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September 28, 2021

by Yixian Sun, The Conversation

China’s President Xi Jinping recently announced at the UN General Assembly that China “will not build any new coal-fired power plants abroad”.

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Chinese banks have already got going. Three days after Xi’s speech, the Bank of China said it would stop providing funding for new coal mining and power projects outside of China as of the final quarter of 2021.

Xi’s statement is expected to affect at least 54 gigawatts of the proposed China-backed coal-fired power plants that are not yet under construction. If this were to be discontinued, CO₂ emissions would be saved that correspond to the global emissions of three months.

This pledge from the world’s largest public financier of overseas coal-fired power plants could usher in a new era of low-carbon development. But that depends on what is happening in the countries where China has put money into coal-fired power plants. Many of these places urgently need new energy infrastructure. Will China’s investments be redirected to renewable energies here – or will they just disappear?

There was a positive sign in the same speech at the United Nations when Xi announced that “China will increase its support for other developing countries in developing green and low-carbon energy “.

China’s energy investments abroad increased as part of the Belt and Road initiative. Xi’s foreign policy effort, launched in 2013, has enhanced China’s cooperation with the rest of the world through infrastructure development, free trade, financial integration, and policy coordination. China continued to fund the Belt and Roads Initiative during the pandemic, and investments in renewable energy made up the bulk (57%) of the country’s financial support for overseas energy projects in 2020 – up from 38% in 2019.

Beijing has supported wind and solar projects in more than 20 developing countries, including Ethiopia and Kenya, since 2013. And Chinese banks and corporations have also expanded their foreign investments in renewable energies over the past decade.

While the trends are positive, challenges remain. China’s foreign investment policy remains noninterfering. This means that Beijing should let the host countries determine the type of energy projects and only require Chinese companies to comply with the regulations of the host country.

Studies show that China’s coal financing in Asia was largely driven by demand in the recipient countries. This is because domestic policies in these countries gave priority to improving energy access over reducing emissions, and coal was a cheap and proven source. Inadequate grid infrastructure and politicians who are skeptical of renewable energies in countries receiving Chinese investment have also hampered development. In Indonesia, business leaders and politicians formed coalition lobby groups to influence the design of China-backed projects.

China’s new pledge tells potential recipient countries that coal funding is no longer an option. China must now increase its range of renewable energy investments. Based on its domestic experience, Beijing should grant subsidies or tax cuts to companies wishing to build renewable energy projects outside of China.

Chinese energy developers are often wary of investment risks in developing countries because they are unfamiliar with local politics. The Chinese government can help by strengthening coordination between Chinese companies and local governments, businesses and communities in the host countries.

Over the past decade, China has helped many developing countries increase their power generation capabilities through funding, affordable technology, and fast project delivery. China has taken the first step to stop funding coal. It is now time to adopt guidelines that support the overseas activities of renewable energy developers.

This article was republished by The Conversation under a Creative Commons license. Read the original article.

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