bne IntelliNews – bneGREEN: China’s pledge not to finance coal overseas could free up $ 130 billion for green investments
China’s pledge to drop funding for overseas coal projects could affect a total of 44 coal-fired power plants in Asia and Africa, with a combined capacity of 42,220 MW.
This could free up $ 130 billion over the next decades that would be available for investing in renewable energy, and would reduce the growth in global demand for coal by 30 million tonnes, or up to 1.1 billion tonnes on the lifespan of power plants, said Global Energy Monitor. updated its Global Coal Public Finance Tracker.
Beijing has yet to release specific details on how it will withdraw from overseas coal funding after Chinese President Xi Jinping announced to the UN on September 21.
Meanwhile, the Bank of China announced on September 24 that it will no longer fund new coal-fired power plants and coal mining projects outside of China, effective October 1, 2021.
GEM said 44 coal-fired power plants with a capacity of 42,220 MW are currently under consideration for public funding from Chinese public institutions and may therefore be affected by China’s announcement. The proposals are spread across 20 countries in Asia, Africa, South America and Eastern Europe.
If China’s announcement rules out any future public funding, all 44 coal-fired plants risk being canceled, given the lack of other financing options for new coal-fired plants.
Japan and South Korea pledged to end public lending for overseas coal-fired power earlier this year, and they have now joined the G7 countries in pledging to end international funding for the coal.
Five of the projects are being considered for financing from the Bank of China and therefore risk seeing their financing from the bank canceled as early as next week.
The 44 coal-fired plants represent over 40% of the 103,000 MW pipeline for new coal-fired plants in the twenty countries. If the coal-fired power plants are canceled, it would translate to savings of over $ 130 billion to $ 50 billion in construction costs and over $ 80 billion in fuel and operating costs over the lifetime. power plants.
In Africa, canceling the power plants would halve the amount of coal-fired electricity offered, as China has been a major financial backer for new coal-fired power plants on the continent.
Canceling the projects would also completely eliminate the pipeline of new coal-fired power plants in Kenya, Madagascar and CÃ´te d’Ivoire.
The reduction would make all three countries eligible for entry into the recent “No New Coal” alliance, a UN pledge for countries to stop building new coal-fired power plants.
Among affected countries in Asia, canceling power plants with proposed Chinese funding would reduce their coal-fired power plant proposals by more than 40%.
The biggest effects would occur in Bangladesh and Mongolia, as the number of coal-fired power plants offered in each country would decrease by more than 90%, making them almost eligible for the âNo New Coalâ commitment. Currently, Bangladesh and Mongolia have the sixth and eighth largest pipeline of coal-fired power plants, respectively, in the world.
China’s announcement will also have a major impact on the global coal market, as many of the 20 countries import the majority of their coal. Together, the 20 countries were home to more than 10% of thermal coal imports in 2019, totaling 130 million tonnes.
If the 44 coal plants are canceled, it will reduce future demand for coal in countries by about 30 million tonnes per year (tpa), damaging the future prospects of coal exporters. In total, future growth in global demand for coal would decline by 1,100 million tonnes over the life of the 44 plants, preventing the emission of around 8,000 million tonnes of carbon dioxide (CO2).
“China’s announcement is the death knell for foreign public financing of coal, and many proposed coal-fired power plants will be canceled, given the lack of alternative financing options,” said Christine Shearer, GEM’s coal program director. .
âThe good news is that China’s move will save several countries from pouring billions of dollars into coal-fired power plants that will quickly become stranded assets, given falling renewables costs and public momentum in the process. favor carbon restrictions. “
âBefore last week, the world’s coal producers were planning more than 390 new coal mines. But China’s announcement just threw a wrench into the work, âsaid Ryan Driskell Tate, researcher and analyst for GEM’s coal mine tracker. âThe coal industry is going to feel this cold splash of reality from head to toe. “
âChina’s announcement is a step in the right direction. It is also recognizing the reality on the ground, because investing in new coal-fired power plants no longer makes financial sense because other forms of energy are much cheaper, âsaid Russell Gray, coal finance researcher at GEM. âTo really have an impact on the climate, China must start phasing out coal from its [own] power park as soon as possible, and focus on the production of renewable energy.
China is still home to by far the largest proposed coal capacity in the world, with nearly 97,000 MW under construction and an additional 163,000 MW in planning, according to GEM’s Global Coal Plant Tracker.
These national proposals are not covered by China’s coal funding pledge and will be the main focus ahead of COP26 in Glasgow.
According to the UN Intergovernmental Panel on Climate Change, avenues to limit global warming to 1.5 Â° C require a virtual phase-out of coal power by 2040.
The IPCC said in August that only immediate, rapid and large-scale reductions in CO2 and other greenhouse gas emissions would be able to limit global warming to 1.5 Â° C this century.