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China has canceled 67% of planned overseas coal capacity since its 2021 pledge, but loopholes allow continued investments in captive coal, especially in Indonesia.
China has canceled 67 percent of the coal power capacity it planned to build overseas in 2021, when President Xi Jinping pledged to stop funding overseas coal power plants, according to a new report released this week to coincide with the United Nations General Assembly. The report, by the Centre for Research on Energy and Clean Air (CREA) and the People of Asia for Climate Solutions (PACS), estimates that by canceling these projects, totaling 61.5 gigawatts, China avoided 6.4 billion tons of lifetime carbon dioxide emissions. The pledge, made five years ago, marked the first time Beijing extended its climate ambitions beyond its borders. However, experts warn that Chinese companies are exploiting regulatory loopholes to continue investing in overseas coal, particularly in captive coal projects.
Background and Context of China's Coal Pledge
China was the world's largest overseas coal financier until Xi's 2021 promise. As a key infrastructure funder in the Global South and the global leader in electric vehicle, solar panel, and wind turbine manufacturing, China is setting the tone for the transition to renewable energy across Asia and Africa. The energy-hungry region of Southeast Asia, often referred to as China's backyard, is a major recipient of Chinese funds and accounts for a fifth of the world's growing energy demand. The region has depended heavily on fossil fuel imports from the Middle East. China is currently the world's largest annual emitter of carbon dioxide, though the United States is the largest historic emitter globally. Despite its overseas pledge, China still leads the world in building out new domestic coal infrastructure. Coal has been China's ubiquitous energy source for decades; when China re-opened to the U.S. in 1979, arriving Americans disembarked into cities that smelled heavily of burning coal, whose residue quickly gathered on clothes and skin.
Progress and Loopholes in China's Coal Financing
The rapid expansion of clean energy, both in China and increasingly abroad, since the announcement of the coal moratorium should encourage Beijing to further prioritize renewable energy in its international energy strategy, said Li Shuo, director of the Asia Society Policy Institute's China Climate Hub. The cancellation of 61.5 gigawatts of coal capacity is a positive story, said Syahdiva Moezbar, an industry analyst with CREA in Jakarta, but coal expansion hasn't stopped because the nature of the pledge itself still allows private Chinese companies to invest overseas. These companies are funding captive coal projects, which are power plants built to specifically power heavy industries like nickel and aluminum smelting without linking to the national power grid. Indonesia takes the top spot for continued Chinese investments, with 17.1 gigawatts of China-backed coal capacity planned. Vietnam and Pakistan are a far second and third with less than 4 gigawatts in the works, the report found. When commercial interests take precedence over China's broader green development commitments and the world's climate security, the benefits of China's remarkable clean-energy leadership are undermined, said Xiaojun Wang, PACS' executive director, in a statement with the report.
Future Challenges and Southeast Asia's Energy Demand
Southeast Asia accounts for nearly 20 percent of global energy demand growth through 2035, according to the International Energy Agency, which stated that the crisis is prompting a reassessment of policy and investment strategies amid a strong prioritization of energy security. The growing desire among countries in Southeast Asia to secure reliable energy supplies could bring about another round of coal fever, said Li Shuo, which will continue to test the resolve behind the coal moratorium. The energy transition is a two-party tango, Li stressed, emphasizing that both China and its partner must be equally committed to phasing down coal. While it has been five years since the pledge, he said, this saga is far from over. The Associated Press' climate and environmental coverage receives financial support from multiple private foundations. The AP is solely responsible for all content.
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