China's 'no new coal overseas' pledge has a big catch

About a year ago, Chinese president Xi Jinping made a pledge at a United Nations meeting that the enormous coal-fired power plants funder would halt any new projects overseas.

But while research shows that no new investment has been made in any new coal plants, experts say the ambiguity in Beijing's plan has nonetheless allowed such facilities to be built. 

As of mid-2022, Chinese funds have supported at least 77 coal-fired power plants overseas, many of them in Indonesia. The remaining are located in Vietnam, Sri Lanka, Bangladesh, Pakistan, Malaysia, Cambodia, Turkey and Kazakhstan, among other countries and Belt and Road partners. 

So far, coal still represents the largest share of energy power facilities funded by China’s overseas investment (34 percent).  

At least 12.8 gigawatts of coal power, or 15 coal plants, of Chinese-funded overseas projects have been suspended or cancelled since the announcement, and an additional 32 plants - totaling at 37 gigawatts of power - can be potentially halted in the pre-construction phase, according to a report by the Centre for Research on Energy and Clean Air (CREA). 

"[China’s] announcement received widespread international attention, which has created accountability," Cecilia Springer, assistant director of the Global China Initiative at Boston University's Global Development Policy Center, told FairPlanet.

"However, the announcement was not very specific about the scope of the ban, so a small number of projects have continued forward."

Old or new?

CERA’s report also reveals that about 18 pre-planned coal-fired power plants fall within the 'grey zone' of China’s pledge, including two new facilities in Indonesia whose construction kicked off. Should they all come online they could produce an annual total of over 100 metric tons of carbons. 

"The Chinese government doesn’t appear to consider these as 'new,' since they are linked to China-backed nickel and steel complexes that were approved before the ban on new coal overseas," the report said. 

A government directive published in March this year offered some more clarity: While it said China "comprehensively stopped the construction of coal projects overseas," the country is also "cautiously pushing ahead with the ones under construction."

The East Asian nation vowing to step away from coal gradually has not actively addressed this grey area mentioned by experts and organisations for months, according to Wawa Wang, director of the NGO Just Finance International.

"We haven’t seen strong evidence of Chinese state actors making public announcements disclosing data on the implementing of the open-ended pledge that do not seem to apply to projects not yet constructed but have had financial closure, like Tuzla 7 in Bosnia and Herzegovina," she told FairPlanet. 

The issue lies in a lack of data transparency from China and should be addressed, Wang added.

"One year after China’s pledge to stop construction of overseas coal projects, little is known about the extent of China’s implementation on rollbacking its overseas coal projects involving state-owned enterprises or state financing."

Her organisation’s analysis further said that Chinese state-backed companies still secured over USD 18 billion worth of 67 overseas coal projects in 2021. Those with financial closure are expected to be built despite the pledge, she predicted.

Greening existing overseas coal projects

Halting new funding aside, Beijing’s March directive also encouraged corporations to strengthen the use of clean coal as well as various types of technology - such as carbon capture - to slash their projects’ carbon footprint. 

China’s existing overseas coal projects are more efficient than many others, Dr Springer said. "My earlier research has shown that China's overseas coal plants tend to be more efficient and less carbon intensive than their non-Chinese counterparts.

"However, their overall emissions impacts are still huge, because the plants tend to be larger and newer, and will operate for decades to come. Even with efficiency upgrades, coal is still not a climate-compatible source of energy."

Wang’s organisation found that some of the overseas coal plants built with Chinese funds fall short on emissions control.

"One has policy statements and pledges on the one hand, and actual implementation as well as monitoring on the other hand," she said. "The latter falls short of reality. It reads to me as an attempt to extend the export of China’s rather faulty coal technology overseas in the name of 'environmental improvement.' "

A 2022 study from the University of Amsterdam suggests that China might bear half of the responsibility of coal plant inefficiency overseas. Indonesia, it said, has little capacity to monitor Chinese-backed coal projects or enforce environmental standards, which leads to Chinese investors opting for more environmentally damaging technology for lower costs. 

Even if local governments in Indonesia do have capacity to hold such companies accountable for violating their environmental protocol, they might lack the incentives to do so, as Chinese power firms offer campaign funds to local officials in exchange for their approval for such projects. 

The study also found that Beijing has not developed transnational supervisory mechanisms to reduce the environmental damages from plants in its BRI partner countries. 

As China has been promoting a green BRI to keep its projects more sustainable, Dr Springer suggested China can explore "debt restructuring and forgiveness" to developing countries to help them achieve their climate goals. This means China can cancel or change the structure of debts of BRI partners if they meet certain conservation targets. 

Image by Karl Hörnfeldt