Xi Jinping, the Chinese President, stated Tuesday at the United Nations General Assembly that China would stop financing overseas coal projects. This is a significant move that would eliminate the largest source of support for coal-fired power.
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Xi stated that China would support other developing countries in the development of green and low-carbon energies and would not invest in new coal-fired power plants abroad.
Xi didn't give a time frame for China's withdrawal of support in his remarks. If the world is to meet its climate goals, it will be critical how fast China stops financing coal. The announcement could signal the end of one the biggest financial lifelines remaining for coal projects. China currently has more than half the world's coal projects in pre-construction. It currently owns 163 gigawatts worth of power, and 40 gigawatts for projects abroad. This is a significant number, but it's significantly less than what it was before the Paris Agreement. China has cancelled 74% of its coal projects, with 484 gigawatts of power being withdrawn from overseas, over the last six years.
China still had over 300 coal plants under its support in 2019, in countries like Turkey, Indonesia, Bangladesh and Egypt. These countries may feel the heat of bad investments as they repay loans from China, as coal's economic future becomes less bright.
The Paris Agreement does not include any regulation or oversight of national fossil fuel investments elsewhere. However, China has been under increasing international pressure to stop financing dirty coal projects. South Korea and Japan, which are the second and third largest funding countries respectively, made earlier this year promises to end coal financing. Their financial commitments to coal are dwarfed however by China's. The new announcement (pending details) could be a bigger deal. China was the only G20 country to defend coal financing until this summer. The change in tone could put pressure on Russia and India, which are obstinate actors, to reconsider their investments.
Although the announcement is positive for international development, China is the largest coal market in the world, with half of all the coal plants still in operation. The country gets 70% of its electricity from coal. The country has not made meaningful progress in its climate commitments due to the coal plants. China commissioned 38.4 gigawatts of additional coal plants last year, despite suffering record levels of air pollution from coal-fired power stations. This is more than three times the number of coal-fired power plants commissioned elsewhere in the world. Although the Xis announcement was historic, it is still unclear how China will quickly end support for international projects and whether it will clean up its coal-fired mess.
