China slow to curb coal financing as Japan, South Korea ‘accept new reality’ on phasing out fossil fuels
- Japan and South Korea recently made moves to limit financial backing for overseas coal projects, joining a trend of banks and multilateral lenders ditching the fossil fuel
- As the largest global financier of coal energy, China is increasingly looking like the lender of last resort
China risks being left behind as South Korea and Japan signal a shift away from financing overseas coal power in response to growing criticism over their support for the dirty fossil fuel.
But there are signs that Japan and South Korea may be preparing to scale back official support amid mounting pressure from the public and investors on environmental grounds.
Japan announced last month that it would tighten funding criteria for foreign coal-fired power plants, and next month South Korean lawmakers will debate several bills aimed at banning overseas coal investment as part of a post-coronavirus “Green New Deal”.
“This is profoundly serious, because it is an acceleration of a trend that is already established in global financial markets,” said Melissa Brown, the director of energy finance studies, Asia, at the Institute for Energy Economics and Financial Analysis.
“It has a very strong economic foundation, which is that – based on virtually all of the coherent and credible evidence we have today – coal-fired power facilities that are brought into service in the next five years are extremely unlikely to have a productive, profitable economic life.”
Banks, multilateral lenders and governments across the world are ditching coal as renewable technology gets cheaper and the climate crisis becomes more pressing.
Two of Japan’s largest commercial banks, Mizuho Financial Group and Sumitomo Mitsui Financial Group, said earlier this year that they would cease funding for new coal power projects in the face of pressure from climate activists.