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  1. Environment
12 December 2023

Net zero’s dirty secret

Britain’s green transition is powered by Chinese coal.

By Nick Ferris

Exclusive New Statesman analysis of climate and trade data exposes how much the UK’s net-zero agenda depends on cheap foreign coal power, particularly from China.

The UK’s top four trade partners are Germany, the US, China and the Netherlands. All four of these countries have a significantly larger share of coal-fired electricity in their energy supply than the UK does. This means that goods produced in factories in those countries will typically have a higher emissions footprint than those produced in UK factories.

China’s power grid is particularly carbon-intensive, with coal-fired power plants running 60 per cent of its grid. The UK has capitalised on cheap imports made using low-cost Chinese coal power, with imports from China to the UK more than doubling in value over the past decade.

For its part, China has positioned itself as a leader in the production of clean technologies such as batteries and solar panels (80 per cent of the global supply of which is manufactured in China). These too are made using cheap coal-fired electricity, which helps China to undercut other countries. China is also trying to dominate the extraction and processing of minerals key to the energy transition. It is responsible for 60 per cent of global production of rare earth elements, which are crucial for low-carbon technologies.

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“For other countries, the choice is between making use of China’s low-cost supply chain, but with the risk of reliance on China, or building their own supply chains using a combination of trade protectionism and subsidies to offset China’s subsidies and cost advantages,” said Lauri Myllyvirta of the Centre for Research on Energy and Clean Air.

The UK’s reliance on China’s low-cost clean tech and mineral exports can be seen in HMRC trade data, which reveals how the UK imported large shares of its energy transition technologies and products from China in 2022 – including 64 per cent of rare earth metals and 49 per cent of lithium batteries.

Via its Belt and Road initiative, China was for many years by far the largest financier of new coal power plants worldwide – until Xi Jinping, the Chinese president, told the UN General Assembly in September 2021 that China would build “no new coal power plants abroad”. There have been loopholes, however, that have enable China to finance the construction of some coal-fired plants that power industrial facilities rather than the national grid. These are known as “captive” power plants.

China-backed captive power plants are a particularly significant phenomenon in Indonesia. The country uses captive coal power to smelt nickel, a metal central to the production of batteries used in electric vehicles. Indonesia is the world’s largest producer of nickel. A 2020 ban in Indonesia on the export of unprocessed nickel ore, designed to maximise the value of Indonesian nickel within Indonesia itself, has further increased demand in the country for nickel smelters powered by captive coal power plants.

Captive coal power capacity has risen eightfold in the last decade in Indonesia, from 1.4 GW in 2013 to 10.8 GW in 2023. Seventy per cent of investment in captive coal power in the country comes from China, with Chinese funding for Indonesian coal power over $5bn in 2022.

The UK is highly dependent on Indonesian nickel for its own industry, importing nearly 80 per cent of processed nickel from Indonesia in 2021.

As world leaders have been meeting in Dubai for the Cop28 UN climate conference, most have at least been claiming in public that they are making efforts to advance the climate agenda. But there is at least one country charting a different path in its national policy: the UK.

In a speech in September Rishi Sunak watered down a number of net-zero policies, delaying a ban on internal combustion engine cars from 2030 to 2035, delaying a ban on oil-fired boilers, and announcing less ambitious home energy efficiency targets. But in the Prime Minister's speech on the opening day of Cop28, he claimed that the UK had “decarbonised faster than any other major economy”. This mirrored some of his language in September, when he suggested UK emissions had fallen by “almost 50 per cent” since 1990, compared with 22 per cent in France, and growth of 300 per cent in China.

France, however, produces significantly lower annual emissions (302.33 megatonnes) than the UK (426.5 megatonnes), even if UK emissions have declined more rapidly.

The “almost 50 per cent” figure also tells only part of the story: data from the the Global Carbon Project, a group of leading climate scientists, reveals that while UK territorial emissions may have fallen 39 per cent since 1990 (the “almost 50 per cent” Sunak refers to), total attributable emissions have actually only dipped by 23 per cent. That second metric, known as “production-based accounting”, includes emissions from products imported from abroad. It makes the emissions record of deindustrialised Western nations look worse, and that of major industrial economies look better (it shows, for example, that 20 per cent of China’s emissions are generated in the production of exports).

“Judging the UK’s climate record solely on territorial emissions reduction offers a far from complete picture, when our consumption emissions reduction is nowhere near as significant,” Caroline Lucas, the Green MP, told the New Statesman. “Emissions are emissions – our climate doesn’t distinguish where they come from or where they go to – so if the UK economy has a role in creating demand for them, we bear some responsibility to reduce them. Yet the government appears to be conveniently forgetting them.”

Given that the UN framework on climate change dictates that only territorial emissions should be measured in countries’ net-zero plans, it would be unrealistic (not to mention impractical) to expect the UK to factor total attributable emissions into its decarbonisation plans. Nonetheless, there are still things the UK could do to address the emissions that it exports. “I’d like to see a legally-binding target to reduce consumption emissions alongside the net-zero target for territorial emissions,” said Lucas.

There is not only a “moral argument” for reducing imported emissions, but an economic one, according to Libby Peake, head of resource policy at the Green Alliance think tank. Domestic manufacturers, which charge a premium for their lower carbon products compared with manufacturers abroad who can rely on cheap coal power, lose out. The EU has recently introduced a carbon border adjustment mechanism, which will tax imports of products that do not meet EU emissions standards, in an attempt to address its own challenges with cheap, carbon-intensive foreign imports. UK manufacturers have recently been complaining about their own government’s slowness to follow suit.

Events such as Cop28 remind the world that climate change is a global phenomenon, with global impacts, requiring global solutions. Self-satisfied claims of domestic emissions reductions, such as those made by Sunak, count for little when representatives of developing countries and small island states step up to describe the real climate impacts they are already suffering.

[See also: At Cop28 the UK must choose: the past, or our future]

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