinping’s announcement was vague enough to leave many wondering when the new plan will come into effect. With no indication of a time frame, it is uncertain whether China will continue to invest in existing foreign developments before eventually phasing coal projects out. In addition, there will be a push back from those with a stake in coal within China.
Christine Shearer, program director for coal at Global Energy Monitor, stated “The Chinese government will face a lot of resistance within China from coal interests opposed to restrictions on their market.”
But it appears that China is already taking action on its announcement with the Bank of China announcing it would stop funding new overseas coal projects from October. It was uncertain from the President’s announcement whether banks would also be limited in their capacity to fund foreign coal projects, but this statement suggests that China’s pledge is further reaching than commitments from many of the other major economies.
Meanwhile, China continues to pump funds into its national coal developments, with no clear plan to curb production. In fact, China burned 53 percent of the world’s coal in 2020. In the same year, China constructed more than three times the coal power capacity as all other countries combined, at a rate of around one large coal plant per week.
Despite not funding any new coal projects overseas, China added 140 MT of national coal mining capacity in the first half of 2021, showing its commitment to coal. Heatwaves in the early summer months also led to higher energy consumption, with domestic reliance on coal at an all-time high.
While Covid-19 reduced fuel usage across many countries due to lockdowns and travel restrictions, prompting many state leaders to welcome the energy transition earlier through a movement away from coal and other heavy carbon fuels, China’s energy usage and coal developments remained high, causing greenhouse gas emissions to continue rising throughout 2020.
China’s announcement that it will cut funding for new coal developments overseas is certainly a step in the right direction, finally responding to international pressure to support the clean energy transition. But with the rest of the world moving away from coal, both domestically and abroad, when will China finally catch up, advancing on its 2060 target for net-zero?
By Felicity Bradstock for Oilprice.com
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