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China’s coal commitments are not enough

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Truck passes in front of a coal-fired power plant in Shanghai,China October 21, 2021. (Picture: REUTERS/Aly Song)

In Brief

At the United Nations General Assembly in September 2021, Chinese President Xi Jinping announced that China would not build new coal-fired power projects abroad. But concerns remain as to whether this promise is too little, too late for the world’s largest emitter to bend the carbon curve in time and meet the goals of the Paris climate agreement. 

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Following China’s carbon neutral by 2060 pledge, Xi’s promise of halting overseas coal construction had raised hopes that the country was willing to accept stringent emission cutting obligations at the United Nations climate summit (COP26) in Glasgow. It turned out that China formalised its commitment to raising the share of non-fossil fuels in its primary energy consumption to 25 per cent by 2030, higher than a previous pledge of 20 per cent, but not much new was offered besides that. 

During US Presidential Climate Envoy John Kerry’s recent visit to China, a moratorium on financing overseas coal-fired projects was a key topic of China–US discussions. While this is a positive step for global mitigation, it alone is far from sufficient to meet the 1.5 degrees Celsius limit on global warming targeted in the Paris agreement. 

A long way from phasing out its massive domestic use of coal, about 57 per cent of China’s total energy consumption came from coal burning in 2020, 3 per cent lower than in 2017. But in absolute terms, China’s coal consumption still grew 2 per cent between 2017 and 2020. Emissions from the 1,000 gigawatts of coal-power that China generates domestically dwarf those from overseas coal plants invested in by China. In 2020, China built over three times as much new coal power capacity as all other countries in the world combined. 

To achieve the goal of net zero emissions by 2060, China has to drastically change its baseline carbon emission trajectory under existing policies, but China reportedly plans to build new coal power plants in its 14th Five-Year Plan (2021–2025), which contradicts the carbon neutral target. It is more important that China cut its domestic coal use than halting overseas coal projects. 

China’s ambition of cutting coal reliance is facing daunting challenges like growing energy appetite, geographic mismatch of supply and demand and limited oil and gas reserves. China has become both the world’s largest energy consumer (accounting for about 24 per cent of global energy consumption) and producer, with energy demand increasing in tandem with its economic rebound. Since 2011, it has burnt more coal than all other countries combined. China also remains the world’s top crude oil importer, surpassing the United States in 2017, and it is the world’s largest natural gas importer, overtaking Japan in 2018.

Self-sufficiency has been the recurring mantra of Chinese energy policy for decades, given that over 80 per cent of its energy demand relies on domestic resources largely due to its plentiful coal reserves. Coal burning contributes to more than two-thirds of China’s electricity output, with state-owned coal mine giants having huge influence in the power sector and economic policymaking. 

China’s inelastic coal demand became evident recently when Beijing’s tougher environmental curbs on coal output resulted in a large-scale power crunch. When major coal-rich provinces had to cut production to meet energy efficiency targets, coal prices soared because of surging demand from industries and households. 

Power generators could not pass on their soaring coal costs to consumers, leaving them with no choice but to suffer losses or reduce power supply. The power crunch indicates the dilemma China is facing in balancing energy and environmental agendas. It is still not clear whether China will cut its coal consumption as aggressively as Europe or the United States did in the past two decades. 

China’s promise of not building new coal projects abroad is consistent with its ‘Green Belt and Road’ initiative, under which renewable power has made up the bulk of China’s Belt and Road Initiative energy investments. Accordingly, there were no investments in coal power and coal mining in the first half of 2021, but new coal plants to be implemented by Chinese developers were still announced during this period in countries like Indonesia and Vietnam. Besides, the promise came with ambiguity over whether Chinese entities including financial institutions and contractors can still participate in overseas coal projects one way or another.

China has been promoting ‘third-party market cooperation’ along the Belt and Road, which refers to economic cooperation among Chinese businesses (including financial sectors) and businesses in relevant countries in third-party markets. Although such third-party cooperation has a focus on green development, it is possible for certain Chinese companies to use foreign partners to bypass the moratorium in a third-party market.

The international community welcomed Xi’s announcement, regarding it a positive step and a good beginning to efforts needed to achieve success at the COP26. US President Joe Biden values such climate collaboration with China, which may open a continuous bilateral dialogue to formulate concrete action between the two countries.

But overseas coal prohibition alone is not enough to avoid climate crisis and China needs to find an effective way to cut domestic coal consumption substantially in the 14th Five-Year Plan period. It is still not too late for China, and other major emitters, to propose more aggressive mitigation targets at the COP26 to save the planet. 

Chen Gang is Assistant Director and Senior Research Fellow at the East Asian Institute, National University of Singapore.

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