China’s pledge to stop building coal power plants abroad opens door for its renewable energy firms

Chinese renewable energy companies need to treat the country’s climate commitments as more than just new markets and business opportunities
As implementers of these promises and builders of the green projects, they must ensure their environmental and social impact is minimised

Xiaojun Wang

Published: 6:45am, 30 Sep, 2021

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At the 76th UN General Assembly, President Xi Jinping announced that “China will step up support for other developing countries in developing green and low-carbon energy and will not build new coal-fired power projects abroad”.

While international climate watchers applauded the second part of the announcement, Chinese renewable energy companies are cheering the first half. An end to coal means a door opened wider for renewable energy.

China is the world’s largest producer, investor and user of renewable energy. According to data from REN21, a renewable energy think tank, almost half of the world’s new renewable energy installations last year was added in China and almost a third of renewable energy investment came from China.

China’s renewable energy industry plays a crucial role in helping the country deliver on its dual climate goals of peak emissions by 2030 and carbon neutrality by 2060.

Many companies have also been expanding overseas rapidly, moving into new markets and exploring new opportunities. In 2020, China’s overseas investment on wind, solar and hydropower overtook that on coal and other fossil fuels for the first time since the launch of the Belt and Road Initiative.

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Following the success of the State Grid Corporation of China and China Southern Power Grid in entering overseas markets, including Vietnam, the Philippines, Chile and Brazil, the recently created China Power Equipment Group is poised to make its global debut as the next electricity transmission and distribution equipment giant, competing with ABB, Siemens and Areva.

Renewable energy generation and efficient transmission technologies help cut greenhouse gas emissions and air pollutants, so they are crucial solutions to environmental challenges. Different from the fossil fuel industry, renewable energy companies proudly present an image of being modern, futuristic, clean, friendly, hopeful and, most importantly, politically correct.

Unlike almost any other industry, renewable energy is where governments, businesses, scientists and civil society groups are willing to sit together with a high level of understanding to fight a mutual enemy: climate change.

However, the industry has its own environmental and social concerns. Scientists and engineers are still looking for upgraded technologies to minimise the environmental impact from manufacturing and installing solar and wind power.

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In the first global human rights benchmark of renewable energy companies – including Denmark’s Orsted, Spain’s Iberdrola and China’s Jinko Solar – the Business & Human Rights Resource Centre found that most of them lacked the essential human rights policies to avoid abuse of communities and workers. Among them, three Chinese companies performed much worse than their Western peers.

Environmental, social and corporate governance (ESG) is still a relatively new term in most Chinese companies’ dictionary, and the practices of proactively disclosing information and engaging civil society groups are even less the norm. While heading overseas, many have been latecomers and are less aware than their Western peers about ESG due diligence.

However, China’s renewable energy companies that started at almost the same time as, and have grown much faster than, Western companies cannot fall back on this convenient excuse.

While China’s climate announcements win global applause, Chinese renewable energy companies need to treat these commitments as more than just new markets and business opportunities. They must realise the pressure on their shoulders as the implementers of these commitments and the builders of the green, high-quality projects that Beijing has promised to Belt and Road host countries.

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In July, the Ministry of Commerce and the Ministry of Ecology and Environment jointly released the Green Development Guidelines for Overseas Investment and Cooperation.

These guidelines encourage Chinese companies to improve their global competitiveness by aiming for higher international green standards and better communications with local communities and environmental groups. This is the first official government document that requires Chinese companies to go beyond the minimum when it comes to environmental and social impact.

With Xi’s UN announcement and more developing countries bidding farewell to new coal projects, China’s renewable energy companies and financiers are presented with an unprecedented opportunity and access to energy markets in more developing countries.

This makes it more pressing for them to acquire the know-how to minimise their environmental and social impact in these communities that are already vulnerable economically and environmentally. This can be done through the help of international groups, industry associations and Chinese embassies in Belt and Road host countries.

Compared with other infrastructure construction projects such as ports, roads and railways, the modern, ambitious Chinese renewable energy industry has more potential to adopt the highest international environmental standards and social responsibility practices.

They can become an example for other Chinese companies, and can even set ESG standards for the global renewable energy industry as a whole so it can truly commit to being a provider of solutions rather than the cause of new environmental and social crises.

Xiaojun Wang is executive director of the Manila-based People of Asia for Climate Solutions

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