Coal phase-out ‘par ordre de mufti’

Uwe Hoering, October 2021

President Xi Jinping’s announcement at the UN General Assembly in September that China will not build any new coal-fired power plants abroad in the future has given the international climate community new hope for an accelerated reduction of CO2 emissions worldwide, like the mirage of an oasis to the thirsty wanderers in the Sahara. For a real energy transition in the countries of the Global South, however, this is only one – albeit important – piece of the puzzle.

Once again, Xi Jinping has managed a publicity coup with a single sentence: China “will no longer build new coal-fired power plants abroad”. With China, Japan and South Korea, all the major public-state financiers have thus promised their exit from energy production with the climate killer coal abroad. At the same time, Beijing is countering the accusation that it is pretending to be clean at home, but promoting dirty energy and environmental destruction worldwide, and is underlining its claim to a “green” Belt & Road.

The announcement not only earns China points as a climate champion, it is also in line with the current trend in the coal sector and pragmatically draws a high-profile conclusion from the declining attractiveness of coal for many countries and investors. Bangladesh, for example, has already scaled back its ambitious plans to use coal instead of natural gas and wants to focus on renewable energies. However, this is rarely done out of ecological motives, but rather because of high costs, impending overcapacities, financial risks, massive protests and rising debt. It has also been apparent for some time that the price advantage of coal over renewable energies is declining. Accordingly, the list of planned coal-fired power plants has become shorter and shorter in recent years.

Brief announcement, long-term impact

For many countries in the Global South, however, the decision causes considerable problems, as Tom Baxter writes in the blog Panda Paw Dragon Claw. In South and Southeast Asia alone, the decision could put an abrupt end to between 40 and 70 projects in an estimated 20 countries. Financing would become even more difficult for countries in Africa.

There were immediate reports that negotiations for several planned projects had been broken off and decisions postponed. The state-owned development bank Bank of China quickly followed its master’s voice and declared that in future it will not only no longer promote coal power, but also no coal mining.

While the Chinese government can bring about an energy policy break with a single statement, with a presidential decree ‘par ordre de mufti’ without the involvement of those affected, creating alternatives is far more difficult. The financial resources that would be saved by a coal phase-out will not automatically flow into the expansion of other energy sources, even though Xi Jinping has also announced that support for renewable energy will be increased. And the countries concerned will have to adapt their energy policies and strategies to the changed conditions after the about-face in Beijing.

Certainly, potent, predominantly private Chinese wind and solar companies are offering to reduce the energy gap that is slowing down economic development and affecting living conditions in many countries. China’s state-affiliated corporations, which want to build nuclear power plants in Pakistan and the UK or large dams with inevitably devastating effects on people and the environment, are also poised to grab any funds that become available. Natural gas is also being pushed as a “transition fuel”, but it is not only highly problematic for the climate, it also makes many countries dependent on imports.

Just starting the phase-out

Moreover, the widely acclaimed announcement is at best an entrée into the coal phase-out. As is typical of Chinese political style, a stone has first been thrown into the water; details of implementation still need to be discussed and negotiated between the various powerful state and private actors in the energy sector. “Does financing, planning and exporting equipment also count as “building”, Baxter asks, for example, with the consequence that it is also excluded?

It is also unlikely that those coal companies, financiers and governments for whom coal power is a lucrative source of profit will allow a single sentence from Xi Jinping to spoil their business that quickly, and are probably already in the process of looking for loopholes, backdoors and new concepts. Moreover, public state money is only a small part of the financing in the international coal business, compared to Japanese and Western institutional investors and commercial banks.

So far, Xi Jinping’s announcement is only a PR coup that, if implemented rigorously, would prolong the energy crisis for many countries or drive them into the arms of commercial investors.

Translated with (free version)

Update: October, 2021 2021

Compensation for an announced coal phase-out

At the 2nd Belt & Road Energy Ministers’ Conference in mid-October, representatives of the Chinese government reiterated their commitment, following Xi Jinping’s announcement that China would stop building coal-fired power plants overseas and instead „step up“ support for green energy generation in developing countries. A ‘7-point initiative’ lists key areas to act on such an intensified cooperation on renewable energies. But „with no work plan around the seven points provided, it reads much like a wish list of areas for collaboration“, comments the Blog Panda Paw Dragon Claw.

See: Panda Paw Dragon Claw, week of Oct 1, 2021

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