China’s Overseas Coal Pledge Is Not a Climate Change Gamechanger

To great fanfare at the U.N. General Assembly, Xi Jinping promised that China would not build more coal plants overseas. The global response, including from heads of states, was that this is a historic turning point in the fight against climate change. But it’s most likely not.

In fact, the pledge has already been gradually fulfilled over the last few years as part of broader tendencies that have little to do with Chinese climate policies. The climate impact of the pledge is, therefore, likely to be minimal. Problematically, overly praising the pledge reduces pressure on China to make a similar commitment where it really counts – domestically rather than overseas. With COP26 scheduled to begin in two weeks in Glasgow, international pressure needs to be upheld for China to increase its climate ambitions. Keeping up the pressure requires curbing the enthusiastic response to Xi’s coal pledge and seeing it as part of an underlying context of four main areas.

First, we still don’t know exactly what Xi meant. His pledge was made with a brief sentence, promising that “China” would increase support for green energy and not “build new coal-fired power projects abroad.” Does “China” only refer to state-owned or also private companies? Does “build” also include finance? Does the ban on “new” coal projects include those already planned but not yet constructed? These questions remain unanswered.

Second, the pledge merely confirms an existing trend. Chinese investment in the 140 countries taking part in the Belt and Road Initiative (BRI) fell by 50 percent in 2020 and is falling further in 2021. Regarding coal-fired power plants, most that were planned have already been canceled, and no new ones have been started in 2021. This all happened prior to and without Xi’s pledge.

On the other hand, three-quarters of the world’s new coal plants are built inside China’s borders, with 250 new plants under development. That is more than the United States’ total capacity and five times as much as China had planned overseas. A domestic pledge not to build more coal plants would be tremendously impactful, but this was not mentioned by Xi either.

On the green side of the pledge, it is also hard to be optimistic. Since the BRI was launched in 2013, China has labeled the initiative as “green.” However, fossil fuels have made up about 90 percent of energy investments, and compared to the same period in 2020, green energy investments have fallen 90 percent. Three-quarters of the remaining energy investments involve oil and gas, which were not mentioned in Xi’s pledge.

Third, China’s reduced appetite for overseas investment comes from economic pressure at home. Lower growth rates and high debt burdens in the financial system have put pressure on state-owned and private financial institutions to closely watch their international exposure. Furthermore, COVID-19 and a trade war with the United States have reoriented many Chinese companies to focus on the domestic market. In this way, dynamics in the Chinese economy are the main reason for a fall in overseas investment. It appears that it might not be a lack of interest in coal that is the basis for Xi’s pledge, but rather the underlying economic factors that make the pledge low-hanging fruit.

Fourth, China is under great pressure to increase its climate ambitions, both internationally as the world’s largest greenhouse gas emitter and domestically with serious pollution problems. This pressure will culminate in the U.S. climate conference in Glasgow, where all the world’s countries will present new and increased climate goals. To manage this pressure, China has an interest in coming across as a responsible climate partner at the outset of the negotiations. Promising to do something that has already largely happened is an easy way to score goodwill points. This appears to be a smart and intentional move by China. That the world responded with enthusiasm is exactly what China could have hoped for, as this reduced pressure for further pledges. That means that the global response may risk decreasing China’s overall climate ambitions.

Because of this context, Xi’s pledge appears largely symbolic and will most likely have little practical effect. If the world is over-enthusiastic, then China may not increase ambitions above its current targets. The pledge is, of course, a small step in the right direction of China making a similar commitment to stop building coal plants domestically. If that commitment is not made and China builds a further 250 coal plants, it becomes next to impossible to meet the Paris agreement globally. It is, therefore, on Chinese domestic coal plants that the world’s attention should remain focused. Rather than being impressed too easily and playing into China’s own climate narrative, the pledge could be used as a lever to push for a similar domestic commitment.