To make Xi’s clean energy vows a reality, China must strengthen its ‘green’ belt and road and overseas coal ban

Beijing can build on its ambitious vision for the belt and road by offering technical guidance on renewable energy, more financial resources and international cooperation – a role unfortunately mired in geopolitics
It should re-examine its overseas coal power ban, which still allows plants under construction to continue

Cecilia Han Springer

Published: 9:15am, 19 Sep, 2022

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One year ago, Chinese President Xi Jinping captured headlines at the 76th UN General Assembly when he declared that China would stop building new coal-fired power plants overseas. The announcement was notable, as China was the largest provider of public finance for overseas coal-fired power plants.

While other major financiers restricted support for coal, over the years, China had become the lender of last resort for some countries still seeking to develop coal power. This was a blot on China’s record as it sought to claim global climate leadership. Xi’s coal ban signalled a new era for China’s overseas energy engagement, and marked a major step towards achieving global climate and development goals.

But the attention on this eclipsed much of the rest of Xi’s speech at the UN, and in particular, the first half of the sentence that ended with the coal ban: “China will step up support for other developing countries in developing green and low-carbon energy”.

Given the pressing need for energy infrastructure in many developing countries, this commitment was just as important – if not more – than pulling the plug on coal.

One year later, where does Xi’s commitment to support more green and low-carbon energy and not build new coal plants in developing countries stand? For a start, an ambitious vision for a green and low-carbon Belt and Road Initiative, codified in policy, is starting to emerge.

Mere months after Xi’s announcement, 15 planned coal power plants with Chinese finance or construction services were cancelled. This was partly due to Chinese institutions adjusting their overseas operations to fall in line with Xi’s energy commitments, though credit should also be given to host countries such as Vietnam, which updated their energy plans.

Will China’s green guide burnish belt and road’s environmental credentials?

While there are still overseas coal power projects in China’s pipeline with an uncertain fate, Beijing has taken other steps to codify policies to promote green and low-carbon energy in other countries. Last March, several Chinese ministries jointly released a guidance on the greening of the Belt and Road Initiative.

This guidance represented a significant inter-ministry effort that elevated environmental and social considerations for China’s overseas projects and clearly prioritised clean energy, including wind and solar energy, smart grids and energy storage.

Last June, the China Banking and Insurance Regulatory Commission, which regulates China’s banks and other financial institutions, issued green finance guidelines that specifically mentioned the Belt and Road Initiative, carbon neutrality and better standards for environmental and social governance.

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With new policy frameworks in place, why did green energy finance and investments for the belt and road shrink in the first half of this year? Several factors are at play. Across the energy sector, Chinese development finance and foreign direct investment plunged last year compared to previous years.

The Covid-19 pandemic has changed China’s fiscal situation and the capacity of host countries to take on new projects. Many developing countries with growing energy systems still systematically prioritise coal over renewable energy, something Xi’s announcement alone cannot change.

Still, China can do more to strengthen and implement its emerging green belt and road frameworks – especially in stepping up support for low-carbon energy. This support should come in the form of technical guidance, additional financial resources and international cooperation.

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As the world’s leader in solar manufacturing and a top player in the supply of wind turbines, China has a wealth of technical expertise to share – not just in installing renewable energy projects, but also in scaling up production facilities in other countries and upgrading the electricity grid to send and absorb more renewable energy.

Unfortunately, China’s role in overseas renewable energy deployment has been mired in geopolitical debates and trade wars. China and Western countries should align around the essential technical aspects of renewable energy deployment beyond the project finance and construction phases.

Beijing can also scale up financial support from Chinese financial institutions for the development of renewable energy overseas, especially from its policy banks, which have not historically supported many projects related to renewable energy or its technology.

While individual institutions have their considerations when adopting overseas finance policies, leadership from the Chinese government – such as by setting portfolio targets for the amount or percentage of a financing portfolio going to renewable energy – can make a big difference in enabling institutions to adopt more climate-friendly policies.

US-China competition won’t help battle against climate change

In these endeavours, China will benefit from international cooperation. While its policies and announcements have consistently emphasised cooperation, the geopolitical reality is that climate change has sometimes become a pawn when it should be off the board entirely.

This year’s UN General Assembly, which opened on September 13, and the UN climate talks in Egypt set for November are key venues for measuring the extent to which cooperation will be a part of the green Belt and Road Initiative.

Finally, China can do more to fully implement its overseas coal ban. Aspects of last March’s guidance are not in line with science-based climate targets, including allowing coal power plants under construction to continue, supporting carbon capture for coal plants, and a lack of clarity over its coal-to-chemicals policy and captive coal power projects.

One year on, China has made significant progress towards turning Xi’s promise into reality. The challenge is to implement these policies fully and efficiently to match the scale of finance needed for the global energy transition.

Cecilia Han Springer is the assistant director of the Global China Initiative at the Boston University Global Development Policy Center. She earned a PhD from the Energy and Resources Group at the University of California, Berkeley