With Chinese President Xi Jinping confirming the country will no longer build coal-fired power projects abroad and the Bank of China no longer providing funds for new coal power plants, attention now turns to what energy sources the state will opt to invest within.
With Jinping outlining China’s stance on renewable power, the statement is expected to affect some 54 gigawatts of power plants that have not yet been constructed, but are funded by the Chinese Government. While saving three months of global emissions if these projects are put on the shelf, the question remains: will China keep the money saved in the bank, or will it spend it on renewable projects?
The short answer is that it will. Xi, who announced at the UN General Assembly the shift away from coal-powered plants, also said in the same address that China would “step up support for other developing countries in developing green and low-carbon energy."
Introduced in 2013, the One Belt One Road (OBOR) initiative implemented by Xi saw China invest in over 70 countries, increasing the state’s cooperation with the rest of the world. Developing countries such as Ethiopia and Kenya saw a number of wind and solar projects undertaken by the Chinese following the announcement of the OBOR. The initiative includes increased infrastructure development, unimpeded trade, financial integration and policy coordination. The pandemic has not slowed China from providing funds to these nations, with renewable technologies being the highest investment China made in 2020, with 57 percent of their expenditure directed towards renewables — up from 38 percent in 2019.
The increased investment in renewables is certainly a positive, but there are still some adversities involved. China’s investment policy overseas is still guided by non-interference principles, meaning the state must let host countries decide which energy projects it will undertake, with Chinese firms then asked to comply with the regulations of the host country. The ramifications of non-interference principles has been on show in the past, with China’s finance for coal in Asia driven by recipient countries. Given that many of the countries China looked to assist were developing, many of the nations were intent on simply improving energy access, as opposed to reducing emissions. In Indonesia, for example, a number of politicians and private sector leaders formed pro-coal groups to influence where the Chinese money would be directed.
The new pledge offered by Xi at the UN General Assembly is that China is signalling a shift in its funding towards renewable resources exclusively. To get the developing countries on board, Beijing must now look to promote this with a number of subsidies or tax cuts to businesses in order to help them invest in renewable energy beyond its borders. Due to the unfamiliarity Chinese companies have with developing countries, the government would be wise to be a mediator between these companies and the developing nations, in order to ensure they make the switch to renewable energy.
Ultimately, the way Xi and Beijing have looked to support a number of nations through the OBOR initiative should be commended. As they look to pivot from coal-powered plants and focus on renewable energy, the Chinese must now look to assist developing nations through a number of incentives and subsidies, in an event to drive down emissions and move towards renewable energy, in a number of places where it remains uncommon and out of favour.