International Chinese construction giants will build or bankroll whatever you need, few questions asked. Worse still, they are particularly adept at erecting planet-destroying power plants. Coal is their specialty, but gas, oil and hydro projects are also on the menu.
As things stand, China is the king of global energy finance. Unfortunately, the country’s overseas energy investments remain concentrated on fossil fuels. In fact, of the overseas power capacity that China has built since 2000, 40% has been coal plants – the most polluting form of energy generation. With a lifespan of about 40 years, each plant amounts to a miniature environmental disaster.
Yes, China’s installation of renewable energy has ballooned over the past ten years – and is world leading – but fossil fuel projects have also grown and remain predominant. Little wonder, therefore, that the country still accounts for the vast majority of newly commissioned projects globally.
In recent years alone, about 240 coal-powered plants in Asia and Africa have been financed by Chinese banks as part of the country’s Belt and Road Initiative (BRI), designed to build infrastructure and coordinate policymaking across Eurasia and eastern Africa. BRI countries (the vast majority of which are emerging or frontier markets) could account for half of all carbon emissions by 2050.
China’s coal power investment is highly concentrated in South East Asia, south Asia and Africa – in that order. These projects often involve opaque contracts that trap low-income countries in debt. Meanwhile, there is a notable lack of ‘dirty’ Chinese energy in the most developed parts of the world (especially the EU). Chinese investment in lower-middle-income and low-income countries is key for these countries’ energy consumption, not least since cheaper alternatives are few and far between.
Part of the problem is that ‘Western’ countries have not stepped up their global energy finance (green or not). For example, China’s two major policy banks (Chinese Development Bank and Chinese Export-Import Bank) invested a total of $196.7bn in overseas energy sectors between 2007 and 2016, which is as much as all the energy funding of major Western-backed multilateral development banks combined, according to the Brookings Institute.
Some positive news is on the horizon. Western superpowers may soon have a green response to the tar of Belt and Road.
For one, the EU and India are discussing a new connectivity partnership on energy, digital and transportation projects in Europe, Asia and Africa (funded by public and private investors). Both sides claim that they are not attempting to ‘compete’ with the BRI, but this is pure rhetoric. The UK may also weigh in. A few months ago, US President Joe Biden said he had proposed to UK Prime Minister Boris Johnson that the countries set up an infrastructure effort to rival the BRI.
With the Biden administration putting climate back on top of the global agenda, pressure is growing on others to follow suit. Although India has been one of the biggest clients for Chinese coal plants, it has renewed its pledge to build 450GW of renewable energy capacity in the next decade. China is also stepping up its promises to scale down coal, despite the recent release of its rather tepid five-year plan. Covid-19 sent China’s BRI into a period of self-reflection – an increasingly cautious and green direction is expected.
It is becoming evermore plausible, therefore, that Beijing and Washington will collaborate to fund green infrastructure projects worldwide – or at the very least healthily compete for green credentials. There is also hope that China may ease its notoriously unforgiving debt collection by, say, waiving a country’s unpaid coal loans in exchange for a green energy deal from a Chinese supplier.
That said, China’s coal investments will not end overnight. A coherent and organised alternative to the BRI’s dirty wares and wiles is urgently needed. The war against climate change can only be won in the developing world.
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